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Sutton-Glennallen Corespondance 1997
Re py anorg Gor t Ll \ — J, Ts F . t7Y)\ - On <r Tire Mi AANewN {File # utiDn-Q1cr ric yd fa\ G} feV AR TUE al |] /d\ Hae itl iP fB\ re Bl a\ [9 TONY KNOWLES, GOVERNOR YUUYU ia L (Ute UU Lf \ DEPARTMENT OF COMMUNITY AND 333 WEST FOURTH AVE., SUITE 220 i SKA 99501-234 REGIONAL AFFAIRS ANCHORAGE: ALA nes ae DIRECTOR'S FAX: (907) 269-4645 DIVISION OF ENERGY ENGINEERING FAX: (907) 269-4685 November 25, 1997 The Honorable Jim Duncan Alaska State Senator State Capitol Rm 119 Juneau, AK 99801-1182 Subject: Sutton-Glennallen Intertie Dear Senator Duncan: Provided below per your request is a brief summary of the Sutton-Glennallen intertie issue prepared by this Division in March 1995. It is based upon a feasibility study completed under our direction in April 1994. As noted in the summary, the estimated project cost at that time was $47.6 million in 1993 dollars. Shortly after this summary was prepared, this Division ceased to be involved in any additional project review. From that time forward, all further analysis of the intertie was carried out by AIDEA and its contractors. However, we are also attaching for your information a newspaper article that appeared in November 1996 indicating: ds that the project cost estimate had apparently increased to $53 million, and 2. that Copper Valley Electric Association had withdrawn its support for the project. The summary below ends by noting that an administrative appeal was filed in Superior Court by environmental groups. The appeal attempts to block the intertie by challenging the State’s feasibility study. That appeal has been dormant over the last two years since the Administration has not moved forward with the project. There is now an indication that the appeal will be withdrawn but may be refiled should project development start back up again. Project Summary Prepared in March 1995 1. Copper Valley Electric Association (CVEA) serves Valdez and Glennallen, which are connected to each other via an existing transmission line. The utility supplies power to about 3000 customers including the Petro Star Valdez oil refinery. It does not supply power to the Alyeska marine The Honorable Jim Duncan November 25, 1997 Page 2 terminal, which has always generated its own power on site. There are no transmission lines connecting CVEA to any other utility system. 2: In 1992, the year before the Petro Star refinery began operations, roughly 60 million kWh were generated to serve the utility's load as follows: A. about 40 million kWh from the State-owned Solomon Gulch hydro project; B. about 20 million kWh from CVEA diesel generators. Assuming moderate future expansion, the Petro Star refinery will require about 20 million kWh or more per year which, if supplied by the utility, would come mostly from additional diesel generation. Total diesel generation requirements for the utility are therefore projected in the range of 40-50 million kWh per year. 3. There are several alternatives to replace diesel generation in the CVEA system: A. The proposed Sutton-Glennallen intertie would give CVEA access to Anchorage area power sufficient to supply any plausible requirements beyond the capability of the existing Solomon Gulch hydro project. As defined in a 1994 feasibility study conducted for the State, the intertie: i. would be approximately 135 miles long; ii. would cost about $47.6 million in 1993 dollars; ili. would be routed through undeveloped backcountry north of the Glenn Highway; iv. would be visible from backcountry trails, but (with brief exceptions) is not expected to be visible from the highway. B. The proposed Allison Lake hydroelectric project. Based on a 1992 reconnaissance study conducted for the State, Allison Lake: i. would supply about 27 million kWh per year of additional hydroelectric energy, which would then be supplemented with diesel generation to meet the projected utility requirement; ii. would cost about $32.2 million in 1993 dollars; The Honorable Jim Duncan November 25, 1997 Page 3 C. Others including: i. alternatives considered in the 1994 intertie feasibility study -- a coal-fired power plant in Valdez, a hydro project at Silver Lake; ii. alternatives not developed in the feasibility study for lack of information but which have since been noted as possibilities by CVEA -- cogeneration at the Petro Star refinery and cogeneration at the Alyeska marine terminal. 4. The 1993 legislature appropriated $35 million for a zero interest, 50-year loan to CVEA for the Sutton-Glennallen intertie but made the appropriation “contingent upon completion of a feasibility study and finance plan satisfactory to the Department of Community and Regional Affairs:” A. The feasibility study concluded that, under mid-range assumptions, the intertie and Allison Lake scenarios were the two least cost alternatives (with the Allison Lake scenario coming in at slightly lower long-term cost than the intertie). In July 1994, the Commissioner of DCRA issued a finding that the feasibility study and plan of finance were “satisfactory,” and directed the Division of Energy to proceed with issuance of the intertie loan to CVEA. The Division of Energy drafted a loan agreement and proposed it to CVEA in November 1994. CVEA did not agree to its terms and the proposed agreement has not been executed. [As of November 1997,] none of the $35 million has been spent. In August 1994, a collection of environmental groups filed an administrative appeal in State court challenging the Commissioner's finding. [As noted above, the appeal has been on hold for the last two years but is still pending as of November 1997.] Please let me know if you need additional information. Sincerely, Per risby Director Attachment as stated. W/29l4& Pinch Daly Neos Intertie loses backer Utility seeks aid for 4 generators By S.J. KOMARNITSKY Daily News reporter PALMER — The main pro- ponent of the proposed $53 million powerline between Sutton and Glennallen says it no longer supports building the controversial line Officials with the Copper Valley Electric Association said Wednesday they have withdrawn their support for the project and instead will ask the state for a $15 million grant to buy four new diesel generators Opponents of the power- line, which include environ- mental groups and some Matanuska Valley residents, hailed the utility’s decision, saying it signaled the pro- ject’s death. “There’s absolutely noth- ing supporting this*:project now,” said Chris Rose, a Sut- ton resident and co-founder of Alaska Citizens for Re- sponsible Energy Develop- ment. Bob King, a spokesman for Gov. Tony Knowles, said the administration had not yet seen the details of the utili- ty’s proposal, and that it was unclear what effect it would have. But, he added, if the main proponent is dropping out, “that’s obviously trau- matic.” The project has been on hold for nearly two years while the Knowles adminis- tration reviews whether to approve a $3S_ million interest-free loan and up to $25 million in state-issued bonds to build the line. Mike Irwin, commissioner of the state Department of Community and Regional Af- fairs, plans to meet with Cop- per Valley officials sometime Please see Page D-3. LINE Now that Thanksgiving’ fn » Dinl Kalads af Mara Minr yhIS LINE: Utility wants new generators Continued from Page D-1 next week to discuss the plan, King said The utility’s about-face comes after years of staunch support for the powerline as a way to reduce electric rates in the Copper River basin. It also came just weeks: after the resignation of general manager Clayton Hurless, a strong proponent of the pro- ject. Glennallen residents pay about 20 cents per kilowatt- hour for power, nearly twice what Anchorage residents pay. The powerline, which would stretch 135 miles from Sutton to Glennallen, would allow Copper Valley to tap into the vast and relatively cheap power supply of the Railbelt utilities Robert Wilkinson, the utili- ty's acting general manager, said the change was prompt- ed in part by an internal re- view that showed the intertie would be too expensive, faced public opposition, and might not mean lower rates for customers Also, crucial was renewed hope for’a trans-Alaska gas pipeline; ‘he said. The gas line ,has been talked about for the past two decades. Recent dis- “cussions have focused on a - startup date of 2005S. If the pipeline is built, the utility could tap into it and gain a cheap source of power, , Wilkinson said. In the meantime, he said, it makes more sense to go with something small instead of the $53 million intertie. Rep. Gene Kubina, D- Valdez, said he will push the Legislature to make the change, but he acknowledges there are “lots of political problems” with the idea. “The plan is to see if we can’t turn the $35 million loan back and then get a $15 mil- lion grant,’ Kubina_ said. “That's going to take a lot of work and people coming to- gether.” The intertie loan was ap- proved by the Legislature as part of a package that includ- ed money for upgrading lines from Anchorage to the Kenai Peninsula and from Healy to Fairbanks. That loan is con- tingent.on a finding by :the Knowles administration ‘that’ the project. is economically Reece s “feasible. ; A prime: backer of the in- tertie was Rep. Ramona Barnes, R-Anchorage, then speaker of the House. » . “I don’t think those tur- bines do anything for the Railbelt integrated energy system, and that was the pur- pose of the loan in the first place,” Barnes said Wednes- day. , “If they need those gener- ators, they should sell bonds to pay for them. My thing was not to give them money. My thing was to tie together an energy grid,” Barnes said. While the utility’s current , drops ir proposal is sketchy, Wilkin- . son said it would include pur- chasing four generators, and’ placing some of thém‘next to the, Petro Star*refinery in Valdez. *The new generators would replace the aging diesel gen- erators,the utility relies on to produce about a third of: the power for its 3,100 cus- tomers. They would save the utility money by allowing it to elim- inate some positions, Wilkin- son said. Lower fuel costs could result if the utility were to buy fuel from Petro Star and then pump waste heat to the refinery, he added. Petro Star also may re- main a Copper Valley cus- tomer, Wilkinson said. intertie dG tate The . company , had an- nounced.earlier this, year that it planned to. produce its own power — the second time of- <ficials have said it would do so. But -.. Wilkinson. said the company has not yet started to produce gts own power, and recent@alks with compa- ny Officials indicate they might stay on line. Petro Star officials did not return calls left Wednesday at the company’s Anchorage office. The refinery is the utility’s biggest customer, ac- counting for about a quarter of the power usage. O The Associated Press contributed to this report. Support PERCU AU ces NB PUTT TTB TEETER 6 eT SS MMS UT Official cable TV guide Extensive , weather’ Monday business * ALASKA INDUSTRIAL DEVELOPMENT =~ AND EXPORT AUTHORITY / => ALASKA Ee ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 / MORECEIVED September 15, 1995 > VU SEP 18 REC Mr. Clayton Hurless, General Manager Copper Valley Electric Assoc. Inc. P.O. Box 45 Glennallen, AK 99588 On? DIVISION OF ENERGY/DCRA Dear Clayton, This is in regards to your letter of August 31, requesting that the Alaska Industrial Development & Export Authority (AIDEA) conduct a due diligence examination of Arctic Slope Regional Corporation. The purpose of the examination would be to determine the financial condition of Arctic Slope as it relates to their possible issuance of a Letter of Credit to Copper Valley Electric Assoc. Inc. (CVEA). The Authority would be happy to assist CVEA in conducting the due diligence, subject to a reimbursement agreement for all of the Authority’s out-of-pocket costs. Since the Letter of Credit is predicated on the Sutton-Glennallen Intertie being constructed, we would propose to delay the start of the due diligence until after the decision is made by the Department of Community and Regional Affairs to proceed with the project. The Authority will move to draft the scope of services if CVEA has other reasons to proceed with the review of Arctic Slopes’ financial condition for purposes of issuance of a Letter of Credit. Please let me know if you wish the Authority to proceed. i Shel Executive Director _comP&Féy Frisby, DIVISION Of Energy, DCRA Ono. ac MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Mike Irwin DATE: September 7, 1995 Commissioner FILE: THRU: Percy Frisby, Dinero Division of Energy PHONE NO: 269-4640 FROM: Richard Emerman {L, SUBJECT: Sutton-Glennallen Intertie: Senior Economist More Info on EIS The memo I prepared last week indicated that the Sutton-Glennallen intertie would cross about 10 miles of federal land presently administered by the Bureau of Land Management (BLM), and that gaining a right-of-way across this land would likely require preparation of an EIS. This week I was able to reach people both at the federal BLM and at the State Division of Land / DNR, and learned that the federal land in question has been selected by the State and at least some portion of the land has also been selected by a Native corporation. (The BLM representative believes the Native corporation is Ahtna, but would have to look into it further to be sure.) Upon request, these lands could be conveyed on an accelerated basis either to the State or to a Native corporation, perhaps within a time frame of six months. In view of this information: 1. It appears that the intertie would not cross any federal land if these conveyances occur. As a result, there would not be any federal right-of-way decision to trigger the NEPA review process and preparation of an EIS. De The intertie would still involve stream and wetland crossings for which a federal permit is required under the Clean Water Act -- a “Section 404” permit administered by the Corps of Engineers. Applications for 404 permits are given public notice. If significant objections are raised: A. The Corps could require an EIS to support the 404 permit application. The scope of the EIS could be narrow or broad -- this is evidently within the discretion of the lead federal agency. B. The Environmental Protection Agency (EPA) could decide to elevate the 404 permit application to its jurisdiction. Please let us know if more information on EIS possibilities would be useful at this time. MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Mike Irwin DATE: September 1, 1995 Commissioner FILE: THRU: Percy Frisby, Director Division of Energy PHONE NO: 269-4640 FROM: Richard Emerm SUBJECT: Sutton-Glennallen Intertie Senior Economist Schedule With regard to the attached schedule, I understand that more detail is desired for the two-year period between December 1995 and December 1997. I have added a little more language into the flowchart and offer additional comments below. Please note the assumption in all of this material that Copper Valley Electric Association (CVEA) would be the entity to build and own the intertie. The State’s role, aside from APUC approvals, would be limited primarily to administration of the $35 million loan and issuance of certain environmental permits. I Environmental Impact Statement. Of the 135 mile length of the proposed intertie, about 10 miles would cross federal land. This land is presently administered by the Bureau of Land Management (BLM) within the Department of Interior. When CVEA applies to BLM for a right-of-way across this land, the provisions of the National Environmental Policy Act (NEPA) will be triggered. BLM’s decision on issuing the right-of-way will be based on the outcome of the environmental review required under NEPA. In most instances, the right-of-way applicant (in this case, CVEA) pays for the costs associated with this process and retains a third-party contractor to conduct the necessary studies. In addition, NEPA is usually interpreted to require environmental review of the entire project, not just the portion of the project on federal land, as the basis for the right- of-way decision. The first step is to prepare a “scoping document” describing the issues of concern. After agency meetings, public meetings, and consideration of comments, a second document is prepared that indicates whether the issues are sufficiently serious as to require an Environmental Impact Statement (EIS), or whether a much more abbreviated process culminating in an Environmental Assessment (EA) will be sufficient. Our feasibility study contractor concluded that an EIS will probably be required if for no other reason than the level of public controversy surrounding the project. The EIS process seems fairly simple in theory -- preparation of a draft, soliciting comment, preparation of a final. We have guessed at a two-year time frame for the entire process, but recognize that somehow the process can become protracted for controversial projects. A major question to be addressed in an EIS is whether there are feasible alternatives to the proposed project that are likely to cause less environmental impact. BLM staff is not available on short notice today to advise further on process and time frames but will be available next week. Attached to this memo is an excerpt from the intertie feasibility study that provides additional detail on the EIS process, as well as certain other permitting tasks that lie ahead for the project. 2. Alaska Public Utilities Commission. As noted in the flowchart, there are at least two issues that are either presently before the Commission, or will be in the future if the project goes forward: A. ACSI’s case against CVEA, seeking to require CVEA to negotiate a power sales agreement under the terms of the federal Public Utilities Regulatory Policies Act (PURPA). B. Approval of any wholesale power contract associated with the project. I have not discussed the project or any of the project-related issues that may come before the Commission with APUC staff, but can arrange to do so if you wish. Mary Gilson could also undertake such contact, but is on vacation until September 11. 35 Other Permits and Approvals. The attached excerpt from our feasibility study provides some information -- I can’t swear at this point that it’s exhaustive. You may wish to note the paragraph on the bottom of page 17 in the excerpt on issuance of a Conditional Use Permit by the Mat-Su Borough Planning Commission. This sounds like a potential obstacle, but I have no additional information about it. 4. $7.3 Million Pre-Construction Limit in Proposed Loan Agreement. Also attached is an excerpt from our proposed loan agreement that requires CVEA to have all permits, approvals, rights-of-way, and supplemental financing in hand before construction funds will be provided or the $7.3 million pre-construction ceiling can be exceeded. Sy Supplemental Financing. The project cost is estimated in the range of $50 million, though the State loan is limited to $35 million. We believe that CVEA will likely have access to the best loan terms from the federal Rural Utilities Service (formerly the Rural Electrification Administration) within the U.S. Department of Agriculture. Acquisition of this financing is another key requirement for the project to go forward. Attachments Sutton-Glennallen Intertie Schedule DRAFT State Loan Appropriation $35 million appropriated to DCRA for Sutton-Glennallen intertie loan (Ch 19, SLA 93)** Feasibility study (final report) issued by DCRA Plan of Finance issued by DCRA State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Design and Construction **Contingent on feasibility Page 1 study and plan of finance "satisfactory" to DCRA. 9/1/95 Sutton-G lennallen Intertie Schedule 1994 DRAFT State Loan Appropriation Finding issued by DCRA Commissioner: Studies are "satisfactory" September State / CVEA Loan Agreement Loan application submitted to DCRA by CVEA Division of Energy (DOE) sends proposed loan agreement to CVEA Hl Administrative Appeal: Trustees for Alaska et. al. Administrative appeal filed in State court challenging DCRA Commissioner's finding Systems Inc. (ACSI) Lawsuit: Alaska Cogeneration | Acs files suit in State court to enjoin State from issuing loan ACSI State court case dis- missed; ACSI files in federal court to stop intertie loan Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Design and Construction Page 2 9/1/95 Sutton-Glennallen Intertie Schedule DRAFT 1994 1994 1995 November December February State Loan Appropriation CVEA comments on proposed loan agreement; DOE makes "final" revisions State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Federal court issues preliminary injunction against execution of the loan Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Federal court lifts preliminary injunction Environmental Impact Statement APUC order: CVEA must Chugach Electric and Petro negotiate with ACSI re: power Star move to intervene in sales agreement™* CVEA / ACSI case AK Public Utilities Commission Other Permits and Approvals Project Design and Construction **ACSI began APUC proceedings against CVEA in Dec. 1993 Page 3 9/1/95 Sutton-Glennallen Intertie Schedule DRAFT State Loan Appropriation Governor suspends further action on project; appoints 3-member review team Division of Energy briefing with Governor Knowles State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Parties agree to stay of pro- ceedings; case has barely begun due to lengthy delays Lawsuit: Alaska Cogeneration | Systems Inc. (ACSI) Federal court grants stay of proceedings Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Design and Construction Page 4 9/1/95 Sutton-Glennallen Intertie Schedule 1995 DRAFT 1995 September By 8/31, AIDEA /CH2M Hill Public comments / public State Loan Appropriation report Issued** meetings; recommendation to | revised / supplemental DCRA P Governor by 9/30 finding by 10/16 October Governor's decision and State / CVEA Loan Agreement DOE/CVEA discussions resume on terms of loan agreement** Administrative Appeal: Trustees for Alaska et. al. Parties agree to extend stay to expire 9/15/95** Stay of proceedings scheduled Litigation continues** Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Federal court grants extension of stay to expire 9/15/95** Stay of proceedings scheduled Litigation continues** Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Design and Construction **In this schedule, italics | ** Attorney General's office to signify projection of future |request further extension of actions or events these stays Page 5 ** In the event the Governor decides to go forward with the intertie project 9/1/95 Sutton-Glennallen Intertie Schedule DRAFT 1995 1995 <--------------- Two Years ------------- _—-> State Loan Appropriation November December December 1995 - December 1997 State / CVEA Loan Agreement Loan agreement executed. Phase 1 (pre-construction) limited to $7.3 million** Administrative Appeal: Trustees for Alaska et. al. Not possible to predict time period for litigation or likely date for court decision. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Not possible to predict time period for litigation or likely date for court decision. Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Design and Construction ™ In the event the Governor decides to go forward with the intertie project Scoping documents, public meetings, determination of EA vs. EIS. If ElS, preparation of Draft, public review and meetings, preparation of Final. Decision on ROW across federal land. The intertie could be blocked if CVEA is ordered to purchase power from ACSI at CVEA's avoided cost, or if APUC does not approve wholesale power contract. Numerous permits, including Conditional Use Permit from Mat-Su Planning Commission for access through the Chickaloon Special Land Use District. CVEA retains contractor for NEPA process / ElS** CVEA retains design contractor** ** In the event the Governor decides to go forward with the intertie project Page 6 9/1/95 Sutton-Glennallen Intertie Schedule 1997 December State Loan Appropriation State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement Completion of ElS; acquisition of ROW across federal land APUC approves wholesale AK Public Utilities Commission | power contract and resolves related matters Acquisition of ROW complete; supplemental financing obtained; permitting complete Project Design and Design complete. Con- af struction start spring 1998 Construction and complete Dec. 2000** ** Construction start fall 1997 and complete Dec. 1999 if Phase 1 accelerated Page 7 Other Permits and Approvals DRAFT 9/1/95 EMrynar- Feasibility Study Copper Valley Intertie State of Alaska, Department of Community and Regional Affairs, Division of Energy Volume 2 Environmental Report and Initial Public Comment Electric System Analysis April 1994 in association with Dames & Moore, Inc. Power Technologies, Inc. 2.0 REGULATORY COMPLIANCE This section presents an overview of the laws, statutes, regulations, and other project approvals that will be required in the future if the Copper Valley Intertie investigations proceed. 2.1 Federal Statutes and Regulations The following discussion of permit requirements is not considered exhaustive. Further investigation of required permits is recommended so that all permitting can be coordinated. 2.1.1 National Environmental Policy Act (NEPA) and Implementing Regulations The proposed Copper Valley Intertie would occupy lands of the United States managed by the U. S. Bureau of Land Management (BLM) and stream and wetland crossings would require review under the Clean Water Act, Section 404, by the U. S. Corps of Engineers. The proposed project will be reviewed under NEPA to determine the extent of environmental review required. The BLM and the Corps would be expected to serve as lead agencies. Other agencies may elect to be cooperating agencies. NEPA requires in Section 102(C) that'all agencies of the federal government "include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on (i) the environmental impact of the proposed action, (ii) any adverse environmental effects which cannot be avoided should the proposal be implemented, (iii) alternatives to the proposed action, (iv) the relationship between local, short-term uses of man’s environment and the maintenance and enhancement of long-term productivity, and (v) any irreversible and irretrievable commitment of resources which would be involved if the proposed action should be implemented. Six specific objectives are listed in NEPA: (1) responsibility to future generations; (2) provision of a quality environment for all Americans; (3) prevention of undesirable impacts; (4) preservation of national heritage; (5) achievement of a population-resource balance; and (6) enhancement of renewable resources and recycling of nonrenewable ones. The scoping and environmental impact statement processes are two important aspects of the NEPA process. These are discussed briefly below. Dalziel Scoping Scoping is the initial stage of formal review under NEPA. The following activities occur under scoping: Supplement to Environmental Review Il April 21, 1994 1 Determination of Lead Agency — Federal agencies who will be involved in project approvals (probably Bureau of Land Management [BLM], who will issue rights-of-way across Federal lands and the U. S. Army Corps of Engineers, who will review project activities under the Clean Water Act Section 404 regarding activities in the vicinity of wetlands and waterways) determine who will be lead agency and identify cooperating agencies. Cooperating agencies may include the U. S. Fish and Wildlife Service, who will identify any Threatened or Endangered Species and conduct consultation under Section 7 of the Endangered Species Act if any adverse effects are identified. The National Park Service, the BLM Archaeologist, Native American Entities, and the State Historic Preservation Officer (SHPO) will review the proposed project for any potential effects on properties or resources protected under Section 106 of the National Historic Preservation Act and related statutes. Other Federal requirements may also be identified. The lead agencies establish a work plan and schedule for reviewing the proposed project under NEPA and other relevant statutes. 2. Scoping Document 1 — A document presenting the proposed action (project) and its alternatives and identifying issues of concern is prepared and provided by the lead agency or agencies to the public for review and comment. In the document, the public and agencies are noticed that public meetings will be held. Usually, two meetings are held in each primary location: one in the afternoon and one in the evening. 35 Scoping Meetings — Scoping meetings and, if requested, a site visit are held usually within two weeks to one month of issuance of Scoping Document 1. Agencies conduct and determine the locations of these meetings. Project applicants may request an opportunity to present their project at the meetings. A 30-day period within which to provide comments on Scoping Document | and any other issues of interest follows these meetings. Comments may include requests for additional studies. 4. Scoping Document 2 — A second document is prepared following after comments noted in item 3 above are received. Scoping Document 2 refines the description of the issues of concern; identifies necessary information that must be acquired in order to assess the environmental impacts; and states whether the proposed action is determined to be a major federal action requiring preparation of an environmental impact statement (EIS) or may be addressed by preparing an environmental assessment (EA). Supplement to Environmental Review: 12 April 21, 1994 For projects that exhibit much public concern and potential opposition and involve many resource issues, an EIS is usually required. Federal regulations provide that EISs may be prepared by third party contractors for the Federal agencies. This usually ensures that the EIS begins and is completed within a defined schedule. If the Federal agency itself is to prepare the EIS, Congressional appropriation of funds is required. Dale Environmental Impact Statement Preparation of the Draft and Final EIS follows the decision made at the close of scoping to prepare an EIS. Major activities are as follows: i Scoping for the Environmental Impact Statement — Using Scoping Document 2, the lead agencies confer with other agencies and identified parties regarding the extent of investigations that will be required in order to prepare the EIS. If additional public meetings are determined necessary, an additional round of scoping meetings could be held. A work plan to prepare the EIS is prepared and studies begin. 25 Preparation of the Draft Environmental Impact Statement — Field and office environmental, engineering, and economic investigations, studies, and analyses are conducted. Additional consultations with resource agencies are conducted as appropriate. The Draft EIS is issued for public review and comment and a comment period established. Additional public hearings may be held to receive comments on the Draft EIS in addition to written comments. Comments are reviewed and additional investigations, studies, and consultations, if required, are conducted. cE Preparation of the Final Environmental Impact Statement Comments received regarding the draft are responded to in the Final EIS. Additional study results and other information are incorporated. Final statements in support of the preferred alternative are presented. The Final EIS is published and provided to the public. The Final EIS serves as the substantive backup for any Record of Decision and other approvals, including rights-of-way and permits. Supplement to Environmental Review 13 April 21, 1994 Zl Summary of Costs to Comply with NEPA The range of costs presented below represents those costs that will likely be incurred to comply with the NEPA process through the scoping and EIS preparation tasks discussed above. These costs assume that a third party contractor prepares and publishes the documents and arranges for public meetings and hearings. The designated lead agency or agencies will probably serve the document on consulted entities. Ne Scoping. Document I 4. ae6 25-6 .96 4 oc8 34 $30,000 - 50,000 Includes startup meetings between third party contractor, lead agencies, cooperating agencies, and State of Alaska/CVEA. 2. Public Meetings ... 6 amc 456s yee nae ns $15,000 - 25,000 Depends on the number of locations and personnel required. 3; Scoping Doctiment:2 =. a.2 ase. 52-56% 956 $20,000 - 35,000 Includes decision process to determine whether EIS is required and to prepare outline of required information for use in preparing study plans. 4. Environmental Studies .............---- $300,000 - 750,000 Includes consultation with agencies in preparing study plans and conducting studies. 2: Dratt BIS yo age eae sae ae oo $250,000 - 500,000 6. Public Hearings 246 soc: 56 22-6 ses smeee $20,000 - 30,000 Depends on the number of locations and personnel required. a. FinaliglS se 2 ace 3o4 une ee ee nae: 6 $200,000 - 450,000 ESTIMATED BOPALICOST - 0. ims sae sac aes $835,000 - 1,840,000 2.1.2 Clean Air Act and Regulations Regarding Siting and Operation of Fossil-fuel Generation for Diesel and Natural Gas Alternatives Pursuant to the Clean Air Act of 1990 and legislation enacted by the Alaska Legislature in 1993, operators of certain fossil-fuel generation units are required to obtain Operating Permits and bring units into compliance with air quality standards by the year 2000. Compliance requirements may include: retrofit of existing equipment to reduce emissions; installation of "scrubbers" or other technologies to reduce emissions; installation of Continuous Emission Monitoring Systems (CEMS); and, in certain cases, substitution of fuel supply to reduce emissions. Supplement to Environmental Review 14 April 21, 1994 2.1.3 Clean Water Act and Regulations Implementing Section 404 The 404 permit is prepared by the U.S. Corps of Engineers and may involve Nationwide or Individual permits, depending on the complexity and controversy associated with the proposed action. In the case of the Copper Valley Intertie, this involves issuing a number of permits for stream crossings and any activities that may directly affect wetlands. If there are significant issues involved, the EPA may elect to elevate the 404 permit activities to its jurisdiction. The application requires a significant level of detailed information; it is expected that the EIS would be used to support this permit application. The Alaska Department of Conservation uses the Corps permit for any dredge or fill activities. 2.1.4 Endangered Species Act The primary activity that will be associated with the Copper Valley Intertie is consultation under Section 7 of the Endangered Species Act, which concerns the presence of any candidate or listed species and their critical habitat in the project area. Consultation is held to determine whether the project can proceed without jeopardizing . the continued existence of such species and habitat. A formal study is performed and a Biological Opinion prepared to support the decision of the jurisdictional agency. The U. S. Fish and Wildlife Service has jurisdiction over non-marine fish, wildlife, and botanical species and related habitat; the National Marine Fisheries Service has jurisdiction over marine species and habitat. 2.1.5 Federal Land Policy Management Act and Bureau of Land Management Implementing Regulations and Guidance Regarding Rights-of-Way The BLM manages lands of the United States that will be crossed by the Intertie. The BLM will entertain applications for rights-of-way over these lands. The NEPA EIS discussed above will serve as the decision document for these rights-of-way. Under the Federal Land Policy Management Act, the BLM may mandate terms and conditions that must be followed for the life of the Project. 2.1.6 Federal Power Act and Regulations Implementing Parts I and II — Allison Lake Alternative and Qualifying Facilities — Coal-fired and Cogeneration Alternatives The Federal Energy Regulatory Commission (FERC) would be involved in licensing Allison Lake or Silver Lake under Part I of the Federal Power Act (FPA). A FERC license also triggers other federal, state, and local agency and government approvals and permits that are considered during the licensing. Supplement to Environmental Review i April 21, 1994 If any of the fossil-fuel generation alternatives are developed by non-utilities, the FERC could entertain a request for Qualifying Facility or Exempt Wholesale Generator status under Part II of the FPA. 2.1.7 Other Federal Permits and Approvals The Federal Aviation Administration (FAA) will require a notice of proposed construction for transmission line segments that could be an obstruction or hazard to plane traffic. Obstruction marking plans must be approved by the FAA. The Federal Communications Commission (FCC) must issue a radio license and permit to operate radio equipment if such equipment is planned for use with the Intertie. Because construction of the proposed Intertie will involve more than 5 acres, a U. S. Environmental Protection Agency National Pollution Discharge Elimination System (NPDES) permit will be required. 2.2 State Statutes and Regulations A Coastal Project Questionnaire must be completed for the Alaska State Division of Governmental Coordination under the Alaskan Office of Management and Budget. This questionnaire initiates the review process for consistency under the Alaska Coastal Management Program (ACMP). During the review, state agencies determine the permits and authorizations required for proposed projects in or affecting the coastal areas of Alaska. Principal state permits likely to be required are discussed below. 2.2.1 Alaska Department of Fish and Game An anadromous fish protection permit, Title 16 Fish Habitat Permit, is required as anadromous fish streams will be crossed. The permit application requires a detailed project description, including maps. The application is. submitted with the General Waterway/Waterbody Application to the Alaska Department of Fish and Game (ADFG). Plan details should include time frame requested for decision. This permit also applies to bridges placed across streams. The ADFG is also to be consulted regarding the need for additional permits if silt, gravel, rock, or other materials are introduced into the water; if the stream is used as a road, even when frozen, or the stream is crossed with tracked or wheeled vehicles; if explosives are used; if a bridge or culvert is installed; or if a Critical Habitat Area, State Game Refuge, or State Sanctuary is affected. Supplement to Environmental Review 16 April 21, 1994 meme eee ll 2.3 2.2.2 Alaska Department of Natural Resources, State Historic Preservation No specific permits are required. The level of study efforts that must be performed under NEPA is determined by the State Historic Preservation Officer (SHPO). Based on preliminary information presented in the draft Feasibility Study, an archaeological survey of the proposed right-of-way and adjacent areas will be required. An ethnographic survey may also be required if Native American properties are affected. This study/survey effort is performed under the regulations established pursuant to Section 106 of the Historic Preservation Act and related statutes and is required for the Intertie due to use of Lands of the United States and the need for federal permits and other approvals. 2.2.3. Other State Approvals The Alaska Department of Natural Resources (DNR) must be consulted regarding permit requirements and other rights-of-way approvals for portions of the Intertie that will cross and occupy State-owned lands. DNR is also to be consulted for timber removal and burning. If over 40 acres are to be cleared during the life of the project, the burn would be regulated by the Alaska Department of Environmental Conservation (DEC). If less than 40 acres would be cleared, the’ burn would be regulated by DNR, Division of Forestry. The DEC is to be consulted if any discharge of wastewater, including stormwater, occurs during operation; if any wastewater disposal system is constructed; regarding dredge and fill near or in wetlands or other waterbodies; if solid waste is produced; if the project Tequires application of oil or pesticides to the land surface; or if fossil fuel is the source of energy. As noted above in the Federal Statutes and Regulations section, the DEC would use the 404 permit issued by the Corps and would issue the related Water Quality Certificate. If the Intertie would affect the right of way of the Glenn Highway, a utility permit from the Alaska Department of Transportation and Public Facilities would be required. Regional and Local Plans, Ordinances, and Other Regulatory Requirements The Matanuska-Susitna Borough regulates land use in the Sutton, Chickaloon, and Glacier View areas. A Conditional Use Permit is required from the Matanuska-Susitna Planning Commission for construction of a transmission line in the Chickaloon Special Land Use District. Similar regulations are being considered in the Glacier View area. The Matanuska-Susitna Borough could also require land use permits and utility permits for any use of Borough lands. Supplement to Environmental Review WT. April 21, 1994 EXCERPT -- PROPOSED LOAN AGREEMENT DRAFT 03/13/95 Page 5 Section 3. Financing the Project 3.1 The Loan. To satisfy part of the anticipated financing requirements for construction of the Project, the Division agrees to lend and the Borrower agrees to borrow, on the terms and conditions provided herein, a sum not’ exceeding $35,000,000, as provided for in Sec. 4, Ch 19, SLA 1993, and subject to the availability of funds and the provisions of this Agreement. The Borrower shall use its best efforts to secure all additional financing necessary to ensure completion of the Project. Concurrent with the execution of this Agreement, the Borrower shall execute and deliver to the Division the Note and Security Agreement. 3.2 Disbursement Schedules. Project development shall be divided into two phases, Phase I and Phase II. Except as approved by the Division, disbursements for Phase II shall not be made prior to the completion of Phase I, as set out in Section 3.2 (b) (ii). The Division will not approve the disbursement of Loan proceeds for any costs listed in Exhibit D attached to this Agreement and incorporated herein by this reference. Disbursements of Loan funds under this Agreement shall be subject to the following limits and ceilings: (a) Preconstruction costs (Phase I). (i) Eligible costs under Phase I shall consist of pre-construction costs, including feasibility studies, pre-construction engineering, design, right-of-way acquisition, permitting, environmental studies, and acquisition of supplemental financing. Personnel costs of the Borrower directly related to the Project under Phase I are allowable to the extent provided for in a budget under Section 3.2., as approved by the Division. Costs that are not eligible under Phase I include Project construction, right- of-way clearing, and procurement of construction contracts and materials. (ii) The maximum amount of Loan funds that the Division will disburse under Phase I shall be $7,300,000. The Division shall determine whether costs incurred by the Borrower are allowable as Phase I costs. (b) Construction costs, and other related costs (Phase II). DRAFT 03/13/95 Page 6 (i) Eligible costs under phase II shall consist of all costs relating to the design and construction of the Project that are not otherwise ineligible. Personnel costs of the Borrower directly related to the Project under Phase I are allowable to the extent provided for in a budget under Section 3.2., as approved by the Division. (ii) Except as approved by the Division, no disbursements of Loan funds will be made by the Division for Phase II costs until the Borrower demonstrates to the satisfaction of the Division, and the Division issues a written determination, that the Project can be successfully completed and the _ following conditions have been met: (A) final approval, not subject to further judicial appeal of matters submitted to the Alaska Public Utilities Commission related to the financing or use of the Project has been obtained by the Borrower; (B) all other approvals, permits and agreements necessary to proceed with Project construction have been obtained by the Borrower, including without limitation, acquisition of right-of-way, required approvals of the Rural Electrification Administration, documented commitment for all supplemental financing required to complete the Project, and receipt of all applicable permits. 323 Disbursement Procedures. Subject to the terms and conditions of this Agreement, disbursement of the Loan funds shall be subject to the following procedures: (a) Within 30 calendar days of the execution of this Agreement, the Borrower shall submit to the Division a budget for Phase I broken down by major task. The Division will either approve or disapprove the budget within 30 calendar days. Such approval will not be unreasonably withheld. No invoices with respect to Phase I costs will be paid until a Phase I budget is approved by the Division. . A Fax From The Department of Cormrrunity & Regional Affairs Division of Fnergy ch < Pravysics! Address- 333 West 4th Avenue, Suite 220 2332 West 4th Avenue, Suita 220 anchorage, AK 99504-23414 Anchorage, AK 29501-2341 fifain Telephone Number: (307) 269-4500 Ofrector's Fax Number: (9O0T) 269-4645 Engineering Fax Number: (907) 269-4685 Deliver Fax to: Wake ~Drcouy _ Cormmpany Name: Company Address: = a _ Fax Phone #: ii LB Senger: ee Sender's Phone # # Of Pages Sent: Z| __Unctuctes this coverpecel Date Fax Serit: Qa nlas you don't receive all of this fax, please call sender DIRECTLY. SPECIAL INSTRUCTIONS TO FAX RECIPIENT: LuLshé Stina boy C+mad _ | TRANSMISSION REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) *%& COUNT **« TOTAL PAGES SCANNED TOTAL PAGES CONFIRMED 21 21 #2 SEND 46% [No. REMOTE STATION START TIME DURATION | #PAGES MODE ] RESULTS 1 9074652948] 9- 1-95 15:46 9°48" 21/ 21)EC COMPLETED 9600 1 TOTAL 0:09'°48" 21 NOTE: No. : OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION PD : POLLED BY REMOTE SF : STORE & FORWARD RI = RELAY INITIATE RS : RELAY STATION MB : SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI-POLLING RM : RECEIVE TO MEMORY -21-95 MON 14:49 D JUNEAU FAX NO. 9 352948 P, 03 eitieia MON UY! 3 EA FAX NO. 90....8998 P, 02/08 Executive Summary Background In 1993, the Alaska State Legislature appropriated $35 million for a zero-interest, S0-yoar Joan for construction of a power transmission line (referred to as the “Intertie”) linking Alaska's Kailbelt region to the service area of the Copper Valley Electric Association (CVEA). The {ntertic is intended to create a power supply infrastructure that would allow power suppliers in the Railbelt region to offer long-term, relatively low-cost power to CVEA. The legislature's bupe for the Intertic is that rodueed power bills wil’fromote economic development in the Copper Valley and Valdez areas. ” ¢ ath, te, The state loan for the nrertic was contingent upon the rosultetsea TeagiBttiry study. The required study was completed and published as the Coppir.Palley IntePeig Bewsibility Study by the State of Alaska Department of Community and’Regional ‘Affairs is“April 1994 (refereed to ng the 1994 Intorti Study). This report upligiéd uve 1994 Intertie Study on the basis of significant, documented changes that haveoccurttd stage the report was completed. ‘This report also summarizes a power supply s! dy cottmictctyyCVEA in June 1995. Results of the study, which also assessed the tebsibiljy of Ti Intertie, were presented in a report entitled Evaluation of Power Supply Altern fives (referred to'as the 1995 Power Supply Study). 5 i: 4 q C4 yy ax eilley, ; See # SN ekgstions SF OS on, at, 3 Following are conclusic fic th ubdate to the 1994 Intertic Study and from a review of CVEA's 1995 Power Supp) ( is iy! 1. Whether cconomic development in the Copper Valley and Valdez areas will result from the Intertie is dependent upon its impact on CVEA ratey. CVEA rates could be affected tn the following ways: + — With sole ownership of the Intertic, CVEA projects that its costs will be higher dian with diesel generation by as much as 3 pcrcent, or 0.4 cents per kilowatt- hour (kWh), during the first four years of [nterti¢ operation. “Thereafter it projects its costs relative to the diesel alternative will decrease over time to be 6 percent or 0,9 cents per kWh tower by 2014, ° If CVEA builds the Intertie and Petro Star, CVEA's largest customer, pennanently {oayes the systern and is not replaced by another customer with equivalent cnergy cpquicements, CVEA rates could cxceed those associated 1 Ad dua on cost and rate impsrets in thit Executive Summary ute ta terms of wonsiant 1995 privet I 8/18/95 Za'd Gop Haast SE6T ‘BT aK BEGE 19S 226 10L WSE—TIH WeHO shoes -21-95 MON 14:49 D--- JUNEAU FAX NO. 977362948 P.O ett ee EA FAX NO. 90 8998 P. 03/08 with diese] generation by 8 percent or 1.2 cents per kWh in 1999, devrcasing over time to no difference by 2010, Under these conditions, economic development would be impeded during the first 10 ycors of the Intertic, a If CVEA builds the Intertie, the addition ofa loud like Alyeska’s would reduce CVEA’s average rate by 6 percent or 0.9 cents per K Wh. (For a custonter like Petro Siar this would equal a savings of nearly $1 million over 5 years.) . CVEA and a potential Railbelt power supplier, Chugach Electric Association (CEA), are currently discussing possible arrangements whereby CEA would participate financially in the Intertic and integrate its sost inte its overall system costs. Under this arrangement, CVEA would,tiysclicved from all or caust of the cost burden of the {ntertic and be ensuceil et lower rates since Intertie costs would be spread over CEA’s broagéreys r base. CEA’s initial proposal would reduce CYEA rates beep as Q.7 cents per kWh, compared to continued diesel ee oes 2. Uf development of the least-cost alternative is the pt prt sb eusideration for the state, the Intertic is feasible if CVEA clectric loads Coan we rings projected. Feasibility of the Intertie is dependent on Petro Star not% system, returning to the system once the Intertic is complete, or beit Ol ed bye 2 customer with similar energy requirements, CVEA and mee curves fer to reach an agreement that provides a more competidve curn for its obligation to remain a CVEA customer. IF CVEA cea sh ag ustomer, continued reliance on diesel generation is clearly the leastec did CVEA should procecd with plans 10 improve operation inion Poutlined in its L99S Power Supply Plun. 3, The feasibility of eit construction of the RSIar OF on gat ‘selling power to CVIEA only exists prior to < Diy that period, marketing power is a realistic possibility, given CVEA’s ee tally avoided cost of nearly 7 cents. However, onee the Intertie exists, the price at WHich these firms vould market powers would be about 4 cents. 4. Based on data currently available, Allison Lake hydroelectric project, Silver Lake hydevelectric project, and Valdez Coal cogeneration® do not appear to be viable alternatives. 5. Fuel escalation rates evaluated in this study do not xignificantly impact these conclusions. Analysis and Results Following is @ review of the update results and a summary of CVEA's L995 Power Supply Plan results. 2 Cogeneration is a process by which waste heat Irdax on industsial orocess is used lo veierate cleciricily 2 REDE fA'd 66r# WeBE:P SEBT ter OTe 8669 19S 206 Held 8SS-THIH WeHD WOM ~-- JUNEAU FAX NO, 9°7°762948 P, 05 AEE ee ON So De FAX NO. 90 8998 P. 04/08 Update to the [994 Intertie Study The 1994 Intertic Study evaluated five power supply options: ’ Au Diesel—Diesel power gencration with retirement and replacement of CVEA's older diesel units - e Intertie—138-kilovoit transmission line between Sutton and Glennallen with power supplied by generation in the Railbelt ‘ Allison Lake~Hydroclectric generation at Allison Lake with contimued flow to Solomon Gulch fur additional geusration there : . Silver Lake—flydroelectric generation : * Valdez Coal-Coal-fired cogeneration producing “esi and steam) for ; district heating and electricity ai we : This report updates the above-listed alternatives and expt two adattagt options: * Petro Star cogeneration : Alyeska cogeneration Based on documented data available for-thig stu ren Silver Lake, and Valdez Coal are not viable alternatives, Alsd..da were vailable on the cost of developing and i Operating cogendration resoures 4 hex: rota or Alyeska. Therefore, this executive : summary compares only the All 1 Dies fivorand the intertie aktermative. (Maximum rates that Petro Star or Alypets 6 cSald for generation were calculated in this update and are summarized at the gi at this secionDStailed descriptions of each of the alternatives are provided in the med be revort) ' i Updated life-cycle costs an Cost ratios for the All Diesel and Intertie alternatives are ; shown in the Summary eee he fol lowing page. The tble is divided into throc sections. i The first section—cost-compares the costs assaciated with each of the alternatives. ‘The next ; section-savings compared to diesel-compares the difference in cost between the Intertic and i the All Diosel alternatives. The final section—benefit/cost ratio—indentifies conditions under which the Intertic alternative would be more beneficial than tie Ali Dicsel alternative: A ratio over { indicates that the Intertie alternative is more beneficial than the Aji Diescl alternative: a ratio less than 1 indicates that the Incertie alermative Is Icss beneficial than the All Diesel alternative}, The Ail Diesel altemative is usod as a baseline in this study because itis CVEA's current method of generating power to mect cusrgy requirements beyond those met by Solomon Guich Hydroelectric Project. 9 dara shown in the Summory Table are estimates. As suth, thoy are nat precise: sual disforenees betrrsen alternatives are not be considered yignificant. j FCVEA in cequined 19 tks ur pay Lor all Solomon Gulem generathort up tw the demand on CVEA's sytem. 4 8719793 VO-¢ GEE WdBe:h SBT ‘81 of S666 TSS 206 OL WBS-MUH WEHD WON AUG-21-95 MON 14:51 D--- JUNEAU FAX NO, 977° 362948 P. 06 (HUG 21-Yd MUN UY! 36 EA FAX NO. 90 ...8998 P, 05/08 Summary Table ~ Copper Valley intertio Feasibility Update Present Value and Benofit/Cost Ratio for Cost-Estimate Resource Alternatives’ SO'd CGH WoGE:t S66T ‘BT SMW Low Fuel Cost Eseaiation High Fuel Cost Escaiation Whi itor Wn — With SCOUT With Alternatives. __ Petro Star Potro Star Alyeska Petro Star_ Petro Star Alyssia Roat (sooo All Diese! 60,403 35,936 81,263 67,632 40,46 = 92,414 Intertie - Eeonomy Energy® 66,088 47,685 © 99,740 59,101 49,296 94,293 - Fiem Energy* W235 49,910 66,281 Ong7 51,521 70,833 All Diecet ° eh e @ 0 Intertle « Eeonomy Energy? 4908 9 -11.740 24.528 5" Fxg? 3.950 98,194 - Firm Energy* 248 = -43,974 ve 21,684 All Diesel * 1.00 1.00 (1.00 ee) interve - Ecanomy Energy? . 1.44 0.82 1.44 - Firm Energy* 1.07 0.78 1.30 Notes; ‘ 1, Based on medumiah forecast in the Intertie 2 999 Geers based on 2 4.5 parcant aston ‘on et oe, Te 3. Assumes either an economy energy sale the Rgiteelt.¢F a fem enetgy see rom MLS 4+ Assumes gither a fitn energy sale ny te inverie oF GEA ownersnip with an “aagented sa" to CVEA (ean tag My Fiem etergy i¢ oriergy yeppliad or ocSmomy energy is mtoruptinls al say time for say seasan and is therefore less wpersivg then firm ht Kea Diesel and Intertic alternatives under different sets of assumptions regarding two important parameters to the analysis; fucl costs and energy cequirements. Since the cost of fuel for CVEA affects the overall cost of cach alternative ~ differently, two scenarios for fuel cost were used in comparing the alternatives: low fuel cost sscalation (a rate of change in fuel cost of -1.18) aad high fuct cost escalation (a rate of change in fuel cost of 0.45)?. Another factor that affects the overall cost of the power supply alternatives is the amount of energy requirements, that are placed on the system, As for fuel costs, changes in CVEA's energy requizements affect the cost of different altematives differently, Three energy coquiremzent scenarios were included in this study update and are presented in the Summary Table; * With Petro Star - Assumes Petro Star wil! continue to purchase energy from CYEA. 2 These escalation cares are buied on the Alaska Deparurient of Revenue's spting (998 furwsasts. 4 8/1895 8668 T9g 486 DL B3S-TTUIH WHO noes AUG-21-95 MON 14:51 Dera JUNEAU FAX NO. £°"*652848 P. 07 (UIT EI~99 LUN USES! EA FAX NO, S{ = (8998 P. 06/08 + Without Petro Star ~ Assumes Petro Star will no longer purchase energy trom CVEA beginning in 1996 and no other comparably sized consumer will replace it ® With Alyeska -~ Assumes Petro Star loads disappear in 1996 but arc more than toplaced by the addition of Alyeska as a customer of the CVEA system beginning in 1999. Following is 2 summary of the major Hndinge presented in the table: The Intertie has the highest set of benefit/cost ratlos assuming Petré Star continues to be a customer of CVEA. This finding is gently the same as in the 1994 Intcrtie Suady, With a firm energy supply, che intextit, edsts are about the same as those projected for the All-Dicsel altemutive assu pg rave! cost escalation, Otherwise, the Intertie is calculated to have u 7 to 1A ene: dFugtage compared to the All Diesel alternative, with the most benefit pein achieved if Aalyeska svere to Juitr the system as a customer, - hy ie “P If cnorgy demands decrease because Pefro Stik. nctonger purchases power from CYEA, tho All Diesel alternative hag the fitghest benétiveast ratio. The Intertie would cost $9 million ta $14 million mgr tity imptementing the All Diesel ultemative if Petro Star 1s no longer, y ae ie CVEA. ao, 4 r As fuel costs increase, the wa ote by Tyiertte alternative increases relative to the Ail Diesel alternative?; asvimeaggrof the Interie alternative over the All Diesel altenuattive j to £ ‘ percenrage points for the high fuel cost scenario, In developing costs << Cur ight nt Metors were taken into cousideration: Oy ‘ott 1. Power demand and co; begheatiga ‘options for CYEA’s largest customer, the Pewo Star tcfinery in Valdez ae é 2, Cogeneration and possible power purchase options for the Alyeska Macine Terminal _ 3. Future options for the TransAlaska Gas System and the High Aldtude Avroral Research Project becoming customers of CVEA 4. Changes in fuel oil prices paid by CVEA 5, Changes in oil price forecasts 6 Changes in CVEA power generation options under the scenario that CVBA vontinucs to rely on diesel generation for power supply beyond that provided by Solomon Gulvh 7. Changes in the cost of power generation uvailable from the Railbelt 8. Consideration of both firm end economy energy supplics from the Railbelt wees 98°d GERM Wd6e:- SeST “eT OMY 0668 t38 ues FOL U3S-TTIN WHO: WOed AUG-21-95 MON 14:52 Dera JUNEAU FAX NO. °°7*652948 P, 08 oS s oy WAY YON) 1VOA FAX NO. 8 18998 P,07/08 242° Gere As mentioned earlier, data were not available on the cost of developing and operating Cogeneration resources at either Detro Star or Alyeska; however, maximum rates that these firmas could charge for generation were calculated in this update. in order to be cost cuulpetitive, the cost of generation from these facilties would need ty he lesg than the cost CVEA would otherwise incur over the long term. Without the Intertie, these costs arc estimated to d¢ as low as 7 cents per kWh. If the Intertie were constructed, the market for output from Petro Star or Alyeska would be limiced to nonexistent, It would be limited to prices of about 4 cenw per kWh if CVEA were to buy energy from the Railbelt without any conditions regarding the quantity ir would be obligated to buy; it would be nonexistent if CVEA were to enter into a contract with a Railbelt utility that obligated CVEA to buy power to micetall of its energy requirements beyond those currently ene as by Sulomon Gulch. CVEA Power Supply Pian On € The CVEA 1995 Power Supply Sindy. mentioned earlier, a ant ep iyous than the 1994 {nterti¢c Study and this update. Asa result, while the nding inks ane simil inghey ore reported differently, ‘The £994 Intertie Study evaluated powefgupplys FBjreatives from the standpuint of the cost of natural, human, and capital resources rooted toidcyclop and operate the required facilities. However, the study did nef'consiger tt, {oan, which is simply a transfer of funds to pay fora portion of beta Srisesys “OK the other hand, CVEA’s 1995 Power Supply Study evaluated t wer pelt alternatives from the standpoint of costs to its ratepayers. Since the sta ae ‘oul efiice the cost of the (ntertic to CVLA's ratepayers, it was considered in SS As a result of its focus, the C3 fier plan for the All Diesel alternative that differed significantly fro ons in'ibe 1994 Intertie Study, With the same method used to calculate resu x ‘Table, the CVHA diesol generation plan compared to the All Diy vtemas in the 1994 [ntertic Plan resulted in benctit/cost ratios from 1.13 to 1.22 dependi Salo fel and load svenarios. In same scenarios, benctits of the CVEA version of the All "Bigsel alternative are higher than those for the {ntertic; in some cases they arc lower For example, if Petro Star continucs to be a customer, the CVEA Al! Diescl alternative has greater benefits than the [nterse alternative assuming low fuel cost escalation; assuming high fuel cost escalation, the hencfits are similar for the two . altematiyes. The CVEA All Diesel alternative continues to have greater benefis assuming the permanent loss of Petro Star loads, while the Intertie continues to have greater benefits assuming the addition of new loads like those of Alyeska. Besides a ditferently configured All Diesel alternative, the CVEA power supply study forecasts the utility's overall cost of power for two other power supply alternatives: the Base Intertie alternative (with the Intertie owned by CVEA) and an Intertic-CEA Integration alternative (with the Intertic owned by CEA, a potential power supplier from the Rail belt). As mentioned earlier, the CVEA analysis reflected the benefits of the $35-million state loan to the owner of the Intertie. CVEA also assumed purchase power rates proposed by CLA in Cl ed HeGE IF SGET ‘Bt ony 8566 T9S 406 OL BES-TIH WEHD WOM Sutton-Glennallen Intertie Schedule 1994 1994 $35 million appropriated to DCRA for Sutton-Glennallen intertie loan (Ch 19, SLA 93) State Loan Appropriation April Feasibility study (final report) issued by DCRA May Plan of Finance issued by DCRA State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. | Lawsuit: Alaska Cogeneration | Systems Inc. (ACSI) Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction Contingent on feasibility study and plan of finance "satisfactory" to DCRA. Page 1 8/25/95 Sutton-Glennallen Intertie Schedule 1994 1994 an State Loan Appropriation June July Finding issued by DCRA Commissioner: Studies are "satisfactory" August September State / CVEA Loan Agreement Loan application submitted to DCRA by CVEA Administrative Appeal: Trustees for Alaska et. al. Administrative appeal filed in State court challenging DCRA Commissioner's finding Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) ACSI files suit in State court to enjoin State from issuing loan Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction Page 2 8/25/95 Sutton-Glennallen Intertie Schedule 1994 1994 1994 1995 State Loan Appropriation October November December State / CVEA Loan Agreement Division of Energy (DOE) CVEA comments on proposed sends proposed loan loan agreement; DOE makes agreement to CVEA "final" revisions Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) ACSI State court case dis- Federal court issues missed; ACSI files in federal | preliminary injunction against court to stop intertie loan execution of the loan Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction Page 3 8/25/95 Sutton-Glennallen Intertie Schedule Governor suspends further action on project; appoints 3-member review team Division of Energy briefing with Governor Knowles State Loan Appropriation State / CVEA Loan Agreement Parties agree to stay of pro- ceedings; case has barely begun due to lengthy delays Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement Federal court lifts preliminary injunction AK Public Utilities Commission Other Permits and Approvals Project Construction Page 4 8/25/95 Sutton-Glennallen Intertie Schedule 1995 State Loan Appropriation By 8/31, AIDEA / CH2M Hill report issued** September Public comments / public meetings; recommendation to Governor by 9/30 State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Parties agree to extend stay Stay of proceedings scheduled to expire 9/15/95** Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Federal court grants stay of proceedings Federal court grants extension of stay Stay of proceedings scheduled to expire 9/15/95** Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction *In this schedule, italics signify projection of future actions or events ** Attorney General's office to request further extension of these stays Page 5 8/25/95 Sutton-Glennallen Intertie Schedule 1995 1995 1996 October Governor's decision and revised / supplemental DCRA finding by 10/16 State Loan Appropriation November December January DOE /CVEA discussions resume on terms of loan agreement** State / CVEA Loan Agreement Loan agreement executed. Phase 1 (pre-construction) limited to $7.3 million Administrative Appeal: Trustees for Alaska et. al. Litigation continues** Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Litigation continues** Environmental Impact Statement CVEA retains contractor for NEPA process / EIS; also retains design contractor AK Public Utilities Commission Other Permits and Approvals Project Construction ** In the event the Governor decides to go forward with the intertie project Page 6 8/25/95 Sutton-Glennallen Intertie Schedule 1996 State Loan Appropriation February State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction Page 7 8/25/95 Sutton-Glennallen Intertie Schedule eet 1996 1996 1996 1996 September State Loan Appropriation State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction | Page 8 8/25/95 Sutton-Glennallen Intertie Schedule 1996 1996 State Loan Appropriation November December State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction Page 9 8/25/95 Sutton-Glennallen Intertie Schedule 1997 1997 1997 1997 February State Loan Appropriation State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction Page 10 8/25/95 Sutton-Glennallen Intertie Schedule 1997 1997 1997 State Loan Appropriation September State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement AK Public Utilities Commission Other Permits and Approvals Project Construction Page 11 8/25/95 li Sutton-Glennallen Intertie Schedule 1997 1997 State Loan Appropriation November December State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement Completion of EIS; acquisition of ROW across federal land AK Public Utilities Commission APUC approves wholesale power contract and other related matters Other Permits and Approvals Acquisition of ROW com-plete; supplemental financing obtained; permitting complete Project Construction Project construction begins spring 1998; construction complete Dec. 2000 Page 12 8/25/95 AUG-04-95 FRI 14:03 pIneA FAX NO. *°7618998 aR? 02/04 _~ * ALASKA INDUSTRIAL DEVELOPMENT ake AND EXPORT AUTHORITY [2 ALASKA ME ENEACY AUTHORITY * 480 WEST TUDOR ANCHORAGE, ALASKA 9503 907 / 61-8050 FAX 907 561-89u8 MEMORANDUM TO: William R. Snell Executive Director FROM: D. Randy Simmons, Finance and Development Manager Katelyn Ohmer, Development Specialist DATE: August4, 1995 SUBJECT: Public input Process- Sutton-Glennallen intertie After thought and discussion , the following is a proposal of options for obtaining public input on the update of the feasibility study on the Sutton-Glennallen Intertie. Each option provides a public review of the findings and would provide information to use in making a decision on project development. We have included the perceived positive and negative factors associated with each option. Form Process Positive Factors Public Hearing Advertised public *Wide-spread public meeting with comment. facilitator; agenda: summary of findings Facto: “Cost (staff time, advertise, room rental). *Time (plan meeting, advertise, summarize findings). “Usefulness of findings questionable “Media coverage unmanageable. “Decision would not be made through process. AUG-04-95 FRI 14:03 AINEA Roundtable meeting Study sent to affected with affected parties. parties (see below) in advance; face-to-face meeting to discuss the proposed project. Study sent to affected parties (see below) in advance requesting comments (specific questions provided). Press release drafted for Governor's approval. Press Release No Public Comment FAX NO, “Direct feedback by affected parties. “Cost would be limited. *Minimal cost. “Limited staff time. "Managed public input. “Wide spread media coverage. "Decision would be approved by the Administration. “Controlled oversight. *Summary of all parties concerns presented to general public in press release. 1618998 P. 03/04 + *Scheduling may be difficult. “Public input may be difficult to manage. *Media coverage may be disruptive. *May require strenuous project oversight and follow- up. “May be difficult to have an Administrative stance. “Some affected parties may be left out “May be perceived as lacking public process. *May be perceived as tacking public process. *Controlled oversight. “Some affected parties may be left out. Below is a list of “affected parties which would be asked to participate in the public input process. \ Jtilities . Copper Valley Electric Assaciation (CVEA) Matanuska Electric Association (MEA) July 27, 1995 To: David Gray CH2M Hill fer From: Dick Emerman ( Alaska Division of Energy Subject: Treatment of Railbelt capacity costs in intertie scenario In the draft feasibility study circulated for comment in January 1994, we did not include a capacity component in the projected cost of Railbelt energy in the initial years of intertie operation, but we did add a capacity cost of 0.3 cents per kWh starting in 2005. This was based on the assumption that Chugach Electric would maintain capacity that is surplus to its own peak and reserve requirements until 2005, but would then install anew 100 MW combustion turbine and allocate a share of its cost to Copper Valley. Attached are selected pages from the January 1994 draft report with relevant segments highlighted. We received at least one comment from a utility reviewer taking issue with this treatment of Railbelt capacity costs. Matanuska Electric argued essentially that Chugach would maintain the same level of capacity regardless of the intertie and economy energy sales to Copper Valley. We understood the implication of this to be that, when necessary, Chugach would supply Copper Valley from its 30% reserve margin, at least some of which would normally be available even during peak load conditions, and which would be unavailable only as a result of planned or forced outages. The analysis already provides sufficient capacity in Valdez and Glennallen to meet Copper Valley’s needs when such outages occur. Attached is the relevant portion of Matanuska Electric’s letter with the relevant segment highlighted. To my knowledge, the Railbelt utilities have not established a policy on this issue in view of the considerable excess capacity they presently have. John and I decided to drop the Railbelt capacity component per the letter from Matanuska Electric, recogizing that the issue (at least at 0.3 cents starting in 2005) was not a major factor in the analysis and could probably be argued either way. Attached are the corresponding pages in the final report that reflect our removal of the 0.3 cent capacity cost. ce: John Heberling AUG-04-95 FRI 14:04 ATNEA FAX NO, *°75618998 P, 04/04 Chugach Electric Association (CEA) Anchorage Municipal Light and Power (MLP) Four Dam Pool (PMC) Government Entities: Legislators in district (Lincoin, Kubina, Mat-Su legislators) City of Valdez Matanuska Susitna Borough Alaska Public Utilities Commission Dept. of Environmental Conservation Major Private C He Alyeska Pipeline Petro Star Valdez Inc. Others: Cook Inlet Regiona! Corporation (C!RI), (land use) Ahtna (land use} Parties of the lawsuit Environmental action committees Arco Alaska B.P. Alaska R.W. Beck previously conducted advertised public meetings in Sutton, Glennallen, Chickaloon, the Glacier View area and Valdez to obtain comments from the general public concerning the Intertie, and to repeat the public meetings is viewed as unnecessary and costiy (not to mention unruly and time- consuming). For your information, Governor Knowles currently favors a “round table” approach to public input. We are ready to discuss the options at your convenience. Thank you. AUG-04-95 FRI 14:03 pINEA FAX NO, °°75618998 P. 01/04 ALASKA INDUSTRIAL DEVELOPMENT =_ x AND EXPORT AUTHORITY ==> ALASKA ME =ENERGY AUTHORITY ere ee 460 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8CS0 FAX 907 /$61-8998 DATE: ghilas a 1™5:__Zp__REGEIVED PLEASE DELIVER THE FOLLOWING PAGES TO: AUG 04 RECD DIVISION OF ENERGY/DCRA THIS TRANSMITTAL 1S FROM: Settee Colma . TRANSMITTING FROM: SHARP FAX 5400T (907) 561-8998 NOIMBER OF PACES (INCLUDING COVER PACE):_ = : HARD COPY TO FOLLOW BY: egular Mail Courier No Documents will follow this transmissio. I¥ YOU EXPERIENCE ANY PROBLEMS IN RECEIVING, PLEASE JELEPHONE IBE OFFICE NUMBER (907-561-8050) AND ASK FOR | . MOTICE: This facsimile contains confidential information that is being transmitted to and is intended only for the use of the recipient naned below. Reuding, disclosure, discussion, dissemination, distribution, or copying of this information by anyone other than the named recipient or his or her employees or agents is strictly prohibited. If you have received this facsimile in error, please immediately destroy it and notify us by telephone, (907) 561-8050. Ze DOCSHS23/p9 A Fax From The Department of Cormmunity & Regional Affairs Division of Energy Mating Address: = 333 West 4th Avenue, Suite 220 333 West 4th Avenue, Suite 220 Anchorage, AK 99507-2347 Anchorage, AK 99501-2347 Main Telephone Number: (807) 269-4500 Orrector'’s Fax Number: (907) 269-4645 Engineering Fax Number: (907) 269-4685 Deliver Fax to: _ Te lee: fon. Company Name: aA. e a Company Address: : ; Fax Phone #: LES — ¥ LEE Sender: -_ ra Sain2e sean Senger's Phone # : 32 2a 207 = SES. # Of Pages Sent: Cate Fex Sent: - SZ 25 a5 Mf you don't receive all of this fax, please call sender DIRECTLY. SPECIAL INSTRUCTIONS TO en RECIPIENT: — a a ae Sam Teg P oc —— See ge oe =. AEP en Atnees s ae a feo Se, Of FERS fn Cy AOL ena — ‘at ae 34% ey ee | TRANSMISSION REPORT | THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) ** COUNT ** TOTAL PAGES SCANNED 2 TOTAL PAGES CONFIRMED : 2 sek SEND kK [No. REMOTE STATION | START TIME | pt RATION|#PAGES | MODE | RESULTS i ul 206 441 4964 | 7-27-95 11:48 1°32" 2/ 2 COMPLETED I | 9600 l TOTAL 0:01°32" 2 NOTE: : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION > RELAY INITIATE RS : RELAY STATION No. : OPERATION NUMBER 48 PD : POLLED BY REMOTE SF : STORE & FORWARD Ri: f MB : SEND TO MAILBOX PG : MULTI -POLLING RM : RECEIVE TO MEMORY : POLLING A REMOTE MP : 21-P1LH aT RECORD COPY VY / A\ TONY KNOWLES, GOVERNOR STATE QE ALASK! vy UIG YE WIN NA) O SEAL ALASKA 66611-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND / REGIONAL AFFAIRS = hcnonae ALASKA oosot 2044 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER : FAX: eo?) 269-4520 July 25, 1995 Ms. Donna Tollman Executive Director Copper Valley Economic Development Council, Inc. P.O. Box 9 Glennallen, Alaska 99588 Dear Ms. Tollman: Thank you for your letter of July 7, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project’s feasibility including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. rely, } 4 Vt Arr / Mike Irwin ‘Commissioner Si . Mee TO tee COPPER VALLEY ECONOMIC DEVELOPMENT COUNCIL, INC. P.O. Box 9 Glennallen, Alaska 99588 PeCEM i) JUL11 1995 RECEIVED 4 COMMISSIONER'S OFFICE — 14 RECD COMMUNITY & REGIONAL AFFAIR sion oueeeane July 7, 1995 Department of Community and Regional Affairs Commissioner Mike Irwin PO Box 112100 Juneau, AK 99811-2100 Dear Commissioner Irwin: On behalf of the Board of Directors of Copper Valley Economic Development Council, Inc., an ARDOR organization, we would like to reiterate our profound support for the Sutton to Glennallen Intertie. Infrastructure in rural Alaska at times is almost an insurmountable problem when economic development is discussed, however the Sutton to Glennallen Intertie is an infrastructure issue which does not need to present a barrier to the development of the Copper Valley Region of the state. The removal of this barrier is certain to allow development to occur and for this region to realize its full potential. "Other" development has not been discussed when feasibility studies were completed. Among the potential d we see is the Alaska Pork Project, forestry value added production, the Trans Alaska Gas line and a rapidly growing tourism industry. Investors have repeatedly stated, until the cost of energy is stabilized or lowered, we are not a feasible location for them to invest in. Realizing the concerns of the residents in the Sutton and Chickaloon area, and the difficult decision ahead, it must be remembered the line has been relocated innumerable times, to accommodate the concerns of these individuals. The Intertie is the only long term solution for our region. Seward serves as an excellent example of what can occur with affordable and reliable energy. We hope we will be afforded the same opportunities for sustainable development in our regions. We look forward to a favorable decision and a prosperous future for our region. Sincerely, Donna Tollman Executive Director sl ARDOR SHAPING ALASKA’S FUTURE Ph. (907) 822-5001 - Fax (907) 822-5009 lO-Cle Commissioner's Office Route Slip Te; (2) Administrative Services (2 Director ——_ID Energy Divisic : é —F Director R ‘ Slo Deputy Direc tort oe, (3 Municipal & Regional Assistance C) Director (2 Deputy Director ( Rural Development (© Director C3 Deputy Director CO Initial & Retun © PleaseComment O See Me © Draft Reply © Your Information [| Duplicate Copies © Reply Direct © For Your File © Please Distribute © Sign/Approve © Action Required © Post or Circulate © As Requested CD Please File ee PETRO sTYyr tenn, 201 Arctic Slope Avenue, Suite 200 Anchorage, Alaska 99518-3030 ps CEIVED Telephone: (907) 344-2661 Fax: (907) 267-6429 JUL 2 July 18, 1995 - 1 1995 COMMUN SS rp Rear ) OFFice RECEIVED . Al AFFAIRC Mr. Riley Snell JUL 2% RECD Director AIDEA DIVISION OF sepa 480 W. Tudor Road ; Anchorage, AK 99503-6690 ( tn MmnUuc Dear Mr. Snell: As a follow up to our discussion on the Sutton to Glennallen intertie project, its impact on Petro Star Valdez Refinery (PSVR), and the future power requirements of PSVR, I would like to submit the following: Petro Star Valdez Refinery believes the intertie project to be crucial to the development of new and existing electrical generation facilities and the efficient distribution of power throughout central Alaska.. As we discussed, PSVR is currently developing plans for a small scale co-generation project to address the high cost of its own powér. This is a quick solution to an immediate problem that we face at our refinery and will not address the long-term need for reliable low cost power in this portion of the state. With the anticipated schedule for completion of the intertie line (seven years), a small co-generation facility can be installed and serve a useful economic life prior to delivery of power over the intertie. Continued operation of this co-generation facility by PSVR after completion of the intertie and the availability of lower cost power would have to be determined at that time. However, with the intertie line in place, a whole new realm of opportunities will exist for the generation and/or use of power for this portion of the state. An interim PSVR project will in no way detract from the long-term need for reliable, low cost power provided for by the intertie. The PSVR project would provide, however, an interim power supply alternative for CVEA pending completion of the Sutton to Glennallen transmission line, a solution ; for PSVR’s short term problem, and a potential standby source of power \ once the transmission line is completed. _Letter to Mr. Riley Snell July 18, 1995 Page 2. If you have any questions or concerns, please feel free to contact me. Sincerely, ’ James F. Bol VP, Engineering & Technical Support CC? Clayton Hurless, CVEA Stephen T. Lewis, PSI Mike Irwin, Commissioner, DCRA John Shively, Commissioner, DNR tdm/JFB/snell07 1 8.doc A Fax From The Department of Comrunity & Regional Affairs Division of Energy = Physical Address: 333 West 4th Avenue, Suite 220 3323 West 4th Avenue, Sulte 220 Anchorage, AK 29601-23417 Anchorage, AK 99501-2341 Main Telephone Number: (807) 269-4500 Director's Fax Number: (807) 269-4645 Engineering Fax Number: (307) 269-4685 Deliver Fax to: 7 Ss J CAN lon 5 Company Name: = LC, &% (se. = Company Address: Fax Phone #: Zoe “YC F TES = ; Sender: Z Dice Frere, Foz 2697- f6EVF Sender's Phone # # of Pages Sent: Date Fax Sent: DLle2< eS af you don't receive all of this tax, please call sender DIRECTLY. SPECIAL INSTRUCTIONS TO FAX RECIPIENT- a fH a fase on 2. = = | TRANSMISSION REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) *%« COUNT ** TOTAL PAGES SCANNED 3 TOTAL PAGES CONFIRMED 3 oe ae 4k SEND 6k }No. REMOTE STATION START TIME [DURAT 1 ON] #PAGES MODE RESULTS 1 206 441 4964| 7-26-95 12:04 | 1°56" 3/3 COMPLETED | 1 | 9600 ae i ae dt | I TOTAL 0:01 °56" 3 NOTE: : ERROR CORRECT G2 : G2 COMMUNICATION No. : OPERAT!ON NUMBER 48 : 4800BPS SELECTED EC : PD : POLLED BY REMOTE SF : STORE & FORWARD RI: RELAY INITIATE RS : RELAY STATION MB : SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI-POLLI\G RM : RECEIVE TO MEMORY JUL-21-95 FRI 11:04 AIDFA FAX NO. 977518998 P. 01/04 ALASKA INDUSTRIAL DEVELOPMENT > iis sehoomalttnceeey /, ALASKA ; @az— ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / §61-80506 FAX 907/561-8998 pare: 2/a/¢@S° TIME: PLEASE DELIVER THE FOLLOWING PAGES TO: ___ fe a THIS TRANSMITIAL IS FROM: — iC AWoY Simmowy TRANSMITTING FROM: SHARP FAX 5400T (907) 561-8998 NUMBER OF PAGES (INCLUDING cover PAGE):__-So 9 HARD COPY TO FOLLOW BY: Regular Mail _ Courier No Documents will follow this transmission. IF YOU RXPERIENCE ANY PROBLEMS IN RE ING, PLEASE TELEPHONE THE OFFICE NUMBER (907-561-8050) AND ASK FOR Cig NOTICE: This facsimile contains confidential information that fs being transmitted to and js intended only for the use of the recipient named below. Reading, disclosure, discussion, dissewination, distribution, or copying of this information by anyone other than the named recipient or his or her employees or agents is strictly prohibited. If you have received this facsimile in error. please immediately destroy it and notify us by telephone, (907) 561-8050. SPECIAL INSTRUCTIONS OR COMMENTS ee UE IIIS EIIIIEIII SSSI =< cocsise3/p9/~ \ KC tn Linry X YU ™ ikea JUL-21-95 FRI 11:05 AINFA FAX NO. £77"618998 P, 02/04 Y pi SERVICE ine "638 SOUTH BRAGAW STREET ANCHORAGE, ALASKA 495°2 David Pritchard President & CEO June 13, 1995 Mr. Mike Irwin, Commissioner APSC Letter # 95-3009-G Department of Community and Regional Affairs 333 W. 4th Avenue, Suite 220 Anchorage, Alaska 99501-2341 Subject: Sutton - Glennallen Intertie Dear Commissioner Irwin: We have received your letter dated June 2, 1995 regarding the Sutton - Glennallen Intertie. We appreciate the inclusion of Alyeska in the Governor's review process for this project. The issue of power import or export for the Valdez Marine Terminal is a complex issue and one which we are currently reviewing in the light of the anticipated regulations for tanker vapor control. The following represents our perspective on the Sutton - Glennalien Intertie and the questions posed in your letter. The Valdez Marine Terminal (VMT) was designed and has been operated since start-up as a stand alone facility in terms of electrical power. The VMT power is generated by steam driven turbines with the steam being created in boilers fired by a combination of diesel fuel and hydrocarbon vapors from the tank farm vapor control system. There are three boiler/steam turbine generator trains cach capable of producing 12.5 Megawatts (MW) of power for a theoretical total of 37.5 MW. Actual VMT power need/isage is currently in the range of 6-9 MW. This is expected to increase to 7-11 MW when tanker vapor control is implemented at year end 1997. The design of the VMT power facilities is such that the power generation and existing vapor control systems are integrated. As such, by-products from the power generation operation - steam and inert (flue) gas, are used as key elements of the vapor control system. This philosophy will be continued when tanker vapor controls are added at the terminal. Alyeska is keenly interested in running its operation as cost effectively as possible. As such, the cost of operating the power and vapor contro! system has and will continue to be studied periodically in the light of changing fuel costs, alternate power sources, power export potential, improved technology, etc. Import and/or export of power may be of interest, but only based on of a rigorous understanding of the technical, economic, reliability, legal and tax issues involved. Technical and economic considerations require the cost of changing the existing power/vapor system, to allow vapor control to be accomplished essentially on a stand-alone basis. to be attractive relative to the cost of JUL-21-95 FRI 11:05 AINFA v / FAX NO. £°7°318998 P, 03/04 Mr. Mike Erwin, Commissioner Sutton-Glennallen Lotertie June 13, 1995 Page 2 imported power when taking into account the remaining life of the VMT. Reliability questions regarding imported power are another significant factor to Alyeska given the vulnerability of remote transmission lines particularly through the Thompson Pass area. Given the complexity of the VMT situation it is unrealistic to expect that the necessary power purchase price and availability information could be known with sufficient certainty until significantly later in the implementation phase of bringing the state power grid to Valdez. Accordingly, Alyeska has taken the position that the decision on whether or not to proceed with the intertic should be addressed without account of whether Alyeska will buy or sell electricity, or remain a stand alone facility. This remains our position. We would welcome an opportunity to meet with you and your staff to discuss this further. Please contact Norman Ingram (265-8730) Sincerely, SEIAS- David Pritchard President & CEO DP:NI/csc JUL-21-95 FRI 11:06 AINFA FAX NO. 9°77 718998 P, 04/04 ; ys us oS jars S 2dS50R4 APSC EXec Ullive -+~ bd2 vapor Coli waar TONY KNOWLES, GOVERNOR ———— .0,80x 112109 , ; FUNGAL, ALASKA 9B8T1-2100 BHONE: (907) 454700 DEPARTMENT OF COMMUNITY AND =—— a REGIONAL AFFAIRS OF at Were AVENUE SUTE ZrO PHONE: (007) 240-4600 OFFICE OF THE COMMISSIONER FAX: (807) 280-4620 June 2, 1995 Mr. David Pritchard, President Alyeska Pipeline Service Company Mailstop 528 1835 South Bragaw Anchorage, Alaska 99512 Subject: Sutton-Glennallen Intertic Ea Dear Mr. Pritchard: The State of Alaska isl continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has; appointed 2 cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to'be transmitted aver the line, the future source of power for Alyeska’s Valdez terminal is an important piece of the puzzle. - | In the imertie feasibility study completed a year ago, it was assumed in all scenarios that the Alyeska terminal Hier ge iso indefinitely from the utility grid and would continue to self-generate all of the terminal's power requirements. We imderstand. however, that utilities are interested inl supplying power to the terminal ~ power that would be generated in ee se ee ee ee A decision by Alyeska to purchase most or all of its Valdez terminal power supply over the intertie would be a dominant factor in the project economics, and therefore it is essential that ws factor in to our snalyils wheiere: 400 can tel] us acts tie company’s fires power supply TL por nag there may be important technical issues in addition to considerations of reliability cost. ‘ If you suggest that there is an even chance ~ or a better than even chance - of purchasing powsr for the terminali over the intertie. we would consider this an important factor in ding whether the project development process should be kept alive. In the future, if a a financing depends upon it, ectual purchase commitments would clearly be needed ‘ore the start of project construction. If, on the other hand, y Sunes that it is unlikely that Alyeska would purchase power over the proposed intertie, we base our recommendations to the Governor on the project's viability without regard to possible future interconnection of the Valdez terminal. I would certainly appreciate an oppornmity for a member of our review team to formally discuss a Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs In THE ial / TONY KNOWLES, GOVERNOR O P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND ee © Fr LAS as ae PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 7, 1995 Ms. Meera Kohler General Manager Naknek Electric Association P.O. Box 118 Naknek, AK 99633 Dear Ms. Kohler: Thank you for your letter of June 20, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project's feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. ommissioner sutton.doc CcCIO-012 Commissioner's Office Route Slip TO: (3 Administrative Services (Director ‘ ~E) Energy Divisi BP Visi dean be t we des Director (2 Deputy Director C) Municipal & Regional Assistance ( Director (J Deputy Director C[) Rural Development (3 Director C3 Deputy Director © Initial & Retum © PleaseComment O See Me © Draft Reply © Your Information [© Duplicate Copies © Reply Direct © For Your File OC Please Distribute © Sign/Approve © Action Required © Post or Circulate © Please File oO NAKNEK ELECTRIC ASSOCIATION, INC. POST OFFICE BOX 118» NAKNEK, ALASKA 99633 * PHONE (907) 246-4261 + FAX (907) 246-6242 June 20, 1995 PECEIVE; Mr. Mike Irwin, Commissioner JUN 26 Department of Community & Regional Affairs N2 1995 P.O). Box 112100 Cc a Juneau, Alaska 99811-2100 a OMMISSIONER'S OFFICE a MMUNITY & REGIONAL AFFAIRS Dear Mr.—trwin As you perform your review of the proposed Sutton to Glennallen transmission line project, I wish to offer the unmitigated support of Naknek Electric Association. Copper Valley Electric Association depicts, in a large sense, the plight that all of the non-intertied utilities find themselves in. Too small to enjoy their own economies of scale and too small to justify the cost of interconnecting into a larger system in order to spread the benefits of their economies of scale. The dilemma is nowadays complicated further by the increasing clout of the "environmental" community. Although small in numbers, these individuals are articulate and persistent and are able to cast enough doubts on any proposed development to stunt or even stop it altogether. The fact remains that electric utilities exist to provide the service that their consumers demand. It is crystal clear from the various studies that CVEA’s service area is consuming more electric energy every year. One third of the power sold by CVEA in 1994 was generated from diesel fuel. Any expansion to their hydroelectric generation capacity will have a finite limit to the energy it can provide and its own environmental and operational costs. Tying the CVEA system into the railbelt is the only logical solution to the power needs of the Copper River and Valdez districts. There are vast quantities of relatively non-polluting natural gas and excess capacity available in South Central Alaska to provide all of the needs of CVEA’s service area. To force this utility into purchasing new diesel generation when there is accessible capacity elsewhere would be irresponsible and completely unjustifiable. Mr. Mike Irwin, Commissioner Department of Community & Regional Affairs Page Two I believe that CVEA has done its homework and presented an unarguable case to win the funding approved by the 1993 Legislature for this intertie. For a handful of intractable opponents to be able to block this vital project is simply beyond comprehension. I urge you to look closely at the merits of this project. I am convinced that you must agree that there is no other long-term, cost-effective solution to meeting the energy needs of this area. Sincerely, ele Meera Kohler General Manager MK/dv / TONY KNOWLES, GOVERNOR O P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS O ANCHORAGE, ALASKA 60601-2041 ; PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 7, 1995 Mr. Wayne Parkin General Manager Barrow Utilities and Electric Cooperative, Inc. P.O. Box 449 Barrow, AK 99723 Dear Mr. Parkin: Thank you for your letter of June 26, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project's feasibility, including another look at key assumptions.. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. fo Sincerely, - a kh Mike Irwin Commissioner sutton.doc Barrow Utilities and Electric Cooperative, Inc. P.O. Box 449 Barrow, Alaska 99723 ye RECEMET Sif) JUN 30 1995 June 26, 1995 ns AMISSIONE; SA EEIA COMMUNITY @ pertes OFFICE REGIONAL AFEAID Commissioner Mike Irwin Department of Community and Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Dear Commissioner Irwin: I am writing you to urge your support of the Sutton to Glennallen Intertie. Having lived in the Glennallen area for some years and having worked for Copper Valley Electric Association. I feel I can speak with some authority of the need for this intertie. Many of the facilities that have been built in Alaska have been looked at as marginal, with some skepticism. When "C" Street was extended from Northern Lights Boulevard to International Road, there was a big "huff" that building that street through the muskeg swamp was in poor judgement. It was to say the least, an alternate go get to the airport, with out going out Spenard Road, but surly did not pass through any populated area. That was less than 25 years ago, now look at the difference. Many of the sections of the State power grid have been marginal, when Homer Electric had less than 1000 consumers, Chugach Electric Association had the foresight to extend its transmission line to serve its needs, now serving nearly 16,000 consumers, in barely over 30 years. The issue hefore you is not one of "now" but of the future. The Copper River and Valdez areas are rich in resources and have tremendous potential for a contribution to the Alaskan economy. I would urge your support of the Sutton to Glennallen Intertie. Yours truly, BARROW UTILITIES & ELECTRIC COOPERATIVE, INC. Wayne Parkin General Manager cc: Clayton Hurless, G.M. 2 21-P11H If (C (fyi if j \ hk TONY KNOWLES, GOVERNOR O P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS C7 333 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 7, 1995 Mr. Dave Hutchens Executive Director Alaska Rural Electric Cooperative Association, Inc. 703 W. Tudor Road, #200 Anchorage, AK 99503-6103 Dear Mr. Hutchens: Thank you for your letter of June 8, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project's feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. nc iran Commissioner sutton.doc : Alaska = Rural an OBR Electric Tandon Ral, #200 Cooperative Vnchonge. VK 998038 6650 ARECA 107) 361-6103 PAN (907) S01 Association. Ine. June 8, 1995 Mr. Mike Irwin, Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Dear Mike: The Sutton to Glennallen intertie will probably occupy more of your time over the next couple of months than you would like, but | hope the cabinet level task force on that subject and Governor Knowles will ultimately come to the conclusion that this is a worthwhile piece of infrastructure and it should be built. The formal feasibility study followed the rather narrow and strict directives which used to be required by statute for projects of the Alaska Energy Authority. Even when measured by that procedure, this intertie came out looking pretty good. To my members in the utility industry. this old AEA feasibility study process always looked artificial and quite distant from reality. As we frequently told legislative committees through the vears, if the feasibility of other infrastructure projects had to be determined under the same rules. the Parks Highway never would have been built. here are any number of development projects which may occur if the line is built, but under the rules. they were not considered in the feasibility study. For example. there are known mineral deposits along the route of the proposed intertie. The ability to puta substation on the line to serve a mine load may well be a very significant factor in deciding to develop a potential mining operation. Railbelt utilities may negotiate an agreement to supply power to the Alyeska terminal in Valdez. This would result in a very large bloc of power being transmitted over the line. When the time comes that the Yukon Pacific Corporation is able to build its pipeline to Valdez. they will need a liquefaction plant which will exhaust waste heat equivalent to 50 to 100 MW of power. Ifthe Sutton to Glennallen line were in place. YPC could put in a cogeneration plant and sell its surplus power in the Railbelt grid. The timing for that very likely could work out to match the need for the next increment of power in the Railbelt rh I wish I could tell you that these things will happen if the Sutton to Glennallen line is built, but I can't. No one can know with any certainty which, if any, of these things will happen. What I can tell you, though, is that without the Sutton to Glennallen Intertie. it is a certainty that none of these things will happen. The low load growth projected by opponents of the intertie will become a self-fulfiling prophecy if they are used to prevent construction of the line. This project makes so much sense to professionals in the utility industry, that we have a hard time understanding how opposition to this line can be taken very seriously. We have heard that you are contracting with CH2M Hill to review the feasibility of this project. We certainly hope this review will be a "real world" look at its feasibility rather than being constrained by the now repealed statute. We wish you success in your review of this project, and we hope you are able to provide Governor Knowles with a firm recommendation that it should be built. Sincerely, David Hutchens Executive Director vu ui ( vev es eta) AN VILLASUC LELLUINIUT™ LANA UIY UP CIVCRUI> L/L Alaska Village Electric Cooperative, Inc. 4831 Eagle Street Anchorage, Alaska 99503-7497 (907) 561-1848 (907) 561-2288 FAX July 3, 1995 Mr. Mike Irwin, Commissioner REC Ey VED Department of Community and Regional Affairs JUN : : P.O, Box 112100 : ©) Reo Juneau, Alaska 99811-2100 MSION oo 4 ENE, SY/0cRy Mr. John Shively, Commissioner Department of Natural Resources 400 Willoughby Avenue Juneau, Alaska 99801-1796 Mr. Riley Snell, Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503 Gentlemen: This letter is written in support of the Sutton to Glennallen 138 kV transmission line project. This project has been studied in depth and submitted to public review. In our opinion, it is clearly in the best interests of all Alaskans that this important piece of our economic infrastructure be put in place. With the Sutton to Glennallen “energy highway" in place, we will have the capability to maximize the efficient utilization of our energy resources. Under any scenario of future events our economy is strengthened by this project for the ultimate benefit of ali Alaskans. We and our fifty villages join with the Copper Valley Electric Association in respectfully requesting your favorable consideration and decision on this important project. Sincerely, Hale hide Charles Y. Wallis General Manager es US Retun Kee Lee Tony Knowles Mrerrr be Citd JO BW RECEIVED — Vv |. JUN 26 RECD ZICTRIC ASSOCIATION INC. Box 71249, Fairbanks, AlaskpiQRiQ¥ Ui GR ERGYSDERIO7-452-1151 RECENME)) ye JUN 23 9995 COMMISSIONER'S OFFICE COMMUNITY & REGIONAL AFFAIRS Sa) > Stare of Alaska’ (2 | fom V9 Floor suucau an yyvol1-0001 Dear Governor Knowles: Although the Valdez/Copper Basin is far from our service territory, the Copper Valley Electric Association is our sister co-op. We've maintained close ties with their board and management as they have struggled time and again to reduce rates that are over 2 12 times what GVEA members pay. Several years ago we even jointly studied merger. They are tied to diese! generation and prevented by !aw from receiving PCE. The hydro power they receive supplies only a small portion of their load and is largely summer-seasonal. The Copper Basin desperately needs the Sutton-Glenallen intertie as the basic infrastructure to solve their power supply and power cost problems. No other solution will have the positive short-term and long-term impacts of the intertie. Al! other fixes are bandaids. Prior to your election I understand you heard complaints from a group of "agin'ers" and they may now expect your assistance to kill the line. I understand the pressure you must feel. However, this is not a zero-sum, win-lose prospect. The legitimate environmental challenges in the Glenn Corridor should be relatively easy to mitigate. We betieve that both sides can win and that this intertie should proceed immediately to design and construction. Golden Valley's board and management pledges to help in any way we can: engineering expertise, project management support, contract administration assistance, etc. This line really should be built now and strong State assistance for this critica! infrastructure is very appropriate. Please Jet us know if we can help in any way. Kincest regards, Mob. Michael P. Kelly General Manager cc: Commissioner Mike Irwin Clayton Hurless-CVEA GVEA Board of Directors ’ Dee JUN-26-95 NON 13:06 Nara JUNEAU Fax NO. 7652948 P, 02 RECEIVED JUN 26 RECD DIVISION OF ENERGY/DCRA June 14, 1995 RECEIVED Mr. Paul Holland, President Copper Valley Electric Associatiou, Inc. | i P.O. Box 45 (y? JUN 86 $35 Glennallen, AK 99588 COMMISSIONER'S UrriCE COMMUNITY & REGIONAL AFFA! Dear Mr. Holland: AFFAIRS Thank you for sending the documents regarding the proposed Sutton to Glennallen transmission line. Commissioner Irwin, his review team, and my staff will include this information in developing a final decision. As you are aware, there is lot of interest in this project. Even with all of these opinions, my Administration will make a decision based on the best possible information available. We want to make a decision that will be the most beneficial to your consumers and the State of Alaska. — Commissioner Irwin has been given until July 1 to make a final recommendation for. action on the proposed project. Any further information you feel is vital to the final decision should be routed through his office. I appreciate your interest. Sincerely, sls Tony Knowles Tony Knowles Governor ec/enc: Commissioner Mike Irwin Department of Community and Regional Affairs TK/DR/TT/dk 0101 Rural electric (0. (Ulin Rr 4a Pinoy £28 A ka cioeli ae — yes Qa pipel ine 1835 SOUTH BRAGAW STREET, ANCHORAGE, ALASKA 99512 David Pritchard President & CEO RECEIVED 1995 June 13, JUN 16 RECD DIVISION OF IF ENE! Mr. Mike Irwin, Commissioner APSC Letter # 95-3009-G PCA, Department of Community and Regional Affairs 333 W. 4th Avenue, Suite 220 = Anchorage, Alaska 99501-2341 Dis GEIWs =|} j JUN 15 1995 Subject: Sutton - Glennallen Intertie COMMISSIONER'S UFFICE Dear Commissioner Irwin: COMMUNITY & REGIONAL AFFAIRS We have received your letter dated June 2, 1995 regarding the Sutton - Glennallen Intertie. We appreciate the inclusion of Alyeska in the Governor's review process for this project. The issue of power import or export for the Valdez Marine Terminal is a complex issue and one which we are currently reviewing in the light of the anticipated regulations for tanker vapor control. The following represents our perspective on the Sutton - Glennallen Intertie and the questions posed in your letter. The Valdez Marine Terminal (VMT) was designed and has been operated since start-up as a stand alone facility in terms of electrical power. The VMT power is generated by steam driven turbines with the steam being created in boilers fired by a combination of diesel fuel and hydrocarbon vapors from the tank farm vapor control system. There are three boiler/steam turbine generator trains each capable of producing 12.5 Megawatts (MW) of power for a theoretical total of 37.5 MW. Actual VMT power need/usage is currently in the range of 6-9 MW. This is expected to increase to 7-11 MW when tanker vapor control is implemented at year end 1997. The design of the VMT power facilities is such that the power generation and existing vapor control systems are integrated. As such, by-products from the power generation operation - steam and inert (flue) gas, are used as key elements of the vapor control system. This philosophy will be continued when tanker vapor controls are added at the terminal. Alyeska is keenly interested in running its operation as cost effectively as possible. As such, the cost of operating the power and vapor control system has and will continue to be studied periodically in the light of changing fuel costs, alternate power sources, power export potential, improved technology, etc. Import and/or export of power may be of interest, but only based on of a rigorous understanding of the technical, economic, reliability, legal and tax issues involved. Technical and economic considerations require the cost of changing the existing power/vapor system, to allow vapor control to be accomplished essentially on a stand-alone basis, to be attractive relative to the cost of HOM ; Conmush [AIL lic Mr. Mike Erwin, Con sioner Sutton-Glennallen Int June 13, 1995 Page 2 imported power when taking into account the remaining life of the VMT. Reliability questions regarding imported power are another significant factor to Alyeska given the vulnerability of remote transmission lines particularly through the Thompson Pass area. Given the complexity of the VMT situation it is unrealistic to expect that the necessary power purchase price and availability information could be known with sufficient certainty until significantly later in the implementation phase of bringing the state power grid to Valdez. Accordingly, Alyeska has taken the position that the decision on whether or not to proceed with the intertie should be addressed without account of whether Alyeska will buy or sell electricity, or remain a stand alone facility. This remains our position. We would welcome an opportunity to meet with you and your staff to discuss this further. Please contact Norman Ingram (265-8730) Sincerely, David Pritchard President & CEO DP:NI/csc JUL-31-95 MON 09:52 ra : : FAX NO. £7" 618998 P, 03/03 ALASKA INDUSTRIAL DEVELOPMENT * AND EXPORT AUTHORITY = ALASKA @E™ ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 July 28, 1995 Mr. John C. Morgan, President, Alaska BP Exploration P.O. Box 196612 Anchorage, AK 99519-6612 RE: Sutton-Glennailen Intertie Dear Mr. Morgan: As the agency facilitating the review of the proposed Sutton-Glennallen intertie, Department of Community and Regional Affairs (DCRA) Commissioner Mike Irwin asked that | respond to your letter related to the project. We realize that your company’s internal production forecasts are proprietary and we appreciate the information you were able to provide in your letter. The information will be shared with CH2M-Hill, the consulting firm under contract to provide a report of the project to the review team. As suggested in your letter, we may want to meet with you at a later date to discuss in greater detail your assessment of future North Slope oil and gas production, potential oil and gas investment in Alaska and other related issues. Thank you for responding to the DCRA letter of June 2, and sharing your views with us. Sincerely, & Ln fam R. Snell Executive Director cc: Commissioner Mike Irwin R EC E | V. J John C. Morgan President, Alaska BP EXPLORATION JUL 19 RECD DIVISION OF ENERGY/DORR “Plorston (Alaska) Inc. le P.O. Box 196612 ott eeatonace, tach 99519-6612 , \ »\ July 6, 1995 PECEIVEH Mr. Mike Irwin l) Commissioner JUL 13 1995 Department of Community and Regional Affairs P.O. Box 112100 COMMISSIONER'S OFFICE Juneau, Alaska 99811-2100 COMMUNITY & REGIONAL AFFAIRS Re: Sutton-Glennallen Intertie Dear Commissioner Irwin: Thank you for inviting BP Exploration (Alaska) Inc. to provide input to your review of the Sutton-Glennallen Intertie as indicated in your letter dated June 2, 1995. I recognize the complexity of this issue and the challenge your team has in sorting out a balanced decision. According to Alaska Department of Natural Resources projections, North Slope production in 2015 will be 160,000 barrels a day. While the decline in North Slope production is well underway, many positive opportunities exist which could reduce the decline rates significantly. BP’s internal production projections are proprietary, but I can tell you that with ongoing investment in these opportunities, we believe our net production within Alaska could be equal to 1995 figures in 2005. As you know, our ability to transform this potential into projects and production will depend on factors such as oil price, development costs, fiscal structure, exploration * opportunities, new technology and Alaska’s ability to compete globally for oil industry investment. Such investment will be critical both to Alaska’s future and to the industry’s future in Alaska. Half of the production currently projected for the year 2000 depends on investments yet to be made. Without these investments, both near-term and long-term production will decline significantly. I believe that there is a bright future for oil development in Alaska, but as the Natural Resources forecast indicates, there are many challenges ahead to ensure viable operations well beyond the year 2020. I would be happy to discuss this further with your review team. oa John C. Mprgan — Regards, cc? R. A. Malone J. A. Palmer JUL-317¥D MUN UYiDL HIVE FAX NO, 9075618998 P, 01/03 Alaska Industrial Development and Export Authority F AX 480 West Tudor Road Anchorage, Alaska 99503-6690 Date Tuk Bt 5a x N Number of pages including cover sheet _-3 ald ECEIVED ,,0 JUL 31 RECD ‘ \. DIVISION oF ENERGY/DCRA To; From: Perey Frslee D. Randy Simmons eS SE -_—_oOoO Phone Phone (907) 561-8050 F FaxPhone 26%- YG €¢ FaxPhone = _(907) 561-8998 cc: O urgent (1 Foryourreview () Reply ASAP (J Please comment Fy x, oro TONY KNOWLES, GOVERNOR O P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 DEPARTMENT OF COMMUNITY AND FAX: (907) 465-2948 PEGE SInSEEAIBS ° ice AAS ste PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 6, 1995 Mr. and Mrs. Kenneth Cobb 3126 Tamworth Circle Anchorage, Alaska 99504-3733 Dear Mr. and Mrs. Cobb: Thank you for your letter of June 19, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project’s feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. Sincerely,4 issioner CTS #95179018 TONY KNOWLES, GOVERNOR O P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 DEPARTMENT OF COMMUNITY AND FAX: (907) 465-2948 REGIONAL AFFAIRS OI Le PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 6, 1995 Mr. Rex J. Close 5601 College Drive Anchorage, Alaska 99504 Dear Mr. Close: Thank you for your letter of June 20, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project's feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. Tf. ike Irwin Commissioner CTS #95179016 o+pwHu TONY KNOWLES, GOVERNOR O P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 DEPARTMENT OF COMMUNITY AND = = REGIONAL AFFAIRS O ss5W. <THAVENUE, SUITE 220 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 6, 1995 Mr. Ray Tidwell P.O. Box 2475 Valdez, Alaska 99686 Dear Mr. Tidwell: Thank you for your letter of June 25, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project’s feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. issioner TONY KNOWLES, GOVERNOR O P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND a © AS stan PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 6, 1995 Mr. James A. Armstrong P.O. Box 2935 Valdez, Alaska 99686 Dear Mr. Armstrong: Thank you for your letter of June 26, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project's feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. 21-P1LH C.0. TONY KNOWLES, GOVERNOR O) P.O. Box 112100 JUNEAU, ALASKA 99811-2100 21-P11H PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS ©) 333 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 6, 1995 Ms. Diane Sallee 1540 South Chugach Palmer, Alaska 99645 Dear Ms. Sallee: Thank you for your letter of June 24, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project’s feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. OI iKe Irwin Commissioner 21-P1IH STATE OF ALASIM DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS OFFICE OF THE COMMISSIONER July 6, 1995 Ms. Katherine Wright HCO3 Box 8496 via: Palmer, Alaska 99645 Dear Ms. Wright: TONY KNOWLES, GOVERNOR 0 P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 © 333 W. 4THAVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 FAX: (907) 269-4520 Thank you for your letter of June 23, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project’s feasibility, including another look at key assumptions. valued and will be considered in the course of that review. Your comments are The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. SjrCerel ki e Irwin Cgmmissioner TONY KNOWLES, GOVERNOR O P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 DEPARTMENT OF COMMUNITY AND FAX: (907) 465-2948 REGIONAL AFFAIRS O ANCHORAGE, ALASKA 00501-2941 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 6, 1995 Mr. Cliff Eames Alaska Center for the Environment 519 West 8th Avenue Suite 201 Anchorage, Alaska 99501 Dear Mr. Eames: Thank you for your letter of June 26, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project’s feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. zr shit Irwin Commissioner orp 21D TONY KNOWLES, GOVERNOR 0) P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 DEPARTMENT OF COMMUNITY AND FAX: (907) 465-2948 REGIONAL AFFAIRS 0) Se CANN SUE, PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 6, 1995 David G. and Christina C. VanCleve P.O. Box 366 Sutton, Alaska 99674 Dear Mr. and Mrs. VanCleve: Thank you for your letter of June 24, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project’s feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. Si fll f ike Irwin ommissioner orp TONY KNOWLES, GOVERNOR OC) P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS O 393 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 July 6, 1995 Mr. Charles Y. Walls Alaska Village Electric Cooperative, Inc. 4831 Eagle Street Anchorage, Alaska 99503-7497 Dear Mr. Walls: Thank you for your letter of July 3, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project's feasibility, including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. ye ommissioner DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS OFFICE OF THE COMMISSIONER June 29, 1995 Mr. Robert Martin, Jr. General Manager Tlingit & Haida Regional Electrical Authority P.O. Box 210149 Auke Bay, Alaska 99821 Dear Mr. Martin: BECORD COPY / TONY KNOWLES, GOVERNOR 0) P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 C333 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 FAX: (907) 269-4520 Thank you for your letter of June 19, 1995, regarding the Sutton-Glennallen intertie. As you may know, the Governor has asked for a review of the project’s feasibility including another look at key assumptions. Your comments are valued and will be considered in the course of that review. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in re-evaluating the project. This will provide an independent check on the original feasibility assessment and will allow us to consider appropriate revisions. Thank you again for your comments on this important issue. Sincerely, Die ude Mike Irwin Commissioner tlingit & halda ReGional electrical authority PO. Box 210149 * Auke Bay, Alaska 99821 * (907) 789-3196 June 19, 1995 RECEIVED Commissioner Mike Irwin UUN 27 RECD Department of Community and Regional Affairs PO Box 112100 Juneau, Alaska 99811-2100 Dear Commissioner Irwin: I urge your favorable consideration of the Sutton to Glennallen transmission line project which is being considered by the Interagency Review Committee. The project is extremely important to the residents of the Copper Valley and Valdez, but it is also important to all the people of Alaska. DIVISION OF ENERGY/DCRA The consumers of the Copper Valley Electric Association are not eligible for PCE because of the Solomon Gulch Hydro Plant, but ironically thus have the to pay some of the highest rates in Alaska for the first 700 kWh. Utilities with higher base rates pay less because of PCE. This project will solve that problem for the long term plus provide future options to the entire Railbelt that would not otherwise be considered. The current Railbeit transmission system has brought many positive benefits to the region and neighboring regions want to become part of the system. In fact, electric transmission grids have benefits that go beyond the simple delivery of energy. First, when load centers are connected, the peak demand of the combined system is less than the sum of the peaks of each system. For example, if two 500 kW loads are connected, the new peak may be only 950 kW. This result reduces the amounts of peaking and reserve generation necessary to meet the combined loads. Second, combined loads allow use of larger and more efficient generators. In rural Alaska, this means conversion to medium or low speed engines that use less fuel and require less maintenance. In the TO Dree Gl3alas fur mC py Railbelt, this could mean use of cheap natural gas, coal or hydro. Combined load centers gain and share the benefits of the increased efficiency. Third, interconnected utilities can consider alternate generation which meets the need of an entire region. Planners are free to select a project located anywhere within the region served by the transmission grid. With an interconnection, there is no need to consider projects located close to the load center--projects that may be too large, too small or too expensive to meet the needs of the individual communities. Fourth, small communities located close to the route of a transmission line are able to share in the benefits by tapping into the line, or by building an extension to the nearest point of the line. Alaska continues to suffer from the lack of basic infrastructure. Most of Alaska’s population lives in one of a few urban centers which provide most of their needs. However, they tend to forget the fact that those urban centers are isolated and insulated from the rest of Alaska, and that the vast majority of Alaska does not enjoy those benefits. In the long run, it is the rural areas of Alaska which will provide the raw materials for Alaska’s continued good health and prosperity. If the transportation and energy infrastructure is not created when we can afford it, we will restrict Alaska’s ability to provide opportunities to those who follow. I urge your favorable consideration of the Sutton to Glennallen ~Intertie Project. Please contact me if you desire further information. ‘Sincerely, Robert Martin, Jr. General Manager JUN-06-95 TUE 09:39 Dera JUNEAU ce asc, a ee ie eee DEA FAX NO. 9 19968 » eT ALASKA INDUSTRIAL DEVELOPMENT cl AND EXPORT AUTHORITY a= ALASKA HE =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 9O7 / 561-8050 FAX 907 /361-8998 MEMORANDUM TO: Mike Irwin, Commissioner Department of Community and Regional Affairs John Shively, Commissioner Department of Fes, Meal FROM: ee Pers DATE: Tune 6, 1995 RE: Sutton-Glennallen Tntertie Attached is a draft scope of work, schedule and project estimate for reassessing the feasibility of the Copper Valley Intertie. We took the liberty of asking CH2©M HILL to provide this to us sines we have them on contract, Hopefully, this will be a good starting point for our discussions and gives us another option from what was discussed earlier. You'll notice that tho imitial phase cannot be accomplished until carly August, which is outside the timeline the Governor gave us. Tl] be out of the state through June &. I would be available to discuss this with you, cither in person or by teleconference, on of alter June 9. Attache FAX NO, go74e52948 Dera JUNEAU JUN-06-95 TUE 09:40 JUN-08-95 TUE 09:47 cA FAX NO. 9! 18998 P, 03/27 een FAX PakeslN Seattle Office Scientists TEehs (206) 452-5005, ext 5246, FAX, (206) 462-5957 NEE ton 59, LF Fax “l? SG/- £178 Verification #: Total Pages: zZ4 To: leg Snet From: D> Pane Company: Alaska Ind. Dew + EBypnt Auth. Date: (,/ gl aoe Message: arity for me | ty named on the cover sheet. The information in this fax % confidential and proprietary Wyev vce oct the intended recipient, disclosure, Copying. deoaton ose of ie feraen poked Hf you do not receive ne number, ai) of KE oF nave received this fox in eiTOF, atthe al Wa°d toe weSTt:6 SE6éT ‘S NMS RE68 198 406 701 YaS-TUh WOH WOR JUN-06-95 TUE 09:48 = en FAX NO, 9075618998 P, 04/27 ad 8 ae 3 Pranners June 2, 1995 Mr. Riley Snelt Exesutive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503 Dear Riley: Thank you for the Opportunity to come to Anchorage to plan additional feasibilily analysis of the Copper Valley torertie, | enjoyed meeting you and Randy Simmons. Based on our discussions, I understand that Governor Knowles has tasked 2 blue ribbon committee comprised of you, Mike Irwin, and John Shively to reassess the feasibility of the Copper Valisy Intertie and recommend a course of action relative to the $35 million loan appropriated by the state legislature. You have asked CH2M HILL to provide feasibility analysis (wv sugport the commuttec’s efforts, T have prepared a two-phase approach for our work. Phuxe | is designed to directly address the two new developments that are fundamental to the feasibility of the Copper Valley Intertie: 1.) Peuo Star's announced plan to Icave the Copper Valley Electric Association (CVEA) system and possibly sell power to CVEA under the terms of PURPA, and 2.) Alyeska’s interest in possibly connecting its relatively latge load to the CVEA system, On the basis of our findings in Phase I, the committee may decide that it has cnough information to formulate its recommendation to the governor ard therefore not procoed with a second phase, or it may chuose to proceed with additional analysis in Phage 2. As currently envisioned, Phase 2 would include more detailed scnsitivicy analysis and formal deciston analysis. Decision analysis and associated documentation may be particularly uscful if significant involyement of pryject stukehalders is contemplatcd. Phase 2 would culminate with a comprehensive report on the feasibility of the Intertie. If the committee chooses to proceed with Phase 2, its scope would likely be revised on the basis of information deycioped in Phase {, Drafts of the scope of work and workplan for this project are attached for your review as Attachments 1 and 2, respectively. The sample decision analysis concept we discussed on Thursday is also attached (Attachment 3) for your easy reference. Please note that the last page of this attachment is not in context of the Inrcitic. It is simply a sample of a risk Sontte Office 277 100th Avera NG, CCRGTUO, WA PROLE TE 706 AGL-SOOR AO. Box 91800, Datevire, WA 98009.2050 Tax No, 206 462 5987 4728 WeALT:G S66t ‘Ss Nor S668 19S 276 OL YSS-"THE WEE :WOyd e) FAX NO, 9074652948 rT, Uo yb-¥o TUE 09:40 Dera JUNEAU No. 8 see net-¥b WE 09:48 DEA ae ee an profile that would be developed ror the intertie decision or for associated documentation. As shown in Attachment 4, the cost estimate for Phasc of this work is $45,200. An order of magnitude estimate for Phase 2 costs is $44,300, A better estimate of Phasc 2 costs can be developed once information from Phase | is available, Thesc estimates, are based on the assumption that our analysis can overlay the exising Beck and Bradford analyses using thc Beck model without compatibility problems. I will manage the project, assisted by Bob Brooks, Dan Pitzlcr, Mark Veliccr, and Jeff Haight. Mr, Brooks will be responsible for project modelling and interface with R.W. Beck. Mr. Pitzier will be mtsponsible for assisting Mr. Brooks with model runs and data management. Mr Velicer will be responsible for Icading the decision analysis activitics in Phase 2, Mr. Velicer will be assisted by Mr. Haight. Resumes for team members aro provided in Attachment 5. We expect that the draft technical memorandum for Phase 1 can be completed by August 9. With a one-week period for review and comments, we wil! complete the final product by August 21. This assumes that we are able to meet with project stakchoiders to complcte Task 2 during the week of June 12. As I mentioned to you, other commitments will prevent me from mocting in Anchorage betweer June 19 and July 14, Assuming that by the first or second week of August the committee would know whether Phase Z is necessary and be able to approve a workplan, we covld prosent initial results by September 5, a Phaso 2 draft report by September 27, and, assuming & one-week period for review and comments, a final comprehensive report during the second week of October. {look forward to working with you and Randy on this project and will call you next week fo discuss our plan for project execution, In the meantime, if you have any questions or comments, please call me. 7 Sincerely, M4 HILL, hig fe i A. Gray Project Manager @ EO'd 2TéH WReT:6 S66t *S NOP SESE t9S 4a5 sOL USS WEHD WOR 948 r, UO JUN-U6-¥>. TUE 09:41 Dera JUNEAU FAX NO. 9074852 JUN+O8-85 TUE 09:48 ‘DEA FAK NO. £ 316998 06/27 Attachment | Copper Vailey Intertic Feasibility Update Draft Scape of Work The scope of thie project will be to reassess the feasibilicy of the Sutton to Ccnnallen 138k transmission fine (Copper Valley Intertic) based on certain, conditions that have changed since original feasibility studies on this project were completed. To the extent Practical, assumptions and analysis used in the R.W. Beck feasibility study (easibility Study--Copper Valley Intertie, January, 1994), the Copper Valley Intertic Plan of Finance by J. C, Bradford (May 3, 1904), and Robert Wilkinson testimony on CVA avoided cost will be used with changes made only us necessary to reflect chanyed conditions, The project will be conducted in two phases. Phase 1--Update of Summary Analysis In Phase 1, the existing Copper Valley Intertie feasibility analysis will be updated with data to reflect two new conditions; 1.) Petro Star’s announced plan to leave the Copper Valley Electric Association (CVEA) system and possibly scll power to CVEA under the terms of the Public Utility Regulazory Policics Act of 1978 (PURPA), and 2.) Alyeska’s interest in possibly connecting its relatively lange load to the CVEA system. The product of Phase 1 wili bo updates of table 1-5 of Ue R.W, Book feasibility study and Tubles I though [V of the Bradford plan of finance. These will be presented as part of a - technical.memorandum at the conclusion of Phase I. This work will include conducting sensitivity analysis for: . Load growth . - Oil prices . Interest rate on loans associated with the project ‘ 4-Dam Pool charge rate for output from Aliivon Lake * Long-term power supply costs for power from the Railbelt The load forecasts seasitivitics will be limited to a medium load forecast (the modiunt-low or the medium-high scenario) from the R.W. Beck study (for reference) and consideration of the following load developments: * Loss of Petro Star as a customer of CVEA D , vad 2TdH Weet:6 Séer ‘Ss NA S668 19S cee OL VSS~THIM WEHD Was er Se SN ee RR A SRI PLOT JUN-06-95 TUE 09:41 Dera JUNEAU FAX NO, 9074652948 JUN-06-85 TUE 09:49 DEA FAX NO. 91 © 18998 P. 07/2 . Addition of Alyeska as a customer of CVEA assuming the existence of a Copper Valley intertie (This will include the addition of Alyeska’s existing requirements (approximately 8 MW); also uncertainty surrounding tlic term . Of the power supply to Alyeska will be addressed) The load forecast scenarios will likely consist of the following: * Low: Medium forecast less Petro Star Load ‘ Medium: We wil! select either Beek’s medium-low or medium-high forecast = High: Medium forecast plus Alyeska toad Input values for ofl price forccasts will be reassessed and agreed to with AIDEA before proceeding with the analysis. Analysis of powor supply options for CVEA will be limited to the following five development scenarios; . Ail diese! ° Copper Valley intertia ’ . Allison Lake . Iobbs coal-fired generation at Valdez . Petro Srar supply CH2M HILL will work with R.W, Beck to arrange cunning the updated analyses on the financial model R.W, Beck used in its 1993-94 analysis of the Cepper Walley Intertie. Analysis will include evaluation of 1.) least cost power supply in terms of present valuo (consistent with the Beck scport) and 2.) first year nominal supply costs (consistent with the Bradford report) assuming: e No state assistance e Minitnum state assistance, ic. amount necessary only to set first-year rate equal to the base case, . A $35 million loan from the State of Alaska at zero interest Phase | will bc conducted with input from the various stakeholders (CYEA, CEA, MI-&P, MUA, Hobbs, Petro Star, and Alyeska) and with close coordination with ATDEA. ® SO'd 2148 LWeBT:e SAst ‘Ss NIE S668 Isc 226 204 6SS-—TTIH WZKD Woe 7 2) Uo J FAX NO. 9074652948 P. -08-95 TUE 09:42 Dera JUNEAU Phase 2--More Detaiicd Study and Decision Analysis Tf, at concluston of Phase 1, a clear course of action is not apparent, Phase 2 will provide the additional analysis needed to make a decision regarding the feasibility of the Copper Valley Intertie. in Phase 2, any important residual issues not considered through the Beck model will be evaluated. and formal decision analysis will be performed to more directly address future uncertainties, Among tho issues that may require quandfication through more detailed analysis in Phase Z are reliability differences among the various power supply options, This analysis would censider the costs to put reliability associated with each supply option on a comparable basis with the Intertic option. As part of this analysis, costs to firm-up the Allison Lake resource option will be dircetly assessed. A separate analysis could also be conducted of the likely schedule for the Copper Valley Intertic with realistic consideration given 10 the time requirements for environmental permitting and line consuuctior Phase 2 will also include formal decision analysis. The primary benctits of this project component Will be 1.) to provide an avenuo for stakelcldcr's to have formal inpur on probabilides associated with uncertainties associated with the project, 2.) to explicitly quantify uncertainty associated with the project, 3.) determine the expected yaluc of costs associated with cach supply alternative and the risk profile wssociated with cach. Most of te cost and ULLITy system data for the decision analysis will have been developed in Phase |. In Phase 2, uncertainties will be rechecked through en influence diagram, probabililics associated with uncertainties will be estimated, and 2 decision tree constructed, From: the decision tree model, the expected value of costs and risk profiles mentioned above will be derived, The influence diagram and probability assessments will ba developed though a workshop and individual interviows with key EIntertle project stakeholders. Upon compiction of Phase 2, a formal report will be prepared. This report will summarize the findings of the study and document the process used to cvaluate the Intertic and other CVEA resource options. © 96"d tit Wests S66t ‘S NE Bés3 TSS ce6 iL YES-THIH WEHD: Woes Fr. Ug JUN-06-95 TUE 09:42 Dera JUNEAU Fax NO. 9074652948 JUN-Ub-¥b TUE 09:49 YEA FAR NO. Ol oss ante Attachment 2 Copper Valley Intertic Feasibility Update Draft Workplan (Labor days and schedule for cach task shown in parentheses) Phuse i 1 Reviow project background and develop scope and workplan with AIDEA. (3 days; May 31-June 8) ie Meet with key stakcholders to get input regarding key issues and probubilities essociated with related uncertainties: CVLA Petro Star Alysska CEA MEA ML&P Hobbs (4 days; June 12-16) @to@eees 3: Meet with R.W. Beck to review financial model, Meet with J.C, Bradford & Co. tw get input re financial plan approach. Qbrain Beck model and/or arrange for custom runs for feasibility update. Do not recheck existing numbers or assumptions in existing Beck model. Continue to usc 1993 dollars as base price levels. (3 days; June 12-16) 4. Reassess analytical needs with AIDRA given findings in Taxks 2 and 3; revise Workplan as necessury. (0,9 days; Junc 28) 5, Obtain additional data needed for updawe of Beck and Bradford anulysis. (6 days; July 3-24) . 6, Conduct analysis using RW. Beck model (15 days--This docs not include time for R.W, Beck assistance; July 17-31) 7, Prepare 4 technical memorandum on analytical results, Receive comments. (5 days; July 31-August 9) 8. Prepare final technical memorandum. (2.5 days; August 17-21) ~ 23'd a2tok WeET:G S667 ‘S NOC B66E TSS 425 iGL BES-TNIH WEHOIWOaS JUN-06-95 TUE 09:43 Dera JUNEAU JUN-Ut-Yo TUE 09:50 EA FAX NO. 9 Phase 2 Ty 4. 10, 1. FAX NO, 9074652948 18998 r.iiv en ee eer TEN P. 10/27 Review scope and workplan in light of findingw/necds fcom Phase 1, (1 day; August 4) Obtain additional cost and systems data needed for analysis. (4 days; August 718) Workshop with key stakeholders to develop influence diagcam, outline decision Uuce and preliminarily assess probabilities associated with certain uncertainties. (3 days; August 14-18) Conduct interview regarding probabilities. (3 days; August 14-18) Link Beck moded output to decision analysis model. (2 days; August 14-18) Conduct decision tree and risk profile analysis. (10 days; August 21-September 1) Prosent results of firstecut to AIDEA. Obtain critical review and direetion. (2 days; September 5-8) Rovise analysis In response to critical rsview in Task 7, (3 days, September 15-22) Present revised results in draft comprehensive report for Phases 1 and 2. (6 days; September 20-27) Obtain feedback in workshop with AIDWA and other stakeholders. (2 days; October 2-4) Prepare final report, (5 days; October 4-13) Og's dTed WOUCIG S6ST ‘S NW 8668 TIS 426 7DL ¥aS-THH WES :WOeS P. 11/27 JUN-08-95 TUE 09:50 AIDEA FAX NO, 9075618998 : Attachment 3 Decision Analysis Conceptual Approach CH2M HILL 5/31/95 Sutton to Glennallen Transmission Line Y 6o'd Aten WOREIS SEET ‘S NTE = 8668 T9S 426 2OL WSS HERO: HOM 21-P1LH TONY KNOWLES, GOVERNOR \ fe) O P.O. Box 112100 Aw f JUNEAU, ALASKA 99811-2100 j PHONE: (907) 465-4700 / FAX: (907) 465-2948 =) ry mc eee pe ) Zo = | os — => _J =e, } ce DEPARTMENT OF COMMUNITY AND / REGIONAL AFFAIRS } C0 393 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 f PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. John Morgan, President BP Exploration P.O. Box 196612 Anchorage, Alaska 99519 Subject: Sutton-Glennallen Intertie Dear Mr. Morgan: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the long term future of oil operations in Valdez is critical to the intertie investment decision. The intertie feasibility study completed a year ago referred to a well-known report issued in 1993 by the U.S. General Accounting Office entitled “Trans-Alaska Pipeline -- Projections of Long- Term Viability Are Uncertain.” The report is often cited in support of the view that TAPS will be shut down by 2020, a consequence of declining North Slope oil production. This is a view that has the status of conventional wisdom in much of Alaska. If used as the basis for long-term planning, the case for building the Sutton-Glennallen intertie is considerably weakened because shutting down the pipeline implies a significant contraction of power demand in Valdez. Assuming that TAPS will continue to operate well beyond 2020 does not seal the case in favor of the intertie, but assuming it will shut down by 2020 very nearly seals the case against it. If top management in the Alaska oil industry believes that TAPS shut down by 2020 is more likely to occur than not, then we certainly need to hear that early on in the context of our intertie deliberations. However, if the pipeline is likely to operate well beyond 2020, we will need to base our intertie evaluation on other factors. I would certainly appreciate an opportunity for a member of our review team to formally discuss the long-term oil production outlook with you, and I will contact your office by phone in the near future. Sincerely, While Peet? Mike Irwin, Commissioner Department of Community and Regional Affairs / TONY KNOWLES, GOVERNOR Win O P.o. Box 112100 \ 4 } JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REE © Scena ae sto s0e PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Jeff Lowenfels, President and Chief Executive Officer Yukon Pacific Corporation 1049 W. 5th Avenue Anchorage, Alaska 99501 Subject: Sutton-Glennallen Intertie Dear Mr. Lowenfels: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of up to 40 megawatts of bulk power between the Railbelt and Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the intertie depends on the amount of power to be transmitted over the line, the power supply and power generation plans of Yukon Pacific with respect to a future Valdez terminal are of considerable importance. In the intertie feasibility study completed a year ago, it was assumed that a Valdez terminal for a TAGS line would be isolated electrically from the utility grid -- the company would generate sufficient power for all of its terminal requirements, and would neither purchase nor sell any additional power. We are aware of newspaper accounts, however, suggesting that Yukon Pacific might have a considerable amount of excess power, enough to supply the needs of the local utility and perhaps a significant amount to ship back to the Railbelt as well. At this point, we are unsure whether construction of the TAGS line and terminal as envisioned by Yukon Pacific is more likely to enhance or to weaken the case for the intertie. As a power purchaser, a Valdez TAGS terminal would enhance the intertie case. As a power supplier meeting the needs of the Copper Valley Electric utility, the TAGS terminal would weaken the intertie case. As a power supplier that meets the local utility needs and sells up to 40 megawatts of power back to the Railbelt, TAGS might again enhance the intertie case. I would certainly appreciate an opportunity for a member of our review team to formally discuss these possibilities with you, and I will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs TONY KNOWLES, GOVERNOR O P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: ~ (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS = (9 Stil asic soso ao PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Steven Lewis, Chairman and Chief Executive Officer Petro Star, Inc. Suite 200 201 Arctic Slope Avenue Anchorage, Alaska 99518-3030 Subject: Sutton-Glennallen Intertie Dear Mr. Lewis: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the intertie depends on the amount of power to be transmitted over the line, the power supply and power generation plans of the Petro Star Valdez refinery are important matters when considering public investment in the project. A decision by Petro Star to generate its own power in Valdez, and perhaps to supply power back to the utility grid as well, would be a key factor in the intertie economics, and therefore we would like to factor in to our thinking whatever you can tell us about the company’s future plans in this regard. We have of course been reading the newspaper accounts on the subject but would very much like to communicate with you directly. If you indicate that Petro Star is likely to generate its own power, we would consider this an important factor in deciding whether the project development process should be kept alive. Our intention is to re-run the economic analysis of the intertie with revised assumptions that are consistent with your company’s future plans. I would certainly appreciate an opportunity for a member of our review team to formally discuss this matter with you, and I will contact your office by phone in the near future. Sincerely, Wiki \$pule Mike Irwin, Commissioner Department of Community and Regional Affairs etpuu / TONY KNOWLES, GOVERNOR 0 P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 / PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND / REGIONAL AFFAIRS / CO) 339 W. 4THAVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 f PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. David Pritchard, President Alyeska Pipeline Service Company ea Mailstop 528 : 2\ 1835 South Bragaw XS Anchorage, Alaska 99512 Subject: Sutton-Glennallen Intertie Dear Mr. Pritchard: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the future source of power for Alyeska’s Valdez terminal is an important piece of the puzzle. In the intertie feasibility study completed a year ago, it was assumed in all scenarios that the Alyeska terminal would remain isolated indefinitely from the utility grid and would continue to self-generate all of the terminal’s power requirements. We understand, however, that utilities are interested in supplying power to the terminal -- power that would be generated in the Anchorage area and transmitted over the proposed intertie. A decision by Alyeska to purchase most or all of its Valdez terminal power supply over the intertie would be a dominant factor in the project economics, and therefore it is essential that we factor in to our analysis whatever you can tell us about the company’s future power supply plans. | understand there may be important technical issues in addition to considerations of reliability and cost. If you suggest that there is an even chance -- or a better than even chance -- of purchasing power for the terminal over the intertie, we would consider this an important factor in deciding whether the project development process should be kept alive. In the future, if project financing depends upon it, actual purchase commitments would clearly be needed before the start of project construction. If, on the other hand, you suggest that it is unlikely that Alyeska would purchase power over the proposed intertie, we would base our recommendations to the Governor on the project’s viability without regard to possible future interconnection of the Valdez terminal. I would certainly appreciate an opportunity for a member of our review team to formally discuss this matter with you, and I will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs yUN-UUR-9D TUL U1 38 vera JUNGMU FHA NU, YUl4oody4s Sti eat Veh * JUN-08-965 TUE 09:47 EA FAX NO. 9{ 18998 P, 01/27 Alaska Industrial Anchorage, Alaska 99503-6690 . Development & Export : Authority | Date: 06/06/95 Number of pages including cover sheet: aD FAX William R. Snell Commissioner Irwin, DCRA Commissioner Shively, DNR Phoue: 907.561.8050 Fax phons: 907.561.8998 REMARKS: © Foryourreview [) Reply ASAP © ‘Please comment (Urgent | iO) EGE el) IN | N UN 08 1995 COMMISSIONER'S OFFICE COMMUNITY & REGIONAL AFFAIRS JYN-UOWY9D 1UL UISY vera JUNEAU FHA NU, YU/400¢945 P. Ul TELEFAX COVER PAGE State of Alaska RECEIVED Department of Community & Regional Affairs J P.O. Box 112100 UN 06 Reep Juneau, AK 99811-2100 DIVISION oF ENERGY/DcRA Telephone: (907) 465-4700 FAX: (807) 465-2948 Ste Time Sent: Total pages including cover sheet LOSTS Additional Comments: 0c: Mick Caen 26 JUN-06-95 TUE 09:52 Dera_JUNEAU FAX NO, 9074652948 ee . von vured fun YYi Dd “EA FAK NO. 9( 189898 P. 27/27 * Project manager for a solid waste rate stady and two upsates to that study for the City of Unalaska. * Lead economist for a 20-month series uf housing market studies conducted for US army bases in Germany. ® Task leader for an analysis of waste management funding altematives for Citrus County (FL). . Project manager of a solid waste cate study fer Kiwap County (WA). . @ "Task Loader for an econometric waste stroum foreast for Snohomish County (WA) as part of an engincer’s roport for a revenuc bond issue. . Task leader for evaluation of proposuls subimiticd to B.C. Hydro (B.C.) by private vendors for construction and operation of a refrigerator recycling and buyback program. . Project manager of a feasibility study of installing pre-load compaction equipment in five transfer statious for the King County Solid Waste Division (WA). . . Task loader for an economis analyses of disposal altematives for the City of Unalaska, * Task leader for an economic analysis of disposal alternatives for the Kenai Peninsula Borough. ° ‘Task leader for development of CH2M HILT's methodology aid computer tomplate for sendusting vost assessments that are coviewed by the Washingwn Utilities and Transportation Commission as part of the approval process for completing Comprehcusive Solid Waste Maagement Plans in Washington _ State. « ‘Task {cader for development of 2 computer model that simulates countywide solid waste system operations using a transportation network unalysis, an econ- ometic forecast, and information from regional planning agencies as part of a system operating plan for King County (WA). Education M.A., Economics, University of Washington B.A., Economies, Westem Washington University Membership in Profegsional Organicatious ° Seattle Economisis Club ° Solid Waste Association of North America Sé°d Ltd WBS: S6GT ‘SG MIL 8668 TOS 225 OL YES-TIIH WOH): KOdS FAX NO, 9074652948 r.co - _ 152 Dera JUNEAU ER aa ws ee a ate JUN-08-95 TUE 09; 82 yi55 AIDEA FAX NO, 5818898 P, 26/27 DANIEL R. PITZLER Economist Distinguishing Qualifteations ° Rapsricneed leader of feasibility studies for many types of projects © . Conducted over 20 cost of service and rate design studies Related Expericace Mr, Pitzler provides strategic planning and technical assistance to public- and private-sector clients on a wide range of cuergy und waste managerial issues, Flis areas Of capertise include feasibility analysis, cost of service and nite design, computer modeling, financial inanagemont and analysis, procucoment, and forccasting. Representative Projects - Lead technical analyst fora demand side management plan, multi-quarter toad research prograin, and rate analysis for Alaska Electric Light and Power. . Technical analyst and lead computer modeler for power supply planning and oust of service ytudics for Ketchikan Public Utilities. e Task leader for a cost of service study and cate analysis for Glucier Llighway , Blectwic Association. ia - ‘Task loader for marginal cost rate analysis and various othicr rute issues for Omaha Public Power District (NU). e Lead computer modeler and techaical analyst for a cost of service and retail rave study for Central Electrie Power Coop. (SC). . Technical analyst for a cost of service analysis for the City of Saskatoon, Saskatchewan, . ‘Technical anulyst for a rate analysis for revenue bond issue, Grant Co, PUD, (WA). . Task leader for a cost of service study for Midstate Elsetric Coupemtive (OR). * Technical analyst for @ cost of service study for Modesto Irrigation District (CA). ° Task leader for an analysis of solid waste rite structure alternatives for tho Matanuska-Susitna Borough. 12 S@'d ATdR Weezes S66T ‘Ss NOL e668 19S 486 204 BRE-TIK WEHO:LiOds FAX NO. 9074652948 ee i F ‘ Dera JUNEAU Jun-U6-9 “iUe U9i! 09:65 AIDEA Fax NO, "6618988 P, 26/2? JEFF A, HAIGUT Solid Waste Engincer Education MS, Engineceiny Management, Cornel! University B.S., Environmental Engineering, Comell University Expericnes Mr, Haight is a member of the solid waste department in CIIZ2M [ULL’s Scaitle regional office. His responsibilities include system planning, cust modeling, facility design, and tecycling plan development. For the city of Istanbul, Turkey he assisted with the evaluation of specific multi-family recycling options for Istanbul's recycling initiative. For BC Uydro, Vancouver, Canada, Mr. Haight assisted in the final solid waste management plun, including Incorporation of detailed cosVbencfit intormation. [n addition, Mr, Haight has assisted with the planning end design of a landfill gas drainage system for the closure of the Kent Highlands Landfill in Kent, Washington. Currently, Mr. [aight is working with Lewis County, Washington, in the preliminary design ef a new solid waste transfer station, [is rosponsibilities include assistance in cost estimation and operational Impacts on design. Prior to joining CH2M HILL, Mr. Haight acquired diverse environmental planning a “ exporience. AS a maritime development advisor, he prepared cost and feasibility assessments for muritime development projects in the Washington D.C. area, While working for the Center for Environmental Research at Comoll University, Mr, Iaight developed water-level management plans for Skaneateles Lake in New York, These plans outlined annual dam operation schedules in order to satisfy cnvironmental, flood, and re- creational needs. [or both assignments, his recommendations involved striking delicate balances between political, economic, and environmental considerations. As a graduate student at Corel! University, Mr. Haight created a decision model for the utilization end disposal of waste ash for Monrye County, New York. The first part of this modcl involved comprehensive economic and feasibility studies for the uses of ash generated from the incineratlon of the County's waste treatment sludge. ‘I'he second pact formulated alternatives through joint linear and integer programming. All the recommendations were thea examined in an extensive sensitivity analysis before presentation to the County, Membership in Professional Organizations Government Refuse Collection and Disposal Association yoal2220.wollt | Ev lisiorg2 ped 2TAH Hezse6 S6ET 'S NTF RESe 15S 106 202 YES-TUH WER HOU we 1 Dera JU uyneus-¥p TUE USIPE og icq IDEA FAK NO 75818998 P.24/27 Avoided Costs af Waste Reduction and Recycling in Now York State. With Dr, Daryl Ditx, Cornell University Waste Mapagcanent Institute. Uebruary 199), Avoided Costs Prom Reeyeling Investment. Cornell University Waste Management Institute. July 1990, The Tompkins County WastePlan (c) Report. Engineering Management Project Report. Cornell University. May 1990. Guidelines for Minimizing Environmental fmpacts From River Diversions. With E.F. Hewicks, Universily of flinois. For Illinois Department of ‘Transportation. August 1987. ced tex wuse;6 $663 ‘Ss NAC Bebe TSS LE 101 OBE“ THK WHO ods J FAX NO. 9074652948 Te CC -Yb-Yb TUE UY! dU Dera JUNEAU : a Ye eH (Uk 09:54 YEA FAX NO. gt 18998 g = mechanisms for ull operating and capital costs components over a detailed 6-year implementation horizon. Tic alse contributed to a regional plan for system of 8 counties -- in southwestern Washington. Mr. Velicer has worked scveral western Washington jurisdictions regarding the procuremiont of contracted private services for construction and operation of solid waste management programs and facilities. His negotiating and procureinent cxperionce includes the joint Lewis/Grays Ilarbor waste export contract awarded for 2 value of $38 million over a 20 yeur period, and the Grays Harbor transfer station construction and operation services contract worth $21 million. Mr, Velicer has developed several customized computer decision aids for use in anvironmental systems Inanagement planning, He worked with the Tellus and Cornell Waste Management Institutes to develop the WastePlan (¢) cost model and develop in- house municipal and County staff expertise in New York State, and currently is sosponsble for training CH2M HILL staff in all offices in the usc of WasicPlan. Mr. Velicer has customized the EXTEND graphic simulation model for use in water resources and solid waste system-wide planning and analysis, and has also applied the model to specific _ technical problems ‘such as poliutant loading analysis. Mr. Velicer has practical experience in the application of simulation packages Stella and Ithink, the VP-Expert expert system shell, multi-objective decision tools BestChoice and Multi-Objective Reasoning Environment (MORE), uncertainty and risk anulysis tools including At-Risk and Crystal Ball, and decisien tcce analysis for tisk management using DPL. Prior to joining CII2M HILL, Mr, Velicer developed diverse environmental systems experience, including solid waste system software development and implementation for - Corell’s Waste Management Institute, hydropower and environmental modeling for Pacific Gas and Licctric, international training in water resources cngincering, and instream flow methodology work for the Llinois Natural Llistory Survey. Affiliations Association of Northwest Environmental Professionals Governmental Refuse Collection and Disposal Association Association of Hospital Engineers King County Municipal League Alki Foundation Publications * Choosing « Medical Waste Treatment Technology. With Territ! Chang, P.C. Air and Wastu Management Pacific Northwest International Section, November, 1993. Managing Integration: A Local Government Guide to Coselifficient Program finplementation, or, “What Wasn't Written in Your Solid Waste Management Plan.” Biooycic Conference Presentation, March 1993 and Biowyele Magavine, April 1993- OP 9 Zoid Aten wGe:6 SEET 'S NAME SECS TIS ace OL WES-<THH WED -WOes FAK NO, 9074652948, rect . ; JUNEAU JUN-08-96, TUE 08:43... Per? ie FAX NO { 318008 P, 22/27 projections, & treatment and disposal technology review, cconomis analysis, and regulatory Strategy. 7 Mr, Velicer is currently perforrning an effectiveness and orgunizational evaluation of hazardous and moderate risk waste managenrent programs implemented by four agencies in King County, WA, in conjunction with SERA, Inc, ‘This evaluation is designed ta assess how existing program avtivides are meeting stated objectives and budgets, and design new evaluation procedures to measure program performance in the future. Evaluation methods and success indicators will be designed and implemented for all progratns, including recommendations regarding methods of data collection, compilurion, presentation, and analysis, Mr. Velicer is currently assistant project manager for the Regional Needs Assessment in King County, Washington. This project is a consensus based decision process to ‘implement a new watershed/ccosystem approach lo surface water management In the tegion. This project involves establishment of existing environmental conditions and modeling of future water resource conditions; consensus building decision approsches for Stakeholders, surface water menagers, and elcoted officials; evaluation of ihe economic implications of surfuce water regulations; evaluation of institutional alternatives; and implementation of 1 preforred regional arrangement for storm and surface water management. Mr. Velicer is wurrently structuring a consensus based alternatives analysis and decision process for the Washington State Ferry system, using the Nominal Group Technique. This ferry termina! master planning process will formail develop siting and development criteria for both technical and community concerns, develop vuluc tradeoffs and criteria weights - through an interactive and community based process, and select a development alternative for recommendation to policy maleers. Mr. Velicer was ussistant project manager for the full development process for the Lewis County transfer station. This process included comprehensive system planning, economic feasibility analysis, siting, and conecptual through full design. The siting process was structured to allow full Solid Waste Advisory Commlttce (SWAC) involvement in criteria setting, scoring, and evaluating for a broad sereoning process to narrow the number of feasible sites to three before detailed engineering investigations took place. Mr. Velicer - assisted the County in a bid procurement for waste export services, and was responsible for export and transfer system compatibility issues, This process included bid options fur other Colnties in the region to participate in a shared export arrangement. Mr, Velicer was project manager for conceptual design and siting of the Kitsap County moderate risk wastc management facility. This facility will accept houschold hazardous and small quantity business wastes from ail County residents, For four western Washington counties, Mr, Velicer has developed comprehensive solid waste management plans, including administrative and financisl strategies. In each case he lead the devclopment of system cost assessments detailing the funding and financing sae 8 a Tz’d ete Wese:6 S66t ‘S NO 9662 TOS 485 :OL BRS-—TNIH WEHD WOHS 52948 rm, cv -Yb-Yb TUE UY! 48 Dera JUNEAU FAX NO. 90746 JUN"UGReuu-¥> UE 09:63 = “EA FAK NO. 9¢ 8998 P.21/27 MARK A. YELICER Management Systems Analyst Education M.S. Engincering Managomeat and Environmental Systems, Cornell University BS. Civil-Environsental Engineering and International Studies, Univ. of linois Summary Mr. Velicer specializes in environmental systems management for CLIZM UILL’s Bellevue office. His expertise lies in the areas of integrated management planning and implementation, quantitative management methods, orgunizationel analysis, economic feasibility analysis, and management information systems. He has formal training and project experience in environmental systems modeling, decision analysis, uncertainty analysis, and other computerized devision aids. Experience Mr. Velicer was the lead management systems analyst for a Fortune 200 manufacturing’ firm's management assessment of company-wide remediation systems. This review included assessment of corporate remediation costs, risks, and liabilities, evaluation of corporate environmental strategies to reduce risk and liability, internal communication Processes, an organizational assessment, and staffing analysis relative to risk at various plant sites. - Mr. Velicer was recently task, leader for the decision and uncertainty analysis for a Fortune 500 encrgy firm, This project involved realistic assessment of the risks and uncerjaintics associated with managing over 300 of the companies hazardous waste sites, Mr. Velicer guided a team of engineers to perform approriale cost cstimutes, conducted a decision and uncertainty analysis, and communicated the results in a clear and ’ “understandable format to upper management. Tho results of this analysis were used in successful insurance cost recovery negotiations. Mr, Velicer is currently performing a decision analysis to assist 4 Tortunc 500 oil and gas production firn: in its decision t relocate a local maunicipalities water supply well system, ‘This analysis involves a comprehensive analysis of the financial and public image risks faced by the company, and employs 4 multi-attribute decision technique to combine Loth quantitative and non-quantitative risk considerations. Mr, Velicer recently managed a strategic, risk-based biomedical waste management plan for Swedish Medical Center (SMC), the largest medica! facility in Seatite. ‘This comprehensive assessment is driven by simultaneously changing orgunizational, technological, regulatory, and economic influences affecting SMC. ‘This project includes an audit of stalTing levels and budgets for current waste manugement practices. Recommendations for reduced costs and improved operations are based on Waste stream Gd 7 2's ATLN H¥PZ:6 SEST 'S NO Ssee TUS 2B6 OL YBS—TIIH WZHD :WOes 2 oe FAX NO._ 9074652920 sea JUNEAU 06-95 TUE 09: 48 nore © JUN-06- 9° tae TU 09:52 DEA FAX NO, ....618998 P, 20/27 ROBERT G. GROOKS Page 2 Prior to joining CLI2M HILL, Mr. Brooks worked for a large consulting firm where he was ivolyed in financial forecasting und load research for clectric utilities. For the Kingdom of Saudi Arabia. he conducted field surveys of electric utilities and assisted in the design of 2 large-scale computer-based financial modeling system. Thie scries of computer programs integrated Joad forecast and system: plan data with financlul and operating statistics and projected the Kingdoia's clectrical requirements for 25 years. As an analyst on foad management research, Mr. Brooks doveloped specialixed computer prograuns tO analyze tho cost-effectivencss of various load management techniques for South Carvlina Public Serviec Authority. As Programming Consultant to the Economic Council of Canada, he designed and developed 2 computerized loud dispatch simulation model and presented results cost summarics by provinoe fur cach year of a $-year planning period. The model performed generation scheduling 1 minimizes upcrutonal Costs, subject to uger-selected constraints. As Projuct Auniinistrator on 2 345-kV transmission interconnection project for the New York Power Authority, Mr. Brooks was cesponsible for progress monitoring and reporting; Jevel- opment and impicmentation of project procedures; coordinativa of spevitications, drawingy, and contract documents; and accounting and cost control. Membership in Professional Organizations National Association of Business Economists - AEFBE/Demand-Side Management Society GT's 2Tdh tehe:S Se6t ‘S NU S668 TSS LoS 10h WES-THIH WES: Woes ee en nn weed « @D FAX NO, 907452948 fe bu ‘ AU -Ye6-Yb TUE UY:4f Dora JUNE a ON-08-86 TUE 09:62 EA FAX NO. $C © 8988 P, 19/27 ROBERT G. BROOKS Senior Economist Education Graduate Studies in Business Administration, Suffolk University B.A., Econamics, University of Colorado Experience Mr. Brooks specializes in utility planning and analytical studies, including integrated resource planning, financial forecasting, cost of service, and rate design studies for clectrie, gus, watcr, sewer, and solid waste utilities. Ils background Includes the design and development of software for both maintrame and microcomputers. Mr. Brooks recently testified ou an integrated resource plunning study for the Golden Valicy Hilectric Association, Ile developed a dispatch simulation moucl to evaluate supply- and demand-side resources and presented expert witness testimony before the Alaska Public Unitities Commission. He also served as the lead economist on an integrated resource planning study for the Juneau Alaska area. Earlicr, Mr. Brooks performed power supply planning studies for Ketchikan Public Utilitics. Lake Worth Utilities Authority, and Anchorage Municipal Lipht and Power Company.. Lic has assisted the Omaha Public Power District in evaluating their demand-side management Programs, and performed a study of solar power and conservation technologies for the Gas = Company of New Mexico (now part of Public Service Company of New Moxico), Mr. Bronks was the project manager responsible for the development of MICROCOS™, CH2M HILL’s microvomputer-based cost of service program. He also designed and developed the firm’s detailed financial forecasting program for utilities (INCAST). Mr. Brooks routincly manages and executes cost of service and rate design studics for clients including the Modesto Irrigation Distiet, Alaska Electric Light and Power Company, Keteiskan Public Utilities, and the Public Unility District No. L of Grays Llarbor County (elesteie}; the City of Aurora, Colorado, and the Sult Lake County Water Conservancy Diswict (water); the Ciry of Alexander City, Alabarna (sewer); and the City of Centralia, Washington, Kitsap County, Washington, and the Matanuska-Susiina Borough, Alaska (solid waste): and the cities of Decatur, Hlinois and Corpus Christi, Texas (gas). As lead economist on a cost of service and regulatory intervention on behalf of the City of Saskatoon, Seskatchewan, his responsibilides included the analysis and critique of the wholeyale supplier’s cost of service and rate design study, and ansiswnce in the preparation of expert witness tostinony for presentadon before the provincial Public Utilities Review Cotinission. @t'd 2tdh bee: S667 ‘Ss NM 8668 19S 426 OL WBS-TIIN WEHO WOR Fax NO, 9074652948 . . . JUNEAU -Ub-Y> TUE Usi4f Dera JUNEAI : JUN SUn-08-35 TUE 09:52 “EA FAX NO. 9¢ 8098 ee DAVID A. GRAY Mr. Gray has performed numerous cconomic base and development studies including analyses of cconomic Impact resulting from both major construction of now facilites and closure of existing facilities. Mr. Gray regularly performs feasibility studies for publi¢ and private projects, Papers and Publications Practical, Low-Cost Imad Research for Electric Utilities. Public Uuilities Farinighily, August 1, 1994. Load Porccasting for Smafi Utilities; Credibility Without « Black Box. Presented at NWPPA Consultants Workshop and Rates Symposium, Seattlo, Washington. 1985. “The Economies of a Regional Approach to Load Research." Public Utilities Formigh:ly. " January 1, 1981, Fully Allocated Average Cost of Servite Based on Forecast Loads and Revenue Requirc- ments, Presented at NWPPA Rate Symposium, Scattic, Washington. 1978, @ 23‘d 2tet WES:6 SET ‘S NTE S668 196 226 :OL BBS=TIIK WHEHS:WOes Dera JUNEAU FAX NO, 9074652948 ca cra uv JUN-UG=Qb WUE OO arbt TEA FAX NO, 90 8998 , 17/27 DAVID A. GRAY po represented the Direct Service Industrial Customers of the Bonneville Power Administration in the preparation of regional load forecasts for tho Pacifte Northwest. For ABLP, Mr, Gray designed the innovative rates to help implemeat the ulllity’s conservation and load managcment programs, These rates included a duai-fuel rato for customers who could have electric heating scrvice interrupted by shifting to an alternate heating source, a water heating control rate, a clean air rate for customers who could use surplus hydroclectric power to displace wood heat, and a heat storage rate, He has also advised AEL&P on its strategy to market temporary ¢lectric service during periods of hydroelectric surplus to promote conservation during periods of hydroelectric deficits. For GVEA, Mr. Gray hag prepared four sucesusive power requirement studies (1985, 1987, 1990, and 1993), conducted an innovative load research project, and prepared the utility's demand-side management and conservation plans. The conservation plan received the National Energy Award from the U.S, Department of Energy in 1994 for utility technology. He managed an intensive study of energy maxkets and balances in the state of Kansas to establish a polley for curtailing natural gas during perieds of shect supply, Mr. Gray testified on the study findings before the State Corporation Commission of Kansas. He also planned this commission's majoc investigation into electric utility load management, rate design, and conservation, Mr. Gray performs market foasibility studies for public and privare projects including port prajects, energy facilities, and real estate development. For example, he recently conducted a market study that supported a $95 million bond issue for a wood-waste cogeneration facility. His real estate economics background includes wurchouse siting analysis and market and financial feasibility analysis of office park development. He also routinely provides least-cost and financial analyses for major public works projects. Mr. Gray has performed a number of transportation development studies, For the Pow of Tacoma, Washington, he managed the feasibillty study for u sucecssful $60 million bond issuc, He bas pertormed economic analyses for 2 number of other port developments including developments at the Port of Portland, Oucgon; the City of Saxman, Alaska; and the Alaska Marine Highway system in Ketchikan, Alaska. For Scattlo Metro he prepared an analysis of tho potential economic impact of a bus suike. He advised in the preparation of a major trade forccast by the Chicago, Milwaukee, St. Paul, and Pacific Railroad to axsist in zoning changes for switchyard development near Tacoma, Washington. Te also prepared a report documenting the potential economic impact of Rock Island Railroad abandonment in northwest Kansus. This report was submitted in evidence before the U.S, District Court for the Northern Division of Illinois. Ot'd ates WweZ:6 S66t ‘Ss NM 66S +9 LOG :G1 YaS-TIIH WEHD : WOR FAX NO, 9974852948 _np_or Ii 44 Dera JUNEAU : JUN-08-95 TUE oe ae DEA FAK NO, 9. ...!1899B- P, 16/27 DAVID A. GRAY Senior Energy Economist Education B.A. Bcomumics and Mathematics, Westem Washington University Graduate Studies, Economics and Business Administration, University of Washington and Western Washington University Experience Mr, Gray is an economic and financial consultant who serves as a project manager and advisor on cnergy, regional, and business economics studies. His expertise also includes financial, utility. transportation, and impact analysis, He develops and presents cxpert witness testimony before regulatory bodies. Mr, Gray advises elients on a wide range of energy and ulitity matters. He conducts utility cost-of-gervice and rate design studies, loud research studies, load forecasts, feasibility analyses, demand-side management and integrated resource planning studies, and contract analyses for & variety of clients. Mr Gray has evaluated the economic feasibility of numerous energy projecis in Alaska. Kor Golden Valloy Elecuic Association (GVEA), he evaluated the economic feasibility of participation in the Bradley Lake Hydroclectric Project by Golden Valley Hilectric Association and supervised the production of an integrated resource plan that supported the S atility’s decision regarding the feasibility of the Healy Clean Coal Project. He bas also studied tho feasibility of energy conservation resource development for GVEA and for Alaska Electric Light and Power Company (ABLP). Mr, Gray also condneted the feasibility studies leading tw the installation of AELP’s loud inanagement program. He has also conducted reconngissance-leve] feasibility studies of a number of small hydroelectric projects in Alaska, His electric ratemaking experience includes testimony on cost-of-service and rate design before the Alaska Public Utilities Commission. Hy has prepared cost-of-service and rate studics for Scattle City Light, Modesto Icrigation District, AELP, Glacier Highway Electric Association, and Ketchikan Public Utilities, He managed the environmental impact analysis of rate design changes to the Bonneville Power Administration. Mc. Gray has performed load forecasts for GVEA, AELA&P, Contra! Electric Cooperative, Inc., in Oregon; the City of Richland, Washington; the Southwest C#as Corporation in Nevada; the Intermountain Gas Company in Idaho; and a number of small towns in southeast Alaska. He hag also advised Anchorage Municipal Light and Power, Snohomish County PUD in Washingtyn, and Grant County PUD in Washington on load forvcasting as part of « critical review of these utility's load forecasting techniques, Mr, Gray has Se St'd Tek WHZE:6 S66T 'S NNT BESS 19S 206 OL BAE=TNIA WEHO WOU FAK NO, 90740000 ene JUN-U6-95 TUE 09:44 Dera JUNEAU vo-vo TUE 03:51 “"DEA FAX NO, € 318998 P. 15/27 yun Attachment 5 Resumes (#) pT'es 2Tah HUES « 76 S66T ‘S NM BE68 TSS 406 101 ws-T1 : =TIIH WeHDsWwOWS -HR-95 TUE 09:44 Dera JUNEAU JUN-UB Sp oi luk Us51 “IDEA FAK NO, § 318998 p.14/27 Attachment 4 Copper Valley Intertie Feasibility Update Estimated Budget Phase 1 Labor (39 professional labor days at average rate of $800) $31,200 Support and expenses (25 percent of iabor) 7,800 Contingency (20 percent of labor) __§,200 Total $45,200 Phase 2 Labor (41 professional labor days at average rate of $800) $32,800 Support and expenses (25 percent of labor) 8,200 Contingcucy (10 percent of labor) 3.300 . Total $44,300 Total $89,500 1 Std AtdH WUTEIG S6GT “S NNEC g668 155 286 OL WES-TNIH WHO: Wt FAX NO, 9074652946 eas JUN Ss 1935 @:2iAM HM? P.a2 9087 S6i 8998 Oo: FROM: CR2M HILL=SEA Risk profiles can be used to compare the risks of different policies ET LE I REE a ES NE ELS TE ECE TOS EN NE ET ELT TL ER OE CMTS I IIE ITE EEE Se Which policy is riskier? Which has a greater chance of making money (positive profits)? Cumulative Probability -2000 -1000 OO 1000 2000 3000 4000 S5C00 «60900 Profits ~ Ps iS 6-9 Evaluating Alternatives n-ne fbrRN AN GR-an-Neir 09:60 SNL 96 ¥aq) nvanner e490 3 ON X¥d appcaap/.o6 ‘ON XvA 86681E Te/€1 ‘4 71 YUN 3S) 1985 S=2i1AM 8717 P.it ~er ool oFeE — _ — st | Sutton to Glennallen Transmission &_.. # 2 | Decision Tree | 5/31/95 Economic Decision t Development / Petro Star Bulld Transmissioh®@9 Growth Load / Resource Alveska Line Load/ Resource Avalancka <_—== => Ksemee UI Zero MW Build il Lay ||| Freque we LA mt ch _Med | 4 Four MWA ~ Rei Oni ~~ ee Not Buil-¢ ha \A High \A_ infreques= = a1 t ay \_High \_ Eight Mu Relice > Tlie 4 MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Percy Frisby DATE: April 5, 1995 Director Division of Energy FILE: | al PHONE NO: 269-4644 FROM: Richard Emerman {. f wi SUBJECT: Sutton-Glennallen Senior Economist Intertie Division of Energy A recent newspaper article indicated that the Petro Star refinery in Valdez plans to discontinue purchasing power from Copper Valley Electric Association (CVEA) within the next couple of years and plans to generate its own power instead. In addition to meeting its own needs, the refinery may decide to sell surplus power to the utility as well. Because the Petro Star electrical load is an important factor in the economic feasibility of the Sutton-Glennallen intertie, this development would seriously erode the economic case for the intertie in the absence of any other compensating factors. This in turn could lead to reconsideration and possible reversal of the July 5, 1994 administrative finding, in which the DCRA Commissioner declared that a “reasonable demonstration” had been made that the intertie is economically feasible. In view of this development, I suggest that the Administration proceed as follows: I. In our March 17, 1995 meeting with the Governor, a preliminary consensus was reached that top officials should look into certain issues of particular importance in judging the feasibility of the intertie, specifically: A. the long-term future of oil production on the North Slope and of the oil pipeline to Valdez; B. power supply plans of the Petro Star Valdez refinery; Cc possibilities associated with the proposed natural gas pipeline to Valdez, and; D. power supply plans of the Alyeska marine terminal in Valdez. Percy Frisby April 5, 1995 Page 2 Il. Il. IV. This recommended course of action was formalized in the attached memorandum dated March 24, 1995 to the Governor from Commissioner Irwin. This course of action still makes sense today and should be undertaken as planned: A. With regard to Petro Star, the Administration should contact top management directly to inquire about its plans, as proposed in the March 24 memorandum. We cannot assume that the newspaper article contains complete and accurate information. B. There may be compensating factors. For example, if Alyeska decides to purchase utility power for the marine terminal in the event the intertie is built, the effect of losing Petro Star as a utility customer might be offset. Top management at Alyeska should still be contacted directly by Administration officials for insight into their power supply plans. C. Overall, it is best to consider these issues in a careful and deliberate manner. The State is presently in litigation with respect to the Commissioner’s July 5, 1994 administrative finding, and may be involved in additional litigation if that finding is amended or revoked. D. After the consultations recommended in the March 24 memorandum are completed, the Administration should invite CVEA to come in and make its case. CVEA may be able to convey additional information or ideas that the Administration should consider. If the Administration is considering a policy reversal on the intertie after the process outlined above has been completed, the next step should be to direct our consultant to produce one or more new runs of the computer model that was developed for the economic feasibility analysis. For example, if the only significant change to the previous assumptions is that Petro Star will remove itself as a utility customer, the comparison of the intertie with the diesel “base case” should be re-run to determine formally how this changes the long-term economics. If the Administration at this point decides to disapprove the intertie, the Commissioner of DCRA would issue a new administrative finding declaring the State’s revised conclusion and describing the review process that led up to it, including the consultations and revised economic projections noted above. A new Percy Frisby April 5, 1995 Page 3 finding might also be based in part on a revised weighting of environmental criteria. As you know, the $35 million appropriation for the zero-interest loan was contingent on completion of a feasibility study and plan of finance “satisfactory” to DCRA. A revised finding would essentially declare that the studies had not produced a satisfactory demonstration of the intertie’s feasibility. If the Administration disapproves the intertie. CVEA consumers will still be burdened with rates that are roughly twice the level paid in Anchorage and in the larger communities of Southeast Alaska. A proposal to use part or all of the $35 million to help reduce rates for CVEA consumers could be put forward by the Administration: A. Use of these funds to subsidize a different power supply alternative might not be appropriate if Petro Star does proceed to sell power to the utility. Surplus power from Petro Star could be an attractive alternative to diesel without State subsidy. B. The State-owned Solomon Gulch hydro project will continue to provide a major share of CVEA’s power requirements. Wholesale power rates of 7.0 cents/kWh or more will be paid under the existing power sales contract which extends until the year 2030. It may be impractical to reduce this obligation contractually because Solomon Gulch is tied into the Four Dam Pool, and it would be very difficult to affect the obligations of one participant without affecting the others. Even so, the clearest and most direct approach to reducing rates over the long term for CVEA consumers would be to somehow reduce their payment obligation for Solomon Gulch power. One idea would be to invest some or all of the $35 million over a 35 year term and use the earnings of the investment to pay a portion of the wholesale power cost for Solomon Gulch otherwise payable by CVEA consumers. For illustration, assume that CVEA consumers presently purchase 45 million kWh from Solomon Gulch at $0.07 per kWh -- about $3.1 million per year. If $35 million were invested at 7.5%, interest earnings alone would be $2.6 million per year. Less than $35 million could be invested and still provide very significant long-term rate reduction. Perhaps Percy Frisby April 5, 1995 Page 4 AEA/AIDEA, as owner of the hydro project, could invest the funds and enter into a long-term rate reduction agreement of this nature. Attachment MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Tony Knowles DATE: March 24, 1995 Governor FILE: ; if PHONE NO: 465-4700 FROM: Mike ou A fh SUBJECT: Sutton-Glennallen Intertie Commissiéner Dept. of Community and Regional Affairs As you know. the 1993 legislature appropriated $35 million to be used as a zero-interest loan for the Sutton-Glennallen intertie but made the appropriation contingent on completion of a feasibility study and plan of finance “satisfactory” to this department. My predecessor issued a finding in July 1994 that the required studies were satisfactory in his judgment, and directed the Division of Energy to move forward with issuance of the loan. To date. however, agreement has not been reached on the terms of the loan and none of the appropriation has yet been spent. At this point, this administration has several options. One is for this department to continue to negotiate a loan agreement with Copper Valley Electric Association (CVEA). Another is having this department reconsider our policy on this intertie project. Regardless of which option is pursued, we believe that additional information is necessary before a well-informed decision is possible. As we discussed with you on March 17, there are a number of issues which we believe you should consider carefully in evaluating the proposed Sutton-Glennallen intertie. In each case, we recommend that you or a top administration official undertake discussions with top management in the identified industries to seek a greater measure of insight and confidence in forecasting long-term developments. We believe that those high-level contacts are more likely to promote openness and candor from the private interests than could be achieved through this department’s Division of Energy. As always, this department is ready to assist you in any way you deem appropriate. L. LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The uncertainty associated with predictions of pipeline shut down should be addressed by soliciting views directly from top management of the major oil companies operating on the North Slope. Tony Knowles. Governor March 24. 1995 Page 2 Discussion: If the pipeline and marine terminal are shut down by 2020. very possibly taking the Petro Star retinery with it. the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. A judgment on the long-term viability of the intertie therefore rests to a great extent on one’s vision of the long-term future of the pipeline and, therefore, of oil production on the North Slope. As stated in the following excerpt from the feasibility study, neither the Division of Energy nor our contractors can help very much with this underlying vision: “The authors of this report have not attempted to attach any probability estimates to factors like the prospects for continued oil pipeline operations after 2018. or to related factors such as the long-term oil price and prospects for major additions to North Slope oil production. or to the long-term likelihood of building a natural gas pipeline into Valdez. These are major uncertainties that continue to be debated by informed observers and participants, and which we cannot begin to resolve within an intertie feasibility study. Consequently, this study does not identify any one of the four scenarios as the “expected case” or “most likely case,” but rather presents the analytical results for each case for consideration and judgment by Alaska decision- makers.” (p. 1-14. Volume 1) By way of background on this issue, the feasibility study does include the following information: “In April 1993, the United States General Accounting Office (GAO) issued a report entitled “Trans-Alaska Pipeline -- Projections of Long-Term Viability Are Uncertain.” In its report, the GAO focused much of its effort on the review of projections made in 1991 in a report prepared by the United States Department of Energy (DOE), of the year in which the Trans-Alaska pipeline would be shut down. DOE concluded that the pipeline will shut down between 2006 and 2011, with 2009 identified as the “most likely” year considering projected oil availability on the North Slope, the pipeline’s minimum operating levels, and other factors. GAO indicated that although the shut down could actually be predicted to occur anytime between 2001 and 2021 by varying the basic assumptions, it could not estimate a more reliable termination date than DOE. It is important to note that both DOE and GAO assume new oil field development in making their projections, but neither has assumed development of oil fields in the Arctic National Wildlife Refuge (ANWR).” (p. VIII- 5, Volume 1) Tony Knowles. Governor March 24. 1995 Page 3 II. Ill. PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power supply. although Petro Star may not have developed clear long-term plans at this point. Discussion: Two basic issues are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? In a letter to our consultant dated November 2. 1993, the Engineering Manager at Petro Star Valdez stated that on-site cogeneration was not an attractive alternative: “Petro Star has investigated the installed cost and operating cost of on-site cogeneration to supply power to the refinery. This was looked at with using the lowest grade oil for fuel and the possibility of using waste heat from the refinery process. Several factors make it an unattractive alternative to Copper Valley Electric utility power... In addition to these reasons, cogeneration is less reliable and reliability is of the utmost importance to safety and production in a refinery.” This position appears to have changed. In documents filed with the Alaska Public Utilities Commission (APUC) on January 27, 1995, CVEA states the following: “CVEA has also recently been approached by Petro Star Valdez Refinery concerning the possibility of using the waste gases from the refinery for the generation of electricity. There are numerous questions which remain to be answered with respect to this potential energy resource. However, indications are that such a resource is feasible. _CVEA has been informed that Petro Star Valdez Refinery will be petitioning to intervene in this proceeding in order to protect its interest with respect to being able to supply power to CVEA.” TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of TAGS construction 10 years from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. Questions on the likelihood and amount of excess power production could also be asked. Discussion: In the feasibility study, construction of TAGS in the 2000-2010 time frame was assumed in the “High” case. The scenario developed was that TAGS would generate Tony Knowles. Governor March 24. 1995 Page 4+ IV. power for its own use at the Valdez terminal. but would neither sell excess power to the utility nor purchase any additional power from the utility. We understand. however, that Jeff Lowenfels of Yukon Pacific has suggested that TAGS may in fact have a considerable amount of excess power to sell beyond what it would need for its own operations. There are two main questions, then: A. Is TAGS likely to be built in something like the time frame identified in the intertie feasibility study? B. If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand. intertie viability is enhanced. If the primary effect is to introduce a new local power supply, the intertie may become unnecessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted. however. is very small in relation to Railbelt power requirements. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the State should contact top management at Alyeska. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alyeska has always decided in the end to remain isolated electrically. One reason commonly cited for Alyeska’s historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself to APUC regulation with regard to such power sales. HIGH ALTITUDE AURORAL RESEARCH PROJECT (HAARP) Recommended Action: No action is recommended. The HAARP project is presently excluded from all cases considered in the feasibility study. Because full funding and construction of the HAARP project is considered speculative, the only case it could be included within is the “High” case. Since the intertie is already identified as the least cost alternative in the “High” case, adding the HAARP load would not change the outcome of the feasibility study. Discussion: This subject was raised by the Commissioner of DOTPF. HAARP is a federal project under development by the military near Gakona and has been sponsored thus far by Senator Stevens. A $20 million prototype facility has been completed. The Tony Knowles. Governor March 24. 1995 Page 5 VI. full project would require about $70 million more in federal funds. If connected to the utility grid. the full project would add an annual demand of about 5 million kWh. (The total energy requirement for the utility in 1993 was 70 million kWh.) During the feasibility study, the Division of Energy spoke on several occasions with a Mr. John Hecksher. who represented federal management on the project -- telephone (617) 377-5121. Mr. Hecksher consistently stated that this was a “Congressional project.” that it did not represent an initiative of the military, and that its prospects for full funding should be considered speculative. This assessment was shared by the Governor’s office in Washington D.C. We were informed, however, that Senator Stevens intended to request $20 million per year for the project, and would continue to support it. PROVISIONS OF PROPOSED LOAN AGREEMENT. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. Note that the Administration does not have the statutory authority to forgive repayment of the loan, even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT As noted at the top of this memo, we recommend that top State officials undertake the recommended discussions with industry management, with relevant department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability. The Division of Energy is of course ready to assist in any way you deem appropriate. MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Mike Irwin DATE: March 29, 1995 Commissioner FILE: THRU: Percy Frisby, Diet 2g yor Division of Energy } PHONE NO: 269-4644 FROM: Richard Emerman, Senor Economist SUBJECT: Sutton-Glennallen Division of Energy Intertie Feasibility ‘ This memorandum provides an overview of the following subjects: 1. Il. ll. IV. The basic methodology of the economic feasibility analysis; The scenarios of future electricity demand (i.e. the “load forecasts”) used in the analysis; The results of the economic feasibility analysis for each load forecast scenario; The estimated impact of building the intertie and then experiencing a decline in electricity demand as represented in the “Low” load forecast scenario; Information on the record of public comment. BASIC METHODOLOGY OF THE ECONOMIC FEASIBILITY ANALYSIS The methodology of the Sutton-Glennallen intertie economic feasibility analysis is conventional for such studies and conforms with the requirements of prior statutes and regulations of the Alaska Energy Authority: Mike Irwin March 29, 1995 Page 2 A. The cost of supplying electricity to the utility’s customers over the long term is estimated and compared under varying sets of assumptions, including: 1. the assumption that the intertie is built, and power transmitted from the Anchorage area supplements the power supplied from the existing Solomon Gulch hydro project in Valdez; De the intertie is not built, and diesel generators supply all power requirements not supplied from Solomon Gulch; BE the Allison Lake hydro project is built, and all power requirements not supplied from Solomon Gulch are supplied first from Allison Lake and then, to the necessary extent, from diesel generators; 4. other scenarios involving construction of a hydro project at Silver Lake, construction of a coal-fired power plant in Valdez, and increased electric energy conservation. The time frame over which these costs are compared covers the estimated economic life of the intertie in order to capture its long term costs or benefits. This time period was assumed to be 50 years from a projected on-line date of 1999. Since cost projections become ever more speculative the further out they go, the analysis period is divided into two parts: ip Explicit cost projections are made for the first 20 years of the expected project life, ie. 1999 - 2018. 2: For the remaining 30 years of the analysis period, costs of each scenario are assumed to remain constant in real terms. The idea behind this standard approach is to reconcile the analytical requirement of a long evaluation period with the highly speculative nature of long-range forecasting. The first step in projecting power supply costs over the initial 20- year period is to develop forecasts of electricity demand through the Mike Irwin March 29, 1995 Page 3 year 2018. Four such load forecast scenarios were developed for the Sutton-Glennallen intertie study -- each is described briefly in Section II below. For each load forecast, in combination with other sets of assumptions such as fuel prices, costs for each alternative are projected over the initial 20-year period and then extended over the balance of the 50- year period. In each case, the present value of future costs is calculated by applying a discount rate. Costs that are common to all scenarios, such as administrative costs or depreciation of existing plant, are excluded from the analysis. For each load forecast scenario, the alternative with the lowest present value of future cost represents the least cost option. The base case may be defined as the one in which diesel generation provides all power not supplied by Solomon Gulch -- this is what would be expected if none of the proposed capital projects are built. For several load forecast scenarios, more than one capital project alternative leads to lower costs than the diesel base case. IL. SCENARIOS OF FUTURE ELECTRICITY DEMAND Attachment | to this memorandum provides a graph that displays the four load forecast scenarios developed for the Sutton-Glennallen intertie study. For purposes of the cost projections, the study assumed that higher oil prices (and consequently higher prices for diesel fuel) are associated with the High and Medium-High load forecasts, while lower oil prices corresponding to Department of Revenue projections are associated with the Medium-Low and Low load forecasts. Other assumptions behind each of these load forecast scenarios are summarized as follows: A. Medium-High Scenario. 1. Sufficient additional oil production is maintained at the North Slope to allow the Trans-Alaska oil pipeline to continue to function through 2018, the last year of the load forecast. Mike Irwin March 29, 1995 Page 4 Because costs of supplying power in 2018 are assumed to remain constant in real terms for the following 30 years of the analysis period, this load forecast scenario in effect assumes either: a. the pipeline will remain operational through 2048, or b. although the pipeline may shut down at some point beyond 2018 during the 30-year extension period, other unspecified economic activity will compensate for this loss at least in terms of electricity demand. The Petro Star Valdez refinery will expand from a present throughput level of 30,000 barrels per day to 50,000 barrels per day, as projected in an expansion assessment conducted for the Division of Energy. The refinery will continue to purchase all of its power requirements from the utility, and will either: a. remain in operation through 2048, or b. be replaced in terms of its electricity demand by other unspecified growth in the event the refinery closes during the 30-year extension period. Other population growth over the next 20 years will average about 1.5% per year in Valdez and 0.9% per year in the Copper River area. B. Medium-Low Scenario. I: The Medium-Low scenario differs from the Medium-High only in its treatment of the Petro Star refinery. In the Medium-Low scenario, the refinery is assumed to shut down in 2018 due to cut-off of crude oil availability. The oil pipeline is assumed in this case to close down in 2018 as well, but the impact of such closure on the area economy Mike Irwin March 29, 1995 Page 5 and on utility electricity demand is assumed to be replaced by other unspecified economic growth. As noted above, the Medium-Low case projections were run in conjunction with a lower oil price forecast (2010 price of $21/barrel in 1992 dollars), while the Medium-High case was run in conjunction with a higher oil price forecast (2010 price of $30/barrel in 1992 dollars). The difference this makes in projected diesel fuel prices accounts for much of the difference in the diesel scenario costs between these two cases. The two main differences between the High scenario and the Medium-High scenario are as follows: 1. The TAGS project is assumed to be constructed between 2005 and 2009. This creates temporary boom conditions in the region. With respect to TAGS operations, the High scenario assumes that the TAGS marine terminal will self-generate to supply its own power requirements, but will neither sell excess power to the utility nor purchase any power from the utility. The underlying rate of population growth is assumed to be about 2.5% per year in Valdez and 1.2% per year in the Copper River area. cenario. The Petro Star refinery is assumed to increase throughput from the current level of 30,000 barrels/day to 40,000 barrels/day -- half the increase assumed in the other cases. The refinery is again assumed to purchase all of its power requirements from the utility in lieu of self-generation. The oil pipeline is assumed to shut down in 2013, and the Petro Star refinery is assumed to shut down at the same time. Mike Irwin March 29, 1995 Page 6 ll. No TAGS line is assumed to be built, and no unspecified growth is assumed to compensate for these losses. 35 Underlying population change over the next 20 years is assumed to be a minus 1.0% per year in Valdez and plus 0.5% in the Copper River area. As shown in the graph, electricity demand in Valdez in the Low case is projected to return to roughly 1985 levels after these closures take effect roughly 20 years from now. RESULTS OF THE ECONOMIC FEASIBILITY ANALYSIS Attachment 2 to this memorandum provides a table summarizing the results of the economic feasibility analysis. Following are conclusions that can be drawn from the table: A. If future electricity demand for the Copper Valley electric utility corresponds to the Low case, and future oil prices correspond to the long-term Department of Revenue expectation, the least cost alternative for supplying power to the utility would be the diesel case. This result is apparent from reviewing the bottom row of numbers in the table. The present value of future costs under the Low scenario is: 1. $39,565,000 in the diesel case; 2: $50,042,000 in the intertie case; 3: $44,808,000 in the Allison Lake case. If the expectation adopted for planning and decision-making is that the future will conform generally to the Low scenario, then the intertie project would have to be judged economically infeasible according to these projections -- the intertie would not be the least cost alternative nor would it be less costly than the diesel base case. Mike Irwin March 29, 1995 Page 7 If future electricity demand corresponds to the Medium-Low case, and again future oil prices correspond to Department of Revenue projections, the least cost alternative would be the Allison Lake case according to these projections. Again referring to the table, the present value of future costs under the Medium-Low scenario is: if $67,853,000 in the diesel case; 2, $63,415,000 in the intertie case; 3) $60,596,000 in the Allison Lake case. If the expectation adopted for planning and decision-making is that the future will conform generally to the Medium-Low scenario, then the intertie project could be judged economically feasible according to these projections depending on definitions. Although Allison Lake emerges as the least cost alternative, both Allison Lake and the intertie come in at lower cost than the diesel base case. Our July 1994 finding argues that more than one project could be considered “economically feasible” providing that each project would reduce costs relative to the diesel base case. Under the High case, the intertie is clearly the least cost alternative and would therefore clearly be judged economically feasible based on the High outlook. IV. IMPACT OF THE INTERTIE UNDER THE LOW SCENARIO In addition to the feasibility study, a plan of finance was prepared under the direction of the Division of Energy that sheds some light on questions of rate impact. Power production costs for the Copper Valley electric utility were projected in the years 2000 and 2010 under a number of assumptions, including the following: re No State assistance is provided in the diesel base case. Mike Irwin March Page 8 29, 1995 B. The intertie is partially financed with a $35 million, zero-interest State loan. ( The Low scenario is experienced with respect to future loads and oil prices. Given these and other assumptions, the Plan of Finance indicates that retail rates for the Copper Valley electric utility would be higher in the year 2000 by about 0.5 cents/kWh in the intertie case than they would be in the unassisted diesel base case. Variations in intertie capital costs, as well as the interest rate on supplemental financing for the intertie, could move this estimate in either direction. Based on these same assumptions, retail rates in the year 2010 would be about 0.5 cents/kWh lower in the intertie case than in the unassisted diesel case. Although loads are assumed to be gradually declining in the Low case between 2000 and 2010, nominal oil prices are assumed to be increasing at somewhat above the rate of inflation. Still, 2010 is before the significant drop in electricity demand that occurs in the Low case in the year 2013. What would happen if the bottom fell out along these lines in 2013? I do not have access on short notice to the models used in developing these projections, but based on rough estimates I believe that the upward impact on retail rates would likely be in the neighborhood of 2 - 3 cents per kWh compared with retail rates in 2010. This assumes that transfers over the intertie would drop in the Low case from 27.9 million kWh in 2010 to 9.4 million kWh in 2013. The impact of this development on retail rates would be mitigated by the fact that about 80% of Copper Valley’s power requirements would again be supplied by Solomon Gulch, and by the continuing benefit of the State’s zero-interest intertie loan. PUBLIC COMMENT I read in the newspaper that the Governor’s office is now receiving a lot of mail on this issue, nearly all of it coming from project opponents. I believe you should know that our experience in the Division of Energy over the last two years on this issue is that we receive a lot of mail from one side and then the other in waves. I believe we received roughly the same volume Mike Irwin March 29, 1995 Page 9 from each side prior to publication of the feasibility study in April 1994. Since then, however, we have received hundreds of postcards from Copper Valley electric consumers -- all in favor of the intertie. Conclusions on public sentiment should not be drawn solely from the most recent batch of correspondence received on this issue. Attachments ATTACHMENT 1 Historical = a an c = 15 csc= aS gs os - 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 —— Medium Case High ~-- Medium Case Low —— High Case eee Low Case Figure I-1: Historical and Projected Energy Requirements ATTACHMENT 2 Table I-5 Summary of Economic Analysis Results Cumulative Present Value of Comparable System Costs and Benefit/Cost Ratios(1) ($000) Load Forecast and Fuel Power Suppty Scenario Price Escalation Scenario All Diesel_ _Intertie_ _ Allison Lake Silver Lake A_ _Coal Facility Conservation Medium-High Load Growth (2) High Fuel Price Escalation............-s:-sessee $84,771 $72,604 $71,989 $74,929 $76,567 $84,098 PIGUET GOST RAO bra seqcncsccsacsecseveseassocsecee 1.0 de 12 Jel del 1.0 Medium-Low Load Growth(3) Low Fuel Price Escalation .. 67,853 63,415 60,596 70,508 77,062 67,777 Benefit/Cost Ratio 1.0 1.1 11 1.0 0.9 1.0 High Load Growth(4) High Fuel Price Escalation. 121,562 91,227 108,298 108,376 98,898 120,690 Benefit/Cost Ratio ........... 1.0 13 Tt 1.1 12 1.0 Low Load Growth(5) Low Fuel Price Escalation ..........s:ssssesesee 39,565 50,042 44,808 63,462 61,432 39,775 Benefit/ Cost RMI, cecaescecsxcscersesysessserecesces 1.0 0.8 0.9 0.6 0.6 1.0 (1) Benefit/cost ratios are calculated as the cumulative present value of the All Diesel case divided by the cumulative present value of the specific alternative. (2) Assumes medium population growth m CVEA's service territory and operation of the Trans-Alaska oil pipeline and Petro Star refinery through the end of the study period. (3) Assumes medium population growth in CVEA's service territory, shut down of the Trans-Alaska oil pipeline and Petro Star refinery in 2018. New industrial activity with comparable power requirements on CVEA to the oil pipeline continues through the remainder of the study period. (4) Assumes high population growth in CVEA's service territory, operation of the Trans- Alaska oil pipeline and Petro Star refinery through the end of the study period and construction of a North Slope natural gas pipeline. (5) Assumes low population growth im the CVEA service terntory, limited expansion of Petro Star refinery, and closure of the Trans-Alaska oil pipeline and the Petro Star refinery in 2013. MEMORANDUM State of Alaska Department of Community & Regional Affairs TO: Herv Hensley, Director DATE: July 5, 1994 Division of Energy THRU: TELEPHONE NO: 465-4700 SUBJECT: Final Department FROM: — Edgar Blatchford Determination Commissioner Regarding Sutton- Glennallen Intertie Studies In Section 4(a), Chapter 19, SLA 1993, $35 million is appropriated to the Power Project Fund for a loan to participating utilities for the design and construction of an intertie between Sutton and Glennallen. The Power Project Fund is administered by the Division of Energy. Section 4(d) of Chapter 19 places the following condition on the $35 million appropriation: "The appropriation made by (a) of this section is contingent upon the completion of a feasibility study and finance plan satisfactory to the Department of Community and Regional Affairs as set out in former AS 44.83.181." The feasibility study and finance plan for the proposed Sutton-Glennallen intertie (the "Project") have now been completed and, following the review and discussion summarized below, | find that both studies are satisfactory within the meaning of Section 4(d), Chapter 19, SLA 1993. Please proceed with development of a loan agreement with the participating utilities for design and construction of the Project. Conduct of the Studies The feasibility study was prepared by R.W. Beck and its subcontractors under the direction of the Division of Energy, and was issued in April 1994. The plan of finance was prepared by J.C. Bradford & Co. with the assistance of R.W. Beck under the direction of the Division of Energy, and was issued in May 1994. Both studies conform with the requirements of content and procedure set out in former AS 44.83.181. Herv Hensley, Director July 5, 1994 Page 2 In addition to these requirements, fifteen public meetings were held during the preparation of the feasibility study to provide information to the public and to provide adequate opportunity for public input. Three public meetings were held in each of the following locations: Sutton, Chickaloon, Glacier View, Glennallen, and Valdez. The first set of meetings was held at the beginning of the study process, the second set was held several months later, and the final set was held after issuance of the draft feasibility report. During the last set of public meetings, formal public comment was solicited and recorded. This recorded comment was transcribed and included in the final feasibility report. Review of th udi | reviewed the completed feasibility study and plan of finance, and received extensive briefings from staff. In addition to a formal overview of the studies, subjects which received particular attention in our discussions included: . route selection for the proposed intertie; . description of the existing electric supply system in the Glennallen-Valdez region and in the Railbelt; . forecasting assumptions and scenarios for future electricity demand in the Glennallen-Valdez region; . description of power supply alternatives considered in the feasibility study; . discussion of economic analysis methodology and results; . discussion of environmental impacts; and . review of the public comment record. | reviewed the recorded comment transcribed from the third set of public meetings and the additional written comments included in the final feasibility report, and also visited the region. Decision In my view, the studies are satisfactory within the meaning of Chapter 19, Section 4(d). The requirements as to content and procedure have been met as set out in former AS 44.83.181, and a reasonable demonstration has been made Herv Hensley, Director July 5, 1994 Page 3 that the Project is feasible with respect to long-term economics and environmental impact, and can be successfully financed. As noted above, | have determined that the studies conform with the content and procedure requirements of former AS 44.83.181. With regard to economics, the feasibility study indicates that the Project would result in lower long-term costs than the diesel alternative under all but the "Low" load forecast scenario. Although the study indicates that Allison Lake is the lowest cost alternative under mid-range assumptions, this is not incompatible with my finding for the following reasons: ils It would be unduly restrictive to require that only one alternative to diesel generation can be designated "economically feasible" if more than one alternative promises lower costs. Regardless of the potential merits of other alternatives, the study provides a satisfactory demonstration that the Project is economically feasible because it indicates that the Project would produce substantial economic savings with respect to the diesel "base case" under most sets of assumptions, including mid-range assumptions. 2. The feasibility study is built upon elaborate sets of assumptions and complex computer modeling techniques. While this methodology is common and useful, the output of these complex simulations should not entirely displace the role of judgment in assessing project feasibility. Decisions should not be dictated by relatively small differences in the results of economic modeling. With this in mind, | believe the estimated long-term Project costs under mid-range assumptions are low enough to provide a satisfactory demonstration of economic feasibility. The feasibility study accorded significant attention to the issue of environmental impact, and significant route modifications were incorporated in the feasibility design in response to public concerns. While environmental objections continue to be expressed, there will be additional opportunity in the Project development process to consider these objections in the context of permitting and right-of-way acquisition. | have considered the critical comment included in the feasibility study and conveyed by Project opponents, but | do not consider the projected impacts to be unacceptable. My conclusion is that the feasibility study is satisfactory with respect to environmental impact as well as economics. The plan of finance demonstrates that the Project can be successfully financed without additional State appropriation and without undue burden on Alaska power consumers. Consequently, | find that the plan of finance is satisfactory as well. Herv Hensley, Director July 5, 1994 Page 4 EB:re Copper Valley Intertie Studies ‘inal Department Determination Mr. Clayton Hurless Copper Valley Electric Association P.O. Box 927 Valdez, AK 99686 Alaska Department of Community and Regional Affairs Office of the Commissioner P.O. Box 112100 Juneau. AK 99811-2100 Mr. Shelby Stastny Director, Office of Management & Budget Office of the Governor P.O. Box 10020 Juneau. AK 99811-0020 Mr. Peter Van Tuyn Trustees for Alaska 725 Christensen Drive Anchorage, AK 99501 The Honorable Irene Nicholia Alaska State Representative Room 606, Court State Capitol Juneau, AK 99801-1181 The Honorable Harley Olberg Alaska State Representative Room 110, State Capitol Juneau, AK 99801-1182 The Honorable Gail Phillips Alaska State Representative Room 216, State Capitol Juneau, AK 99801-1182 June 23 1994 1 List Ms. Marilyn Heiman North Coast Research Group 725 Christensen Drive. Suite 5 Anchorage, AK 99501 The Honorable Ramona Bames Speaker of the House Room 208, State Capitol Juneau, AK 99801-1182 The Honorable Ron Larson Alaska State Representative Room 502, State Capitol Juneau, AK 99801-1182 The Honorable Georgianna Lincoln Alaska State Senator Room 510, State Capitol Juneau, AK 99801-1182 The Honorable Rick Halford Senate President Room 111, State Capitol Juneau, AK 99801-1182 The Honorable Jay Kerttula Alaska State Senator Room 427, State Capitol Juneau, AK 99801-1182 Mr. Chris Rose, Co-Chair Alaska Consumers for Responsible Energy Development P.O. Box 1129 Chickaloon, AK 99674 Ted & Theresa Anderson Box 334 Sutton, AK 99674 Susan Archer clo Box 313 Sutton, AK 99674 Jeff Amat Box 124 Sutton, AK 99674 Craig & Jennifer Baer Box 245 Sutton, AK 99674 Manlyn Bailey Box 23 Norton, MA 02766 Mary Barrett P.O. Box 124 Sutton, AK 99674 C.P. & P. Bartley HC03, Box 8758 Palmer, AK 99645 IRENE\CVEALIST 1 Determination on Sutton Glen len IJntertie June 23 1994 Jim Bauer Box 172 Sutton, AK 99674 Mark & Nancy Bertels PO Box 263 Sutton, AK 99674 Greg Black Box 301 Sutton, AK 99674 Paul & Vera Blair Box 168 Glennallen, AK 99588 Jane Brown Box 92 Glennallen, AK 99588 Pat Blydenburgh P.O. Box 201 Sutton, AK 99674 Clement G. Boucher Box 258 Glennallen, AK 99588 Na nedede a dede Adare Shs aetna Copper Valley Intertie Project Distribution Li Final Report Executive Summary, April 1994 Edward Wm. "Bill" Boyle HC-03 Box 8300 Palmer, AK 99645 Kar & Donna Braende! Post Office Box 1148 Chickaloon, AK 99674 Virgina Brannon Box 1101 Chickaloon, AK 99674 Roy Brittain HC60, Box 330M Copper Center, AK 99573 Judith Brown Post Office Box 242 Copper Center, AK 99573 Shirley Buchholz Box 254 Sutton, AK 99674 Shirley V. Buchholz P.O. Box 254 Sutton, AK 99674 IRENE\CVEALIST Evelyn Bunch P.O. Box 31 Glennallen, AK 99588 Glenn Campbell, Jr. HC03, Box 8785 Palmer, AK 99645 Andrea Carmen HC04, Box 9580 Palmer, AK 99645 Mike & Laura Camey Post Office Box 217 Sutton, AK 99674 Dave Carroll Box 9 Sutton, AK 99674 Patricia Cayne Box 86 Sutton, AK 99674 Nancy Choffin Box 547 Valdez, AK 99686 Mark H. Clark Box 242 Sutton, AK 99674 Wayne Clark Mile 72 Glenn Highway P.O. Box 313 Sutton, AK 99674 Rex J. Close 5601 College Dr. Anchorage, AK 99504 Mr. & Mrs. Kenneth R. Cobb 3126 Tamworth Circle Anchorage, AK 99504-3733 Jim Colver Cathy Stimmel Box 427 Palmer, AK 99645 George Coon Box 223 Sutton, AK 99674 Rod Cottle, MEA Director Box 870341 Wasilla, AK 99687 IRENE\CVEALIST Copper Vailey Intertie Project Distribution Final Report Executive Summary, April 1994 Linda S. Dellinger P.O. Box 33 Sutton, AK 99674 Mary DenBleyker HC03, Box 8376 Palmer, AK 99645 Laurie Dilley P.O. Box 3247 Palmer, AK 99645 Kim A. Dodge P.O. Box 111944 Anchorage, AK 99511 Dave Dolfi P.O. Box 76 Sutton, AK 99674 Daryl Douthat P.O. Box 38 Chugiak. AK 99567 John Downes Box 309 Copper Center, AK 99588 scree onsen ce ence tmamen ara nana sere ace SQN PM NPM RRSENERORIEIS NTO: 0A: Wad nbaaaA Adi na didenedda Msivabionie UGE ISA SG SESIGaRS’: Copper Valley Intertie Project C.ouwution List Final Report Executive Summary, April 1994 aA J.J. Doylie Box 1121 Chickaloon, AK 99674 Roy s. Ewan P.O. Box 649 Glennallen, AK 99588 Marge Dunlop Mark Foster P.O. Box 17 611 Gold Street, Unit D Sutton, AK 99674 Juneau, AK 99801 Sharon Dunlop P.O. Box 17 Sutton, AK 99674 Cliff Eames Alaska Center for the Environment 519 West 8th Ave, Suite 201 Anchorage, AK 99501 Mike & Cheryl Easley Post Office Box 927 Valdez, AK 99686 Louis Endre Box 319 Sutton, AK 99674 Michael H. Evans HC-01 Box 6205 Palmer, AK 99645 IRENE\CVEALIST Walter F. Feigin 840 Rockside Wasilla, AK 99654 Herbert T. Fey Post Office Box 1101 Chickaloon, AK 99674 Richard Fixel Box 104 Glennallen, AK 99588 Garie Gardner P.O. Box 204 Sutton, AK 99674 James Garfield HC03, Box 8369 Palmer, AK 99645 LeRoy & Mary Geist Box 31 Sutton. AK 99674 James A. Gerenday Box 326 Sutton. AK 99674-0326 Brolene & Chuck Gerving HC03. Box 8392 Palmer. AK 99645 Stan Gillespie HC03. Box 8392 Palmer. AK 99645 Ivan M. Gilliam 12301 Johns Road, No. 21 Anchorage. AK 99515 Doug Gow Box 100 Sutton, AK 99674 Colleen Granger Copper Valley Electric Association Post Office Box 45 Glennailen, AK 99588 IRENE\CVEALIST Copper Valley Intertie Project Distributior Final Report Executive Summary, April 1994 John & Catherine Greiling P.O. Box 363 Sutton, AK 99674 Herman Griese Division of Wildlife Cons.-ADF&G 1800 Glenn Hwy Palmer, AK 99645 Patricia Grinzell-Lee 2604 Fairbanks Anchorage, AK 99503 Steve Guest Post Office Box 1210 Valdez, AK 99686 Dennis L. Hall Box 1237 Chickaloon. AK 99674 George Hargreaves Box 611 Glennallen, AK 99588 Gary Harison Box 1105 Chickaloon, AK 99674 Roseanne Sane eae OOOO NOVBSRE CE e ee ee nena eee neat ee ee nee UB RO ORUEC EERE UE OEE EEE UE: Copper Valley intertie Project Distribution Li_. Final Report Executive Summary, April 1994 A. L. Haynes Post Office Box 1149 Chickaloon, AK 99674 John Heberling R.W. Beck 2101 Fourth Ave, Suite 600 Seattle. WA 98121-4962 Wayne L. Hickel Box 66 Sutton. AK 99674 Randy Hobbs Box 1989 Palmer. AK 99645 Pam S. Holland Box 612 Glennailen, AK 99588 Ken Hughes Box 8 Gakona. AK 99586 Clayton Hurless Copper Valley Electric Association Post Office Box 45 Glennallen, AK 99588 IRENE\CVEALIST Dave Ingalls Box 2929 Palmer, AK 99645 Nicholas Jenkins Box 371 Glennallen, AK 99588 Nancy E. Johnson Box 256 Sutton, AK 99674 Merle D. Johnson Box 277 Sutton, AK 99674 Moretta Jones HC60, Box 272 Kenny Lake, AK Suel D. Jones HC 03 Box 8460 Palmer, AK 99645 Warren Keogh Post Office Box 1166 Chickaloon, AK 99674 Linda Ketchum Post Office Box 1132 Chickaloon, AK 99674 Jim & Vicki Kindseth Post Office Box 1200 Chickaloon, AK 99674 Gene Kubina Box 2463 Valdez. AK 99686 Dave Kurtz Hick Creak, HCO-3 Box 8410 Palmer, AK 99645 Alan, Alan Jr., Stella & Natalie Larson Box 5 Sutton. AK 99674 Joel & Jane Larson P O Box 3891 Palmer, AK 99645 Alfred M. Lee HC03, Box 8857 Palmer, AK 99645 IRENE\CVEALIST Copper Valley Intertie Project Distribution L Final Report Executive Summary, April 1994 Gerald Lee Box 148 Glennallen, AK 99588 Kevin Lee Box 236 Palmer, AK 99645 Patricia Lee Box 2771 Palmer, AK 99645 Tom Lee Box 2771 Palmer, AK 99645 William Lee PO Box 613 Glennallen. AK 99588 Michael F. Leeper Box 428 Glennallen. AK 99588 L. Alan LeMaster Box 222 Gakona, AK 99586 Julie LeMay Post Office Box 2271 Palmer, AK 99645 John LeMay Post Office Box 1230 Chickaloon, AK 99674 Tim Lengerich Box 4037 Palmer, AK 99645 Barbara Leppanen Box 364 Sutton, AK 99674 Lary Leppanen HC 03 Box 8220 Palmer, AK 99645 Becky Long Box 320 Talkeetna, AK 99676 Randy N. Maay P.O. Box 1031 Valdez, AK 99686 IRENE\CVEALIST Copper Valley Intert'e Project Distribution L. Final Report Executive Summary, April 1994 Donald Mahon Box 207 Tok, AK 99780 Allen K. Mansfield HC04 Box 9625 Palmer, AK 99645 Jane Martine Box 1105 Chickaloon, AK 99674 Bob Mau Box 943 Palmer, AK 99645 Joyce Mays-Rabbitt 1829 Laurel Avenue Manhattan Beach, CA 90266 Deborah McAtee P.O. Box 1124 Chickaloon, AK 99674 Lee McEntee Box 4 Sutton, AK 99674 Pat McEntee Box 4 Sutton, AK 99674 Sharon McEntee Box 4 Sutton, AK 99674 Robin McLean Generai Delivery Sutton, AK 99674 Ted McHenry Ruth McHenry HC60 Box 306T Copper Center, AK 99573 Dianne Milic P.O. Box 28 Sutton, AK 99674 Dianne & Miro Milic P.O. Box 28 Sutton, AK 99674 Red & Michelle Morton Post Office Box 1251 Chickaloon, AK 99674 IRENE\CVEALIST Copper Valley Intertie Project Distribution Final Report Executive Summary, April 1994 Sue Mossgrove Post Office Box 68 Glennailen, AK 99588 Jess Mossgrove Box 11 Glennallen, AK 99588 Elaine Nash Box 302 Sutton, AK 99674 Sy & Carol Nestey Box 88 Glennallen, AK 99588 Helen D. Nienhueser 2561 Lovejoy Drive Anchorage, AK 99508 Dawn C. Oaks P.O. Box 5 Glennallen, AK 99588 Peter E. Oliva II HC-03 Box 8364 Palmer, AK 99645-9404 Sine R neta neem mame ete a nae Oe os ot smenen tate nts Nada Roped aiden tate ne dete Copper Valley intertie Project Dis —_ion List Final Report Executve Summary, April 1994 Ketwah & Charles Overby Box 143 Sutton, AK 99674 Mark D. Owen HC03, Box 8426 Palmer, AK 99645 Mike Pearson Box 6 Sutton, AK 99674 Lorraine Radigan Box 277 Glennallen, AK 99588 Kimberley Reed Post Office Box 1187 Chickaloon, AK 99674 Roy L. Reed Box 1201 Chickaloon, AK 99674 George Reichman Box 403 Glennallen, AK 99588 IRENE\CVEALIST Don Ressler Box 727 Glennailen, AK 99588 Lisa Rhoades Box 169 Palmer, AK 99645 Kenneth Roberson P.O. Box 375 Glennallen, AK 99588 Vera Roberson Box 375 Glennallen, AK 99588 Barb Robinson Box 207 Sutton, AK 99674 Gordon Romtiell HC03, Box 8314 Palmer. AK 99645 William Root Kay Root Box 1244 Chickaloon. AK 99674 Chris Rose General Delivery Sutton, AK 99674 Sharon Ruckman P.O. Box 1155 Chickaloon, AK 99674 Ken Ryan P.O. Box 190913 Anchorage, AK 99519-0913 Connie Sackett P.O. Box 224 Glennallen, AK 99588 Al Sanaers Box 79 Copper Center, AK 99588 Barbara R. Sanders P.O. Box 79 Copper Center, AK 99573 William Schmidtkunz Charlene Schmidtkunz Box 26 Sutton, AK 99674 IRENE\CVEALIST Copper Valley intertie Project Distribution Final Report Executive Summary, April 1994 Michelle Schuman P.O. Box 242 Sutton, AK 99674 Herbert & Jacqueline Simon HC03, Box 8591 Palmer, AK 99645 Julie Sine P.O. Box 163 Gakona, AK 99586 Margaret A. Smith P.O. Box 255 Sutton, AK 99674 Scott L. Smith, General Manager Copper Valley Telephone Coop., inc. P.O. Box 337 Valdez, AK 99686 Chuck Spaulding Box 1129 Chickaloon, AK $9674 Warren L. Stagey clo Box 313 Sutton, AK 99674 svencsenctate te nasavanary QA 4 HAMMAR Nae mama renetascsie ocdirnauta snidnensistdianahdisDUbaaodgeraresan sadaredds canna! Copper Valley Intertie Project Dis tion List Final Report Executive Summary, April 1994 John J. Stang P.O. Box 366 Gakona, AK 99586 Bill Stevenson HC03, Box 8449 Palmer, AK 99645 Veron R. Stevenson P.O. Box 369 Glennallen, AK 99588 Dick Stoffel 1352 Pioneer Peak Drive Wasilla, AK 99687 Reid Straabe Superintenden't Office Box 108 Glennallen, AK 99588 Hans Stricker HC03, Box 8364-X Palmer, AK 99645 Bob Sunder Box 379 Copper Center, AK 99573 IRENE\CVEALIST Jeanne R. Sunder Box 379 Copper Center, AK 99573 Bill & Peggy Sutton HC60, Box 298 Copper Center, AK 99573 Becky Swanson P.O. Box 938 Palmer, AK 99645 Mark Swanson P.O. Box 938 Palmer, AK 99645 Shirley A. Swanson 2685-B Newbury Circle Burlington, 1A 52601 Michael J. Swisher HC-60 Box 339 Copper Center, AK 99573 James & Raylene Tapley Box 175 Palmer, AK 99645 John M. Thatcher HC03, Box 8425 Palmer, AK 99645 Douglas A. Thiessen HC 03 Box 8392 Palmer, AK 99645 Donna Tollman Box 9 Glennallen, AK 99588 Maryellen Tuttell Dames & Moore 5600 B Street, Suite 100 Anchorage, AK 99518 Paul F. Twardock Box 544 4101 University Dr. Anchorage, AK 99508 Shirley Twitchell Box 356 Sutton, AK 99674 David VanCleve P O Box 366 Sutton, AK 99674 IRENE\CVEALIST Copper Valley Intertie Project Distribution Final Report Executive Summary, April 1994 Bev Vosburgh Box 1121 Chickaloon, AK 99674 Deborah Walker P.O. Box 246 Sutton, AK 99674 Peter P. Wansor Box 376 Sutton, AK 99674 Graham Ward Box 23 Glennallen, AK 99588 Tom Wells Box 46 Sutton. AK 99674 John Whisman 4700 E. 113th Avenue Anchorage, AK 99516 R. H. Wilbur Jonesville Road Sutton, AK 99674 Copper Valley Intertie Project Distribution Li Final Report Executive Summary, April 1994 Robert Wilkinson Box 45 Glennallen, AK 99588 Deborah Williams Mile 102% Glenn Highway Chickaloon, AK 99674 Roger & Judy Wimer HC03, Box 8449B Palmer, AK 99645 Lynne Woods Box 37 Sutton, AK 99674 Ray Woodworth Box 481 Glennallen, AK 99588 Perc Yarborough Box 1135 Chickaloon, AK 99674 Bob Ylvisaker Post Office Box 2666 Palmer, AK 99645 IRENE\CVEALIST Roger Box 374 Sutton, AK 99674 Randall Ashby P.O. Box 113 Copper Center, AK 99573 Ms. Helen Pope HC03 Box 8442 Palmer, AK 99645 Ms. Kathenne Wright HC03 Box 8496 Palmer, AK 99645 Ms. Sandra Cox HCO03 Box 8488A Palmer, AK 99645 Ms. Marilyn Meekin HC03 Box 8494 Palmer, AK 99645 Mr. James Hall Box 2404 Palmer, AK 99645 Mr. Loran Thomas HCO03 Box 8364Y Palmer, AK 99645 Ms. Gaila Riuke HC03 Box 8447A Palmer, AK 99645 Mr. Marty Rink HC03 Box 8447A Palmer, AK 99645 Mr. Michael Hemandez HC03 Box 8484C Pallmer, AK 99645 Agnen Box 153 Gakona, AK 99580 Dwight Gievried HC03 Box 8484 Palmer, AK 99645 Mr. Tom Berkley HC03 Box 8565 Palmer, AK 99645 IRENE\CVEALIST Copper Valley Intertie Project Distributio t Final Report Executive Summary, April 1994 Mr. Dan Little HC03 Box 8445A Palmer, AK 99645 Mr. Richard Wood HC03 Box 8487 Palmer, AK 99645 Mr. Charles Braden HC03 Box 8485C Palmer, AK 99645 Mr. Dan Lee HC03 Box 8383 Palmer, AK 99645 Ms. Elaine M. Bishop HC03 Box 8490 Palmer, AK 99645 Mr. Frank Bettine ACSI 229 Whitney Road Anchorage, AK 99501 Mr. Paul Roetman P.O. Box 1402 Valdez, AK 99686 Ms. Jean Stewart Valdez Chamber of Commerce P.O. Box 512 Valdez, AK 99686 Mr. Ray DeStefano P.O. Box 3293 Valdez. AK 99686 Mr. Doug Griffin City of Valdez P.O. Box 307 Valdez. AK 99686 Mr. Bill Wilcox City of Valdez P.O. Box 307 Valdez, AK 99686 Ms. Cindy Frailey Box 3254 Valdez. AK 99686 Ms. Donna Fischer City of Valdez P.O. Box 395 Valdez, Ak 99686 Mr. Dean Thompson, Ms. Mary Ann Pease Mr. Tom Stahr and Mr. Hank Nikkels Municipal Light & Power 1200 E. 1st Avenue Anchorage, AK 99501 IRENE\CVEALIST Copper Valley Intertie Project Distribution Li Final Report Executive Summary, April 1994 Mr. James Brown HC04 Box 9293A Palmer, AK 99645 Mr. Dan Fitzgerald 1135-1/2 G Street Anchorage, AK 99501 Ms. Anita Acevedo 1919 Hillcrest Drive Anchorage, AK 99517 Mr. James Woodcock, Acting General Manager Mr. Jim Hall Matanuska Electric Association P.O. Box 2929 Palmer, AK 99645-2929 Ms. Dori McDannold VACE Box 876161 Wasilla, AK 99687 Ms. Ellen Americus Box 875384 Wasilla, AK 99687 Mr. Gordon Fletcher Box 520564 Big Lake, AK 99652 Susan Winingh HC60 Box 230 Copper Center, AK 99573 Ken Box 8 Gakona. AK 99586 Bradley A. Henspete Box 98 Copper Center, AK 99513 Russell Galipeau Box 248 Glennailen, AK 99588 Russell Lesko Box 334 Copper Center. AK 99573 John Devenport Box 354 Glennallen, AK 99588 Clarence McConkey Box 14 Copper Center, AK 99573 IRENE\CVEALIST Copper Valley intertie Project Distribution Final Report Executive Summary, April 1¢_ . Sam Lightwood HC60 Box 228 Copper Center, AK 99573 Thomas A. Schill Box 353 Sutton, AK 99674 Rocky D. Ansill Box 217 Copper Center, AK 99573 Jewel Ford Everett Box 101191 Anchorage, AK 99510 Ron Frank Box 198 Gulkana, AK 99586 Pat Owens Box 1712 Palmer, AK 99645 Mr. Charles W. Lone Wolf, Sr. Box 1235 Chickaloon, AK 99674 Ms. Sue Liebman 824 D Place Anchorage, AK 99501 Ms. Veronica Slajer 824 D Place Anchorage, AK 99501 Mr. Kevin Kems Box 1161 Chickaloon, AK 99674 David Keane Box 1217 Chickaloon, AK 99674 Mr. Bruce A. Harrison Tribal Forester, Chickaloon Village Box 1105 Chickaloon. AK 99674 IRENE\CVEALIST Copper Valley Intertie Project Distribution t Final Report Executive Summary, April 1994 Mr. Art Eash Box 240801 Anchorage, AK 99524 Patsy Hill Box 12 Copper Center, AK 99573 Linda Linegan Box 28 Glennallen, AK $9588 Jerry and Donna Tollman Box 377 Glennalien, AK $9588 Jay Johnson Box 61 Glennailen, AK $9588 Mary Bowman HC60 Box 222 Copper Center. AK 99573 Julie Woodworth Box 742 Glennailen, AK £9588 A Fax From The Department of Community & Regional Affairs Division of Energy Mailing Address: 333 West 4th Avenue, Suite 220 Physical Address: 32323 West 4th Avenue, Suite 220 Anchorage, AK 99501-2347 Anchorage, AK 28501-2341 Main Telephone Number: (307) 269-4500 Director's Fax Number: (907) 269-4645 Bngineering Fax Number: (907) 269-4685 Deliver Fax to: — MU Dh un | Company Name: Company Address: Fax Phone #: ACS —-2ate a Senger: See oy Cy Sender's Phone # Beh Cots ae # of Pages Sent: =e _.._._—_Unsiudes this cover pmae)p Date Fax Sent: Sisias if you don't receive ail of this tax, please call sender DIRECTLY. SPECIAL INSTRUCTIONS TO FAX RECIPIENT: _Cartleaan mike 20kec7 had Ftc pepe ce ct Mn kis leak once at yet Hare! Terri TRANSMISSION REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) *%« COUNT ** TOTAL PAGES SCANNED > 5 TOTAL PAGES CONFIRMED : 5 A SEND T T T |No. REMOTE STATION START TIME | DURATION | #PAGES MODE | RESULTS 1 9074652948] 5-15-95 14:46 2°13" 5/ 5\EC COMPLETED 9600 + 1 | | TOTAL 0:02°13" 5 NOTE: No. ? OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 PD : POLLED BY REMOTE SF : STORE & FORWARD RI => RELAY INITIATE RS MB : SEND TO MAILBOX PG : POLLING A REMOTE MP =: MULTI -POLLING RM : G2 COMMUNICATION : RELAY STATION : RECEIVE TO MEMORY Ganthner, Terri From: Emerman, Richard To: Ganthner, Terri Subject: Blatchford's Intertie Finding Date: Thursday, March 09, 1995 8:54AM Terri -- | spoke with Mary Gilson about the absence of a signed copy of Blatchford's July 5, 1994 finding on the Sutton-Glennallen intertie, and asked her if we should try to track him down now to get him to sign it. She said no, don't bother. Given the press release issued at the time, plus the fact that he's not going around repudiating it, Mary doesn't think our lack of a signed copy will be a significant issue. Thanks anyway. Dick Page 1 0323/95 15:42 ID:Copper Valley Electric FAX : 907-822-5586 PAGE COPPER VALLEY ELECTRIC AES OCIATION, INC. P.O. Box 45, cree tren ALASKA 99588 (907) 822-3211 Fax 822-5586 VALDEZ (907) 835-4301 FAx 835-4328 March 22, 1995 Honorable lony Knowles Governor of the State of Alaska State Capitol P.O. Box 110001 Juneau, Alaska 99811-0001 Subject: Sutton to Glennallen Intertic Dear Governor Knowles: Given the volume of public discussion about the Sutton to Glennallen wansmission line (intertic) project, | felt it would be appropriate to summarize the current status of the project as well as Copper Valley llectric¢ Association’ s (CVEA) current perspective. You are aware that R. W. Beck & Associates (Beck) prepared a detailed feasibility study of the proposed intertie under the direction of the Division of Energy (DOF) of the Department of Community and Regional Affairs (DCRA). The feasibility study assessed several power supply alternatives, including the intertie project. ‘The other alternatives studied were the Allison Lake hydro project, Alaska Cogeneration Systems Inc.'s (ACSI) proposed Valdez coal plant, the Silver Luke hydro project, and a conservation case. The feasibility study was accepted by ICRA on July 5, 1994, and the Director of DOR was instructed to develop and negotiate a loan agreement for the intertic project. Aficr having spent many years studying power supply alternatives, in 1992 CVEA reassessed its planning process and adopted the following four criteria for the investigation of a replacement power supply for the diesel plants. These criteria were to provide the basic parameters and goals for the process of investigation and analysis of power supply alternatives: E ‘Vo obtain a resource with adequate capacity to serve the long-term requirements of CVEA's service area and allow the diesel plants to be placed in cold standby for emergency use only. Serving: the Copper River Basin and Valdez 03-23-95 15:42 ID:Copper Valley Electric FAX : 907-822-5586 PAGE Governor Knowles March 22, 1995 Page 2 2. To select a resource whose annuul cost would assure ut least rate stabilization with emphasis on identifying a resource that could potentially reduce rates. 3 To identify a resource that could be expected to have a usable and reliable life expectancy ol at teast 50 years, 4. ‘Yo identify a resource that could be constructed to a high standard of reliability for both districts and be within achievable financial limitations considcring the possibility of some State of Alaska assistance. Diesel Lixpansion Case The Beck study developed and assessed the cost of expanding and modernizing CVEA’s existing diesel generation system. Inasmuch as this is the type of generation in use at the present time, it was used as the base case to which all other alternatives were compared. It is readily apparent from the study that this case does not meet the criteria established by CVLA for selecting a future power supply option. Lntertie Given the foregoing resource selection parameters and particularly in light of the Beck study, the intertic appears to be the clear power supply choice for the following reasons: Me It meets or exceeds all of the four planning criteria previously established, 2. It is capable of providing 15 10 18 mw of capacity to Pump Station 11 Substation (PS11) in the initial design configuration. ‘The capacity limit is cconomically expandable in the future to 40 mw if warranted by load growth. 5; It provides the required system reliability of two feeds to PS11 at Glennallen thus facilitating placing the Glennallen and Valdez dicse! plants into stand-by emergency use only status. The Valdez. district has adequate capacity to meet the demand in the midterm. The water in Solomon Gulch reservoir can be managed to assure adequate reserves to serve the Valdez district during the avalanche period. 4. ‘The intertie would provide for the future transfer of power from the Valdez-Copper Basin area to the Railbelt System should a competitive generation plant be constructed, i.e., waste heat from a natural gas liquefaction plant (Yukon Pacific project). 03/23/95 15:43 ID:Copper Valley Electric FAX 907-822-5586 PAGE Governor Knowles Match 22, 1995 Page 3 ey An intertie would provide a clean, efficient method of transporting cnergy to CVLA’s consumers. It would eliminate the burning of 2! million gallons of diesol fuel annually and climinate the associated emissions from the diesel plants, It would remove an element of large truck traffic {rom the highway system. 6, The intertie would drastically reduce the maintenance and operations cost of operating the diesel plants and would eliminate the need to spend a significant sum of money installing emission control equipment required by the recent Clean Air Act amendments, not to mention costs associated with diesel expansion. 7. In addition to benefits accruing to CVEA, this project possesses future economic benefits to the state of Alaska as well. J understand that none of the major intertie projects which were ultimately built were popular during their respective study periods, yet today they are generally viewed in a very favorable light, ‘The intertie creates economic infrastructure at a time when the state sorcly needs it. With the decline in oil revenues and the recent hardships facing lishing and timber industries, the importance of attracting new industry to the state is vital, and this project in effect opens up a whole new arca of the state to cconomic development opportunities. In summary, this project considers the future. In addition to the foregoing, CVEA met May 13, 1994, with Alyeska Pipeline Service Company (Alyeska), In that meeting, Alyeska stated they would like to get out of the power business if a suitable alternative existed. We discussed several potential scenarios including serving Alyeska via the intertic. ft was pointed out to Alyesku that the intertic, under the best of scenurios, would not come on line until 1998. Mr. Bill Newbold, Alyeska’s Marine ‘Terminal Manager, inquired if Alyeska were to agree to purchase power after the intertic is completed, would CVEA be interested in operating and maintaining Alyeska’s existing generation facilities on an interim basis. Our initial response was a qualified yes, pending further analysis of how it would impact CVEA member-owners, We are continuing to discuss the possibilities with Alyeska. The project is now waiting for final negotiations of the loan agreement provisions with DOI. All legal impediments have been lified. We would appreciate your support in reaching agreement with DOK on the outstanding issues. Much has been made by the project’s opponents of the fact that suitable alternatives to the intertic exist. It would be appropriate for me to address CVEA’s perspective on the so-called alternatives. 0323/95 15:43 ID:Copper Valley Electric FAX :907-822-5586 PAGE Governor Knowles March 22, 1995 Page 4 Allison Lake Why the Allison Lake project emerged from the study as a competing alternative to the intertie remains a mystery to CVLA. ‘To evaluate Allison Lake, the Beck study used the Allison Luke Reconnsissance Study prepared for the Alaska Energy Authority in September of 1992 by [IDR Engineering, Inc. (HDR). For some reason, the Beck study fails to inform the reader of several significant cautionary suggestions IDR included in its study. HDR called into question the ability of the watershed to produce adequate water to refill the lake on a consistent basis, geotechnical concerns about tunnel stability, concerns about the ubility to tap the bottom of Allison lake because of debris accumulation, cle. HDR also cautioned that an investigation should be conducted into prior waler rights. Alyeska has had a water right out of Allison Lake since the inception of the Trans-Alaska Pipeline and, in fact, had a pending application for an increased water allocation at the time the HDR study was prepared. Allison Lake is known to contain a signilicant amount of glacial silt. Comments received on the drafi intertie feasibility study from Valdez Vishcries Development Association (VFDA) verily the original concern expressed by HDR relative to water turbidity problems that are likely to result from the introduction of Allison Lake water inio the Solomon Gulch reservoir. VEDA is concerned that the turbidity would have a very adverse fleet on its fish hatchery which relies on discharge water from the Solomon Gulch hydro project. Tn addition to the aforementioned technical concerns raised by IDR and VFDA which were not satisfactorily addressed in the study, the Beck study has underestimated the cost of Allison Lake power by assuming Allison Lake to be the beneficiary of a zero-interest state loan and exempt from the 6.6 cent kilowatt-hour (kwh) charged by the Four Dam Poo! (FDP) for the energy generated by the Solomon Gulch turbines (approximately one-half of the power output of Allison Lake). CVEA purchases power from the Solomon Gulch project under a Long Term Power Sales Agreement (agreement) executed in 1985. There are five other partics to the agreement, including the State of Alaska and four other purchasing utilities: the cities of Wrangell, Petersburg, and Ketchikan; and Kodiak Electric Association, All costs of operation are pooled and a postage-stamp rate is established which covers the cost of operations and the four-vent debt service payment to the State. Given that CVIA is a net beneficiary of the pooling arrangement contemplated by the agreement and given the ayreement may only be modified by unanimous consent of the parties, it is a certainty that energy produced at the Solomon Gulch facilities with diverted Allison Lake water will be sold to the purchaser alt or near the current wholesale power cost. To think otherwise demonstrates a lack of understanding of the parties to the FDP agreements and how they do business. 03/23/95 15:44 ID:Copper Valley Electric FAX :907-822-5586 PAGE 6 Governor Knowles March 22, 1995 Page 5 Vinully, opponents of the intertic contend that Allison Lake is the preferred alternative based on economics. How anyone could come to the conclusion that CVA would invest $46.6 million in a project with zcro-annual capacity and 27 million kwh of scasonal energy, which would not meet CVLA’s requirements for supplemental power in the first year und would require continued expansion of the diesel plants, as opposed to the intertic at a cost of $$3.8 million, with the capability to transport 15 to 18 megawatts (mw) of firm capacity and 100 million kwh of firm enerzy annually in its initial configuration, is us irresponsible as it is outrageous. In addition, if CVIA were to expericnee larger than expected load growth in the future, an additional investment of approximately $5 million would expand the capacity of the intertic to 40 mw. To summarize CVEA’s perspective on Allison Lake, we would simply state the project should be examined both on its electrical and economic merits. CVEA docs not consider the Allison Lake project to be a viable option under any known set of circumstances. Valdez Coal Fucility While Allison Lake has certainly received the most media attention up to this point, another alternative to the intertic supposedly exists in the form of a coal-fired cogeneration facility to be located in Valdez. ‘The developer of the proposed project, ASCI’s President and CEO [rank Bettine, is an electrical engineer formerly employed by CVEA. Mr. Bettine and ACS1 are atlempting, under the auspices of the Public Utility Regulatory Policies Act, to construct a power project which would undoubtedly make them a lot of money at the expense of CVEA’s member- owners. In the past two years CVEA has received at least cight different proposals from Mr. Bettine, cach one being a new idea, with the only common thread being the assertion that they would solve all of CVLA’s power supply problems and needs. CVLIA has consistently maintained the position that if ACST could offer the low-cost proposal that would satisfy its power supply planning critcria, it would be willing to consider ACSI’s proposal. very independent study that has been done to date has placed the coal plant option as one of the two high-cost options considered, ACSI has not provided any persuasive information that refutes those findings. There isn't much question that a coal plant project. will face serious environmental concerns in the Valdez airshed, and contrary to Mr. Bettine’s assertions, the project does not enjoy any substantial support of the people residing in Valdez. According to John Nuveen & Co., Investment Bankers, the ability to finance the project is questionable. Simply put, CVEA does not believe the ACSI coal plant is cither a serious or viable allernative to providing CVLA’s long-term power supply needs at a competitive cost. Hi role: The Silver Lake hydro project has been investigated several times over the years. The project has potential for both capacity and energy production in amounts that would be benclicial to CVEA's power supply mix. Silver Lake is located approximately 18 miles southeast of Valdez and discharges into Jack Bay. ‘The project has two major disadvantages. ‘The first is the high cast of 03/23/95 15:45 ID:Copper Valley Electric FAX 907-822-5586 PAGE Governor Knowles March 22, 1995 Page 6 construction of the dam and power facility. ‘The second is related to the physical difficulty and cast of connecting the project to CVISA's power grid at the Solomon Ciulch project. The terrain involved in an overland routing is essentially impossible for the construction ofa transmission facility within a tolerable price range and if constructed, would be maintenance nightmare. A submarine cable is possible, but it also would be very expensive and, as a matter of experience, could pose reliability concerns. The Beck study found that the high rates paid by CVEA's consumers has, for all practical purposes, achieved the majority of the conservation of energy that is attainable by human action and practice. A small amount of additional conservation could be attained through the application of cnergy-clficient appliances, tight bulbs, ctc., but the amount is inconsequential. Governor, | hope that this letter is persuasive on the importance of this project to the people of the Copper Basin and Valdez areas and counteracts some of the arguments of the project’s detractors. ‘The Copper River Basin and Valdez regions of the state are primed for economic development, and we believe the public interest will be well served by investing in the intertic. To that end, we urge you to support the intertic so that we might move forward with this important economic development project. Thank you for your consideration. We would welcome the opportunity to provide you with additional information about CVEA and our efforts over the past ten years to identify and secure a power supply solution, etc. Yours truly, Lh fé Hata. Clayton Hurless General Manager w:\word\95-039jw.doe 03/23/95 15:42 ID:Copper Vai ley Electric FAX :907-822-5586 PAGE dl COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O. Box 45 Glennallen, Alaska 99588 FACSIMILE TRANSMITTAL LETTER Date: CRS RES Phone # —(itsCéQ # QV GP ES Total number of pages: 7 ——S—Seent by: ols UL (including transmittal letter) Message: If the Correct number of pages is not received or if you have received this transmittal in error, please call the number nite (collect) as soon as possible: (inal (907) 822-3211 L—1 (907) 835-4301 oon Hard copy to follow via USPS: ‘—~ Yes fee No Office Use Only Transmitted trom telecopler number: "1 ) (907) 822-5586 gel 5 Date: ae Time: a SO (907) 822-5506 CVEA Account #: 72.“ 2. (907) 835-4328 CVEA Form 105 Rev. 12/92 March 22, 1995 To: Lamar Cotten From: Percy Frisby } “i Subject: Sutton-Glennallen Intertie Plan As I remember it, towards the end of our meeting with the Governor last Friday the Governor indicated that he wanted to consider temporarily suspending further action or negotiation on the loan agreement until he decided what direction to go on the intertie, and that he wanted to reach a higher level of comfort on certain key issues (like the long- term outlook for pipeline operations) before making that decision. It was then pointed out (by Riley Snell I think) that the Governor and/or the Governor’s Office has access to people and to informed outlooks not typically available to Division of Energy staff or contractors, such as top management of oil companies. It was suggested that the Governor or his office should use that access to gain additional insight into these major issues. The Governor agreed and outlined the following plan: 1: We were to put together an “internal memorandum” identifying the major issues on which the Governor wanted to reach a higher level of comfort and indicating how to go about it. 2 The group that met last Friday was to be reassembled to consider the internal memorandum and to consider what position the Governor should take at this time and what action should be taken in the immediate future. 3. A press release would then be prepared stating the Governor’s position (for example, suspension of process pending review of certain key issues), and further consultations would then take place as approved by the Governor. At no point during last week’s meeting did we suggest, nor was it suggested by anyone else, that the Division of Energy should undertake these additional discussions and contacts -- the whole idea was that the Governor’s office had special access that should be used for gaining insight into these long-term issues. I hope that idea is still clear in the draft memo. What we have prepared during the last couple of days is not quite the “internal memorandum” that I understood the Governor to request. I would think an “internal memorandum” should be a collection of ideas printed out on plain paper and used as discussion points. The press release would have considerably less detail than the memo we have drafted. DRAFT MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: David Ramseur DATE: March 22, 1995 Director of Communications Office of the Governor FILE: PHONE NO: 465-4700 FROM: Mike Irwin SUBJECT: Sutton-Glennallen Intertie Commissioner Dept. of Community and Regional Affairs The 1993 legislature appropriated $35 million to be used as a zero-interest loan for the Sutton- Glennallen intertie but made the appropriation contingent on completion of a feasibility study and plan of finance “satisfactory” to this Department. My predecessor in the previous administration issued a finding in July 1994 that the required studies were satisfactory in his judgment, and directed the Division of Energy to move forward with issuance of the loan. To date, however, agreement has not been reached on the terms of the loan and none of the appropriation has yet been spent. This administration may reconsider the administrative finding issued in July 1994 and, in so doing, reconsider our policy with respect to the intertie. Following are issues that the Governor may wish to consider carefully in evaluating the proposed Sutton-Glennallen intertie. In each case, we recommend that the Governor or key staff from the Governor’s Office initiate discussion with top management in the identified industries to seek a greater measure of insight and confidence in forecasting long-term developments. We believe that the strength of the Governor’s Office will be needed to encourage maximum openness and candor from private interests whose instincts may otherwise dictate maximum caution. I LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The uncertainty associated with predictions of pipeline shut down should be addressed by soliciting views directly from top management of the major oil companies operating on the North Slope. Discussion: If the pipeline and marine terminal are shut down by 2020, very possibly taking the Petro Star refinery with it, the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the David Ramseur DRAFT March 22, 1995 Page 2 I. feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. A judgment on the long-term viability of the intertie therefore rests to a great extent on one’s vision of the long-term future of the pipeline and, therefore, of oil production on the North Slope. As stated in the following excerpt from the feasibility study, neither the Division of Energy nor our contractors can help very much with this underlying vision: “The authors of this report have not attempted to attach any probability estimates to factors like the prospects for continued oil pipeline operations after 2018, or to related factors such as the long-term oil price and prospects for major additions to North Slope oil production, or to the long-term likelihood of building a natural gas pipeline into Valdez. These are major uncertainties that continue to be debated by informed observers and participants, and which we cannot begin to resolve within an intertie feasibility study. Consequently, this study does not identify any one of the four scenarios as the “expected case” or “most likely case,” but rather presents the analytical results for each case for consideration and judgment by Alaska decision- makers.” (p. 1-14, Volume 1) By way of background on this issue, the feasibility study does include the following information: “In April 1993, the United States General Accounting Office (GAO) issued a report entitled “Trans-Alaska Pipeline -- Projections of Long-Term Viability Are Uncertain.” In its report, the GAO focused much of its effort on the review of projections made in 1991 in a report prepared by the United States Department of Energy (DOE), of the year in which the Trans-Alaska pipeline would be shut down. DOE concluded that the pipeline will shut down between 2006 and 2011, with 2009 identified as the “most likely” year considering projected oil availability on the North Slope, the pipeline’s minimum operating levels, and other factors. GAO indicated that although the shut down could actually be predicted to occur anytime between 2001 and 2021 by varying the basic assumptions, it could not estimate a more reliable termination date than DOE. It is important to note that both DOE and GAO assume new oil field development in making their projections, but neither has assumed development of oil fields in the Arctic National Wildlife Refuge (ANWR).” (p. VIII- 5, Volume 1) PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power supply, although Petro Star may not have developed clear long-term plans at this point. David Ramseur DRAFT March 22, 1995 Page 3 III. Discussion: Two basic issues are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? In a letter to our consultant dated November 2, 1993, the Engineering Manager at Petro Star Valdez stated that on-site cogeneration was not an attractive alternative: “Petro Star has investigated the installed cost and operating cost of on-site cogeneration to supply power to the refinery. This was looked at with using the lowest grade oil for fuel and the possibility of using waste heat from the refinery process. Several factors make it an unattractive alternative to Copper Valley Electric utility power... In addition to these reasons, cogeneration is less reliable and reliability is of the utmost importance to safety and production in a refinery.” This position appears to have changed. In documents filed with the Alaska Public Utilities Commission (APUC) on January 27, 1995, Copper Valley Electric Association (CVEA) states the following: “CVEA has also recently been approached by Petro Star Valdez Refinery concerning the possibility of using the waste gases from the refinery for the generation of electricity. There are numerous questions which remain to be answered with respect to this potential energy resource. However, indications are that such a resource is feasible. CVEA has been informed that Petro Star Valdez Refinery will be petitioning to intervene in this proceeding in order to protect its interest with respect to being able to supply power to CVEA..” TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of TAGS construction 10 years from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. Questions on the likelihood and amount of excess power production could also be asked. Discussion: In the feasibility study, construction of TAGS in the 2000-2010 time frame was assumed in the “High” case. The scenario developed was that TAGS would generate power for its own use at the Valdez terminal, but would neither sell excess power to the utility nor purchase any additional power from the utility. We understand, however, that Jeff Lowenfels of Yukon Pacific has suggested that TAGS may in fact have a considerable amount of excess power to sell beyond what it would need for its own operations. David Ramseur DRAFT March 22, 1995 Page 4 IV. There are two main questions, then: A. Is TAGS likely to be built in something like the time frame identified in the intertie feasibility study? B; If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand, intertie viability is enhanced. If the primary effect is to introduce a new local power supply, the intertie may become unnecessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however, is very small in relation to Railbelt power requirements. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the State should contact top management at Alyeska. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alyeska has always decided in the end to remain isolated electrically. One reason commonly cited for Alyeska’s historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself to APUC regulation with regard to such power sales. HIGH ALTITUDE AURORAL RESEARCH PROJECT (HAARP) Recommended Action: No action is recommended. The HAARP project is presently excluded from all cases considered in the feasibility study. Because full funding and construction of the HAARP project is considered speculative, the only case it could be included within is the “High” case. Since the intertie is already identified as the least cost alternative in the “High” case, adding the HAARP load would not change the outcome of the feasibility study. Discussion: This subject was raised by the Commissioner of DOTPF. HAARP is a federal project under development by the military near Gakona and has been sponsored thus far by Senator Stevens. A $20 million prototype facility has been completed. The full project would require about $70 million more in federal funds. If connected to the utility grid, the full project would add an annual demand of about 5 million kWh. (The total energy requirement for the utility in 1993 was 70 million kWh.) David Ramseur DRAFT March 22, 1995 Page 5 VI. During the feasibility study, the Division of Energy spoke on several occasions with a Mr. John Hecksher, who represented federal management on the project -- telephone (617) 377-5121. Mr. Hecksher consistently stated that this was a “Congressional project,” that it did not represent an initiative of the military, and that its prospects for full funding should be considered speculative. This assessment was shared by the Governor’s office in Washington D.C. We were informed, however, that Senator Stevens intended to request $20 million per year for the project, and would continue to support it. Provisi f P: d ment. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. Note that the Administration does not have the statutory authority to forgive repayment of the loan, even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT As noted at the top of this memo, we recommend that top State officials undertake the recommended discussions with industry management, with relevant Department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability. The Division of Energy is of course ready to assist in any way we can. A Fax From The Department of Community & Regional Affairs Division of Fnergy Chysical Address: 333 West 4th Avenue, Suite 220 Anchorage, AK 99501-2341 Matting Address: 3323 West 4th Avenue, Sulte 220 Anchorage, AK 99607-2347 Main Telephone Number: (907) 269-4500 Director's Fax Number: (307) 269-4645 Engineering Fex Number: (907) 269-4685 Deliver Fax to: —_Vorwnrou Cas then, Company Narne- Company Address: Fax Phone #: Aves — 2A SS = Sender: Nery, ey. _ _ Sender's Phone # 2 6e A— AC oe # of Pages Sent: \ ——__(includes this cover page) Date Fax Sent: —2albe zias = ff you don't receive all of this tax, please call sender OIRECTLY. We east a ptas— SPECIAL INSTRUCTIONS TO FAX RECIPIENT... _ Opga NNO Are We cies ect A se Sete, TRANSMISSION REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) *« COUNT **« TOTAL PAGES SCANNED TOTAL PAGES CONFIRMED aK SEND 2K 7 7 No. REMOTE STATION START TIME DURATION | #PAGES MODE | RESULTS i 9074652948| 3-22-95 10:58 3°44" W/ = TIEC COMPLETED 9600 TOTAL 0:03'°44" 7 NOTE: No. : OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION PD : POLLED BY REMOTE SF : STORE & FORWARD RI = RELAY INITIATE RS : RELAY STATION MB : SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI-POLLING RM : RECEIVE TO MEMORY MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: David Ramseur DATE: March 21, 1995 Director of Communications Office of the Governor FILE: THRU: Mike Irwin, Commissioner Dept. of Community and Regional Affairs PLONE NO: 269-4640 FROM: Percy Frisby, Director SUBJECT: Sutton-Glennallen Intertie Division of Energy Dept. of Community and Regional Affairs Following are issues that the Governor may wish to consider carefully in evaluating the proposed Sutton-Glennallen intertie. In each case, we recommend that the Governor or key staff from the Governor’s Office initiate discussion with top management in the identified industries to seek a greater measure of insight and confidence in forecasting long-term developments. We believe that the strength of the Governor’s Office will be needed to encourage maximum openness and candor from private interests whose instincts may otherwise dictate maximum caution. I LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The Governor could try to reduce the uncertainty associated with predictions of pipeline shut down by soliciting views directly from top management of the major oil companies operating on the North Slope. After consulting with the Commissioners of Revenue and Natural Resources, the Governor or perhaps his Chief of Staff could solicit these oil company views. The time frame could be anywhere from several days to several weeks depending on the availability of key individuals. Discussion: If the pipeline and marine terminal are shut down by 2020, very possibly taking the Petro Star refinery with it, the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. A judgment on the long-term viability of the intertie therefore rests to a great extent on one’s vision of the long-term future of the pipeline and, therefore, of oil production on the David Ramseur DRAFT March 21, 1995 Page 2 Il. North Slope. As stated in the following excerpt from the feasibility study, neither the Division of Energy nor our contractors can help very much with this underlying vision: “The authors of this report have not attempted to attach any probability estimates to factors like the prospects for continued oil pipeline operations after 2018, or to related factors such as the long-term oil price and prospects for major additions to North Slope oil production, or to the long-term likelihood of building a natural gas pipeline into Valdez. These are major uncertainties that continue to be debated by informed observers and participants, and which we cannot begin to resolve within an intertie feasibility study. Consequently, this study does not identify any one of the four scenarios as the “expected case” or “most likely case,” but rather presents the analytical results for each case for consideration and judgment by Alaska decision- makers.” (p. 1-14, Volume 1) By way of background on this issue, the feasibility study does include the following information: “In April 1993, the United States General Accounting Office (GAO) issued a report entitled “Trans-Alaska Pipeline -- Projections of Long-Term Viability Are Uncertain.” In its report, the GAO focused much of its effort on the review of projections made in 1991 in a report prepared by the United States Department of Energy (DOE), of the year in which the Trans-Alaska pipeline would be shut down. DOE concluded that the pipeline will shut down between 2006 and 2011, with 2009 identified as the “most likely” year considering projected oil availability on the North Slope, the pipeline’s minimum operating levels, and other factors. GAO indicated that although the shut down could actually be predicted to occur anytime between 2001 and 2021 by varying the basic assumptions, it could not estimate a more reliable termination date than DOE. It is important to note that both DOE and GAO assume new oil field development in making their projections, but neither has assumed development of oil fields in the Arctic National Wildlife Refuge (ANWR).” (p. VIII- 5, Volume 1) PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: The Governor or key staff from the Governor’s Office should contact top management at Petro Star directly to gain insight into the company’s long- term plans with respect to power supply, although Petro Star may not have developed clear long-term plans at this point. Again, the time frame could be anywhere from a few days to a few weeks depending on the availability of key individuals. During the performance of the intertie feasibility study, the Division of Energy commissioned an independent assessment of Petro Star’s long-term expansion potential. We did this because of the importance of the refinery’s future power demand to the David Ramseur DRAFT March 21, 1995 Page 3 Il. intertie economic analysis. We now recommend direct contact between the Governor’s Office and Petro Star not only because the stature of the Governor’s Office may be helpful in opening communication but also because Petro Star may be less responsive to the Division as a result of our independent expansion assessment. Discussion: Two basic issues are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? In a letter to our consultant dated November 2, 1993, the Engineering Manager at Petro Star Valdez stated that on-site cogeneration was not an attractive alternative: “Petro Star has investigated the installed cost and operating cost of on-site cogeneration to supply power to the refinery. This was looked at with using the lowest grade oil for fuel and the possibility of using waste heat from the refinery process. Several factors make it an unattractive alternative to Copper Valley Electric utility power... In addition to these reasons, cogeneration is less reliable and reliability is of the utmost importance to safety and production in a refinery.” This position appears to have changed. In documents filed with the Alaska Public Utilities Commission (APUC) on January 27, 1995, Copper Valley Electric Association (CVEA) states the following: “CVEA has also recently been approached by Petro Star Valdez Refinery concerning the possibility of using the waste gases from the refinery for the generation of electricity. There are numerous questions which remain to be answered with respect to this potential energy resource. However, indications are that such a resource is feasible. CVEA has been informed that Petro Star Valdez Refinery will be petitioning to intervene in this proceeding in order to protect its interest with respect to being able to supply power to CVEA.” TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of TAGS construction 10 years from now, the Governor’s Office may wish to contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. Questions on the likelihood and amount of excess power production could be posed to the same individuals. Same time frame as noted for other issues above -- a few days to a few weeks. David Ramseur DRAFT March 21, 1995 Page 4 IV. Discussion: In the feasibility study, construction of TAGS in the 2000-2010 time frame was assumed in the “High” case. The scenario developed was that TAGS would generate power for its own use at the Valdez terminal, but would neither sell excess power to the utility nor purchase any additional power from the utility. We understand, however, that Jeff Lowenfels of Yukon Pacific has suggested that TAGS may in fact have a considerable amount of excess power to sell beyond what it would need for its own operations. There are two main questions, then: A. Is TAGS likely to be built in something like the time frame identified in the intertie feasibility study? B. If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand, intertie viability is enhanced. If the primary effect is to introduce a new local power supply, the intertie may become unnecessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however, is very small in relation to Railbelt power requirements. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the Governor’s Office may wish to contact top management at Alyeska directly. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alyeska has always decided in the end to remain isolated electrically. In view of this history, we would be inclined to discount any statement of intent from Alyeska to interconnect with the utility for purchases or sales unless such intent were clearly stated from the top. HIGH ALTITUDE AURORAL RESEARCH PROJECT (HAARP) Recommended Action: No action is recommended. The HAARP project is presently excluded from all cases considered in the feasibility study. Because full funding and construction of the HAARP project is considered speculative, the only case it could be included within is the “High” case. Since the intertie is already identified as the least cost alternative in the “High” case, adding the HAARP load would not change the outcome of the feasibility study. David Ramseur DRAFT March 21, 1995 Page 5 VI. Discussion: This subject was raised by the Commissioner of DOTPF. HAARP is a federal project under development by the military near Gakona and has been sponsored thus far by Senator Stevens. A $20 million prototype facility has been completed. The full project would require about $70 million more in federal funds. If connected to the utility grid, the full project would add an annual demand of about 5 million kWh. (The total energy requirement for the utility in 1993 was 70 million kWh.) During the feasibility study, the Division of Energy spoke on several occasions with a Mr. John Hecksher, whose title we no longer can find but who represented federal management on the project -- telephone (617) 377-5121. Mr. Hecksher consistently stated that this was a “Congressional project,” that it did not represent an initiative of the military, and that its prospects for full funding should be considered speculative. This assessment was shared by the Governor’s office in Washington D.C. We were informed, however, that Senator Stevens intended to request $20 million per year for the project, and would continue to support it. Provisions of Proposed Loan Agreement. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. Note that the Administration does not have the statutory authority to forgive repayment of the loan, even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT As noted at the top of this memo, we recommend that the Governor or the Governor’s Office undertake directly the recommended discussions with industry management, with relevant Department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability. We do not believe that further inquiries from Division of Energy staff or from our contractors would elicit the candid responses from top industry management that the Governor would like to have. Having said this, the Division of Energy is of course ready to assist in any way we can. MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: David Ramseur DATE: March 20, 1995 Director of Communications Office of the Governor FILE: THRU: Mike Irwin, Commissioner Dept. of Community and Regional Affairs PHONE NO: 269-4640 FROM: Percy Frisby, Direct SUBJECT: Sutton-Glennallen Intertie Division of Energy Dept. of Community and Regional Affairs Following are issues that are important in evaluating the proposed Sutton-Glennallen intertie, and that the Governor may wish to consider carefully: E. Long-term future of trans-Alaska pipeline. The intertie feasibility study (p. VIII-5, Volume 1) includes the following background: “In April 1993, the United States General Accounting Office (GAO) issued a report entitled ““Trans-Alaska Pipeline -- Projections of Long-Term Viability Are Uncertain.” In its report, the GAO focused much of its effort on the review of projections made in 1991 in a report prepared by the United States Department of Energy (DOE), of the year in which the Trans-Alaska pipeline would be shut down. DOE concluded that the pipeline will shut down between 2006 and 2011, with 2009 identified as the “most likely” year considering projected oil availability on the North Slope, the pipeline’s minimum operating levels, and other factors. GAO indicated that although the shut down could actually be predicted to occur anytime between 2001 and 2021 by varying the basic assumptions, it could not estimate a more reliable termination date than DOE. It is important to note that both DOE and GAO assume new oil field development in making their projections, but neither has assumed development of oil fields in the Arctic National Wildlife Refuge (ANWR).” The proposed intertie would not be viable over the long term under this scenario unless other economic growth in the region is sufficient to compensate for loss of the pipeline, the marine terminal, and possibly the Petro Star refinery as well. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. The Governor could try to reduce the uncertainty associated with predictions of pipeline shut down by soliciting views directly from top management of the major oil companies operating on the North Slope. David Ramseur March 20, 1995 Page 2 Il. After consulting with the Commissioners of Revenue and Natural Resources, the Governor or perhaps his Chief of Staff could solicit these oil company views. The time frame could be anywhere from several days to several weeks depending on the availability of key individuals. Short of this, perhaps recent research by the Governor’s staff can provide the necessary information and opinion update. The feasibility study includes the following statement (p. 1-14, Volume 1): “The authors of this report have not attempted to attach any probability estimates to factors like the prospects for continued oil pipeline operations after 2018, or to related factors such as the long-term oil price and prospects for major additions to North Slope oil production, or to the long-term likelihood of building a natural gas pipeline into Valdez. These are major uncertainties that continue to be debated by informed observers and participants, and which we cannot begin to resolve within an intertie feasibility study. Consequently, this study does not identify any one of the four scenarios as the “expected case” or “most likely case,” but rather presents the analytical results for each case for consideration and judgment by Alaska decision-makers.” Petro Star Valdez Refinery -- Power Demand and Cogeneration. Two basic issues are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? In a letter to our consultant dated November 2, 1993, the Engineering Manager at Petro Star Valdez stated that on-site cogeneration was not an attractive alternative: “Petro Star has investigated the installed cost and operating cost of on-site cogeneration to supply power to the refinery. This was looked at with using the lowest grade oil for fuel and the possibility of using waste heat from the refinery process. Several factors make it an unattractive alternative to Copper Valley Electric utility power... In addition to these reasons, cogeneration is less reliable and reliability is of the utmost importance to safety and production in a refinery.” This position appears to have changed. In documents filed with the Alaska Public Utilities Commission (APUC) on January 27, 1995, Copper Valley Electric Association (CVEA) states the following: “CVEA has also recently been approached by Petro Star Valdez Refinery concerning the possibility of using the waste gases from the refinery for the generation of electricity. There are numerous questions which remain to be answered with respect to this potential energy resource. However, indications are that such a resource is feasible. CVEA has David Ramseur March 20, 1995 Page 3 Ill. IV. been informed that Petro Star Valdez Refinery will be petitioning to intervene in this proceeding in order to protect its interest with respect to being able to supply power to CVEA.” Petro Star may not have decided what it wants to do with respect to long-term power supply. We suggest that the best chance for gaining insight into Petro Star’s long-term plans is for the Governor’s office to contact top management at Petro Star directly. Again, the time frame could be anywhere from a few days to a few weeks depending on the availability of key individuals. Trans-Alaska Gas System (TAGS). In the feasibility study, construction of TAGS in the 2000-2010 time frame was assumed in the “High” case. The scenario developed was that TAGS would generate power for its own use at the Valdez terminal, but would neither sell excess power to the utility nor purchase any additional power from the utility. We understand, however, that Jeff Lowenfels has suggested that TAGS may in fact have a considerable amount of excess power to sell beyond what it would need for its own operations. There are two main questions, then: A. Is TAGS likely to be built in something like the time frame identified in the intertie feasibility study? B. If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand, intertie viability is enhanced. If the primary effect is to introduce a new local power supply, the intertie may become unnecessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however, is very small in relation to Railbelt power requirements. For gaining insight into the likehood of TAGS construction 10 years from now, the Governor’s Office may wish to contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. Questions on the likelihood and amount of excess power production could be posed to the same individuals. Same time frame as noted for other issues above -- a few days to a few weeks. Alyeska Marine Terminal -- Cogeneration or Power Purchase. In the future, Alyeska may wish to consider purchasing power for its marine terminal operations, especially if the intertie is built and reliability is adequate. Or they may reconsider the option of generating power for sale to CVEA as well as for their own needs. David Ramseur March 20, 1995 Page 4 V. VI. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alyeska has always decided in the end to remain isolated electrically -- no power purchases from or sales to CVEA. In view of this history, we would be inclined to discount any statement of intent from Alyeska to interconnect with the utility for purchases or sales unless such intent were clearly stated from the top. We believe that discussions with Alyeska on these issues should originate from the Governor’s office. High Altitude Auroral Research Project (HAARP). This subject was raised by the Commissioner of DOTPF. HAARP is a federal project under development by the military near Gakona and has been sponsored thus far by Senator Stevens. A $20 million prototype facility has been completed. The full project would require about $70 million more in federal funds. If connected to the utility grid, the full project would add an annual demand of about 5 million kWh. During the feasibility study, the Division of Energy spoke on several occasions with a Mr. John Hecksher, whose title we no longer can find but who represented federal management on the project -- telephone (617) 377-5121. Mr. Hecksher consistently stated that this was a “Congressional project,” that it did not represent an initiative of the military, and that its prospects for full funding should be considered speculative. This assessment was shared by the Governor’s office in Washington D.C. We were informed, however, that Senator Stevens intended to request $20 million per year for the project, and would continue to support it. Provisions of Proposed Loan Agreement. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. Plea Grave Ye CAmMmeRee A= e* A Fax From The Department of Community & Regional Affairs Division of Energy Malttina Address: Physical Address: 333 West 4th Avenue, Suite 220 333 West 4th Avenue, Suite 220 Anchorage, AK 99801-2341 Anchorage, AK G9501-23414 Main Telephone Number: (807) 269-4500 Director's Fax Number: (907) 269-4645 Engineering Fax Number: (907) 269-4685 Deliver Fax to: Lamar Cottery eee A Company Name. Company Adaress: Fax Phone #: At pS — “2ZACE . Sender: TS RZ Sender's Phone # 2OA-~ Ale AC> i # of Pages Sent: S: (includes this cover page) Date Fax Sent: Poa\2o fas” Wf you don't receive all of this fax, please call sender DIRECTLY. SPECIAL INSTRUCTIONS TO FAX RECIPIENT: ee eee a TRANSMISSION REPORT | THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) *%x« COUNT x TOTAL PAGES SCANNED = Wiis TOTAL PAGES CONFIRMED : 5 *kek SEND 2k No. REMOTE STATION START TIME DURATION | #PAGES MODE RESULTS : 9074652948 | 3-20-95 16:37 2°47" 5/ BEC COMPLETED 9600 | | | TOTAL 0:02'47" 5 NOTE: No. : OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION PD : POLLED BY REMOTE SF : STORE & FORWARD RI = RELAY INITIATE RS : RELAY STATION MB : SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI-POLLING RM : RECEIVE TO MEMORY £ HAR-17-95 FRI 13:00 DCED CAMMISSIONER FAX NO, 9074AA5442 intertie/Energy Briefing Healy to Fairbanks Issues: 1, Ownership of Project: Legislation vs. Participant's Agreement. 2. Benefits to utilities other than GVEA. 3. Scaled back project. Current Status: 1. Design and permitting underway. 2. Project completion projected for March 1997. Funding and Cost Estimate: 1. Funding: - Grant: $43.2 million ($760k expended to date) Bonding Authority: $60 million 2. Construction Estimate: $75.3 million Interested Partics: 1. GVEA 2. Participating Railbelt Utilities 3. Labor (project labor agreement) 4. APUC Actions Needed and Timing: 1. Resolution of Core Business Issues. 2. Action needed within next 60 days to keep project on schedule. — i aad Peaiaenl Issues: 1. Ownership of Project: Legislation vs. Participant’s Agreement. 2. Unsatisfactory progress to date. Current Status: 1. Construction estimated for completion third quarter 2001. Funding and Cost Estimate: 1. Funding: Grant: $46.8 million Bonding Authority: $60 million 2. Construction Estimate: $84.1 million I P.02 MAR-17-95 FRI 13:00 DCEP COMMISSIONER FAX NO, 907485442 Interested Parties: 1. CEA 2. Participating Railbelt Utilities 3. Labor (project labor agreements) 4. APUC Actions Needed and Timing: 1. Resolution of Core Business Issues. 2. Action needed within 30-60 days to keep project on schedule. Sutton to Glennallen Issues: 1. Possible further action by Hobbs. 2. Request for Appeal of Administrative Decision by DCRA, 3. APUC filing concerning possible coal project by Hobbs. 4, Opposition by Sutton and other residents. 5. Significant environmental issues 6. Governor's concurrence with feasibility study. Current Status: 1. Feasibility Study completed. 2. Negotiation for loan package in process. 3. Injunction by Hobbs lifted, 4, Design scheduled after loan package completed. 5. Start-up of constniction anticipated in 1997 or 1998. Funding and Cost Estimates: 1. Funding: : Loan: $35 million Bonding Authority: $25 million 2. Construction Estimate: $53.6 million Interested Parties: 1. CVEA 2. ML&P 3. CEA 4. Labor (project labor agreement) 5. Consumers 6. Area legislators Actions Needed and Timing: 1. Agreements between parties determined. 2. Immediate if project to proceed on schedule. Swan Lake to Tyee Lake Issues: P. 03 MAR-17-95 FRI 13:00 DCEP “OMMISSTONER FAX NO. 9074855442 P.04 Annual appropriations of $4.0 million grants. KPU’s lack of financial capability to bond project without grants. Impact on 4 Dam Pool self-help re annual grant. Ketchikan generation capacity problem. Significant environmental issues. Without additional grant or other financing project not financially feasible. PUPRYUNE * Current Status: . 1. Preliminary design and environmental process underway. 2. Construction anticipated to start between spring 1997 and fall 1998, * Funding and Cost Estimates: 1. Funding: Grant: $4 million (annually) Loan: $20 million Bonding Authority: $40 million 2. Construction Estimate: $65 million « Interested Parties: KPU City of Pctersburg City of Wrangell Cape Fox Native Corp. City of Kodiak CVEA Pr Fe Po « Actions Needed and Timing: 1. No immediate action needed or within next 6 months re intertic. 2. By end of session re self-help. Four Dam Pool Issues: 1. Capital appropriation for needed repairs. 2, Self-help provision. 3. Revenue stream legislatively appropriated to cover: -40% to PCE and Rural Electrification Funds -40% to Southcast Energy Fund -20% to Power Project Fund 4, Divestiture of facilities. Current Status: 1. Legislative capital appropriation request for $20.0 million Interested Parties: 1. City of Ketchikan 2. City of Petersburg “" NAR-17-95 FRI 13:01 DCED “OMMISSIONER FAX NO. 907485442 P. 05 w . City of Wrangell . CVEA . Kodiak Electric Assoc. . Rural Alaska - DCRA INAAL Actions Needed and Timing: 1. Funding issues needs to be addressed during current legislative session or utilities may invoke self-help. : MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Mike Irwin DATE: March 13, 1995 Commissioner FILE: PHONE NO: 269-4640 FROM: Percy Frisby SUBJECT: Sutton-Glennallen Director Intertie Loan Agreement Division of Energy The following outline traces the development of our proposed $35 million loan agreement with Copper Valley Electric Association (CVEA) for the Sutton-Glennallen intertie, and includes discussion of major areas of disagreement. 1s This Division initiated development of the loan agreement in July 1994. The provisions of two prior agreements were relied upon to provide many of the main features of the proposed intertie loan agreement: A. A 1990 loan agreement between the Alaska Energy Authority (AEA) and Alaska Electric Light and Power Co., the Juneau electric utility, for $1.0 million. This was selected as a model for much of the intertie loan agreement because: ie It is a recent agreement governing a relatively large loan amount and, like the $35 million for the intertie, falls under the Power Project Fund loan program. 2: It was developed in close consultation with AEA’s bond counsel (Wohlforth, Argetsinger, Johnson & Brecht), and _ therefore incorporates provisions considered prudent for large loans in the judgment of experienced legal advisors. A copy of this agreement is included in the attached booklet. B. A grant administration agreement between the Alaska Industrial Development and Export Authority (AIDEA) and the Railbelt utilities Mike Irwin March 13, 1995 Page 2 governing the $90 million in grant funds appropriated by the 1993 legislature for two Railbelt intertie projects. Regarding this agreement: 1. Since it had already been signed by the Railbelt utilities for similar projects, we concluded that similar terms would be considered acceptable by CVEA. For example, although exceptions are allowed, the AIDEA agreement prohibits using grant funds for actual - project construction until the utilities have received final approval of all related matters submitted to the APUC. For each of the two Railbelt intertie projects, one utility will be responsible for design and construction. All seven of the Railbelt utilities, however, will share in the project costs above the State grant. These utilities have formed an “Intertie Participants Group” (IPG) that will oversee the work of the lead utilities. The IPG members have a financial stake in keeping the intertie expenditures as low as possible. According to the terms of the grant agreement, all invoices submitted to AIDEA for payment must first be reviewed and approved by the IPG. The IPG will be watching these expenditures closely. Once approved by the IPG, AIDEA still retains the discretion to determine whether the invoices are for eligible costs and whether the documentation is sufficient. Since the Division of Energy will not have a group like the IPG to carefully examine intertie expenditures, we concluded that the Division must retain at least as much authority to review and approve expenditures as AIDEA retains in its grant agreement. A copy of the AIDEA grant administration agreement is also included in the attached booklet. iM Several major issues were raised by CVEA when its loan application was submitted (see July 22, 1994 letter from CVEA included in attached booklet). These issues are summarized below, along with the Division’s position reflected in the most recent proposed loan agreement: A. Loan Security. CVEA asked that we issue the $35 million as an unsecured loan. Mike Irwin March 13, 1995 Page 3 Our position is that a prudent lender would not issue an unsecured loan of this magnitude. In our proposed loan agreement, the loan is secured by a pledge of utility revenues after payment of operating and maintenance expenses and after payment of debt service on outstanding secured debt. The loan would not be secured by a pledge of any of the utility’s physical assets. Loan Amortization. CVEA asked that repayment of the State loan commence one year after the intertie enters commercial operation. We have agreed to this provision. Placement of Loan Funds with Trustee / Accumulation of Interest Earned on Unexpended Balance. CVEA asked that the $35 million be placed with a trustee (i.e. removed from the State’s custody and placed with a third party financial institution), and that the interest earned by investing the $35 million prior to its disbursement be retained by the trustee and added to the loan amount. Our advice from the Department of Law is unambiguous on these two issues. The appropriation for the loan does not authorize interest retention. We do not have separate legal authority to retain the interest earned on the unexpended balance for the benefit of the project, nor do we have authority to place the funds with a trustee. This conclusion was reached after extensive debate and consultation between the Division and the Department of Law. The proposed loan agreement therefore does not provide for retention of interest earnings on behalf of the project nor for placement of the funds with a third party trustee. Study Costs. CVEA stated that it had already expended about $800,000 assessing the feasibility of the project, and asked to recover that amount from the State loan (i.e. to capitalize these prior expenditures). We have agreed to this request: l. Feasibility study costs are included among eligible cost categories in Section 3.2(a) of the proposed loan agreement. Mike Irwin March 13, 1995 Page 4 2: Section 3.2(a) also provides for a $7.3 million ceiling for Phase I (pre-construction) costs. This figure was arrived at by adding the estimated $800,000 in prior costs to the $6.5 million in pre- construction costs estimated in the feasibility study. Ill. Ina letter dated March 3, 1995 addressed to CVEA management, CVEA’s lawyer reviews our most recent loan agreement proposal and lists six issues which, in his judgment, are potential “deal breakers. ” CVEA provided us with a copy of the letter. These issues, along with our position on each, are as follows: A. Issue: DCRA does not agree to subordinate the State loan to supplemental financing. Response: This is incorrect. Section 6 of the proposed loan agreement expressly subordinates the State loan not only to prior secured debt of the utility but also to additional financing needed to complete the intertie project. However, the Division has not agreed at this time to subordinate the State loan to any other financing CVEA may obtain in the future, as the nature and amount of such future financing is presently unknown. Issue: DCRA does not agree to a mechanism which would allow for an accrual of interest to the project. Response: As noted above, the Department of Law advises that, in the absence of specific legislative direction, we do not have the legal authority to accrue interest on the unexpended loan balance for the benefit of the project. CVEA’s remedy would be to ask the legislature to modify the $35 million appropriation to expressly include such interest earnings. Issue: DCRA does not agree to an overlap between Phase I and Phase II. Response: As provided in Section 3.2 of the proposed loan agreement, the project is divided into Phase I (pre-construction) and Phase II (construction). In general, loan funds will not be disbursed for Phase II costs until CVEA has achieved certain milestones such as acquisition of right-of-way across federal land (requiring successful completion of the NEPA process) and favorable resolution of matters submitted to APUC. CVEA has pointed out that procurement of certain items requires long lead Mike Irwin March 13, 1995 Page 5 times, and that it may be justifiable to order such items before these and other milestones have been achieved. In recognition of this, an “escape clause” was included in the proposed loan agreement that allows the Division to approve exceptions to these expenditure limits (see loan agreement at page 6, top). This clause is identical to the language of the AIDEA grant agreement. We have in fact recognized possible overlap between Phase I and Phase II -- we have included language allowing exceptions to the expenditure limits but retain for the Division the authority to approve such exceptions. Issue: DCRA requires that the obligation to repay the loan is unconditional, and the proposed loan agreement includes an overly broad provision to indemnify the Division. Response: Both of these provisions are taken directly from the prior loan agreement with the Juneau utility (included in the attached booklet), and therefore represent the advice of prior counsel. With regard to the unconditional obligation to repay, our position is that CVEA as the borrower assumes all project risks and that the Division should not agree to terms under which part or all of the loan may be forgiven. It is the prerogative of the legislature to enact such forgiveness if warranted in the future. With regard to the indemnity provision, our proposal provides that CVEA will indemnify the Division against all claims other than those arising from the Division’s willful misconduct. We could consider easing this provision to exclude claims arising from the Division’s sole negligence as well, but may wish to consult first with the Division of Risk Management in the Department of Administration. Issue: DCRA requires an opinion from CVEA counsel that no litigation is threatened to enjoin this loan. Due to current APUC proceedings involving Alaska Cogeneration Systems, Inc., CVEA counsel could not presently issue such an opinion. Mike Irwin March 13, 1995 Page 6 Response: This can apparently be resolved by specifically excluding these current APUC proceedings from the required opinion, which we would agree to do. F. Issue: DCRA fails to agree to a covenant of mutual cooperation. CVEA proposed that the parties agree to mutually cooperate towards the successful financing, design, construction, completion, operations and maintenance of the project. Response: We are in the position of lender with respect to this project. We do not want to include in the loan agreement general language that appears to be inconsistent with this role. Our rights and obligations as a lender are already specifically spelled out in the proposed agreement. Other technical issues have been raised by CVEA but we understand the main issues to be those outlined above. To date, we have not received a direct written reply from CVEA to our November 18, 1994 proposal. Attachment Railbelt Prices Low Rates Rates A717 A.4e 967 561 8998 JUN 5, 1395 9§:2aqM TO: FROM: CHM HILL-SEA | Sutton to Glennallen Transmission Line | Influence Diagram . | 4 5/31/95 . | Economic Development / Load Growth acaanTi aaa Petro Star , Load / Resaurce | Decision to | uild Transmission | Line eee SS Alyeska eet ' Load / Resource’: A SO Vee Avafanches | f Raiibelt * - a {Pra J @ { N i Relizbltity - ) 09:60 aN. GA-Aan-Nne t ¥ AWANNe geBslgc'*" ‘ON X¥s Le/et'd -90-NNP 62:01 INL 96 ) Brecse. 6 ‘ON XV 20 'd 21-P1LH Sy \ ope fal l\ ) i eV ri P ee Ply [A\ 1 N\A LY IAN / TONY KNOWLES, GOVERNOR oA | hif In\| De ee) HV Lae 0 P.0. Box 112100 1 U =e OU US UU JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 DEPARTMENT OF COMMUNITY AND OE ODMR O 333 W. 4THAVENUE, SUITE 220 REGIONAL AFFAIRS RIDA AT Aah AYeneurieet? PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Ken Thompson, President ARCO Alaska P.O. Box 100360 Anchorage, Alaska 99510-0360 Subject: Sutton-Glennallen Intertie Dear Mr. Thompson: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the long term future of oil operations in Valdez is critical to the intertie investment decision. The intertie feasibility study completed a year ago referred to a well-known report issued in 1993 by the U.S. General Accounting Office entitled “Trans-Alaska Pipeline -- Projections of Long- Term Viability Are Uncertain.” The report is often cited in support of the view that TAPS will be shut down by 2020, a consequence of declining North Slope oil production. This is a view that has the status of conventional wisdom in much of Alaska. If used as the basis for long-term planning, the case for building the Sutton-Glennallen intertie is considerably weakened because shutting down the pipeline implies a significant contraction of power demand in Valdez. Assuming that TAPS will continue to operate well beyond 2020 does not seal the case in favor of the intertie, but assuming it will shut down by 2020 very nearly seals the case against it. If top management in the Alaska oil industry believes that TAPS shut down by 2020 is more likely to occur than not, then we certainly need to hear that early on in the context of our intertie deliberations. However, if the pipeline is likely to operate well beyond 2020, we will need to base our intertie evaluation on other factors. I would certainly appreciate an opportunity for a member of our review team to formally discuss the long-term oil production outlook with you, and I will contact your office by phone in the near future. Sincerely, Whe Brut Mike Irwin, Commissioner Department of Community and Regional Affairs OSE INSP I / TE ah VE / TONY KNOWLES, GOVERNOR wv) 1} | O P.o. Box 112100 as JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS } ©) 333 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Steven Lewis, Chairman and Chief Executive Officer Petro Star, Inc. Suite 200 201 Arctic Slope Avenue Anchorage, Alaska 99518-3030 Subject: Sutton-Glennallen Intertie Dear Mr. Lewis: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the intertie depends on the amount of power to be transmitted over the line, the power supply and power generation plans of the Petro Star Valdez refinery are important matters when considering public investment in the project. A decision by Petro Star to generate its own power in Valdez, and perhaps to supply power back to the utility grid as well, would be a key factor in the intertie economics, and therefore we would like to factor in to our thinking whatever you can tell us about the company’s future plans in this regard. We have of course been reading the newspaper accounts on the subject but would very much like to communicate with you directly. If you indicate that Petro Star is likely to generate its own power, we would consider this an important factor in deciding whether the project development process should be kept alive. Our intention is to re-run the economic analysis of the intertie with revised assumptions that are consistent with your company’s future plans. I would certainly appreciate an opportunity for a member of our review team to formally discuss this matter with you, and I will contact your office by phone in the near future. Sincerely, Wit houo Mike Irwin, Commissioner Department of Community and Regional Affairs / TONY KNOWLES, GOVERNOR O) P.O. BOX 112100 / JUNEAU, ALASKA 99811-2100 i PHONE: (907) 465-4700 } FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AIRING © Scince AASka mas on PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Jeff Lowenfels, President and Chief Executive Officer Yukon Pacific Corporation 1049 W. Sth Avenue Anchorage, Alaska 99501 Subject: Sutton-Glennallen Intertie Dear Mr. Lowenfels: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of up to 40 megawatts of bulk power between the Railbelt and Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the intertie depends on the amount of power to be transmitted over the line, the power supply and power generation plans of Yukon Pacific with respect to a future Valdez terminal are of considerable importance. In the intertie feasibility study completed a year ago, it was assumed that a Valdez terminal for a TAGS line would be isolated electrically from the utility grid -- the company would generate sufficient power for all of its terminal requirements, and would neither purchase nor sell any additional power. We are aware of newspaper accounts, however, suggesting that Yukon Pacific might have a considerable amount of excess power, enough to supply the needs of the local utility and perhaps a significant amount to ship back to the Railbelt as well. At this point, we are unsure whether construction of the TAGS line and terminal as envisioned by Yukon Pacific is more likely to enhance or to weaken the case for the intertie. As a power purchaser, a Valdez TAGS terminal would enhance the intertie case. As a power supplier meeting the needs of the Copper Valley Electric utility, the TAGS terminal would weaken the intertie case. As a power supplier that meets the local utility needs and sells up to 40 megawatts of power back to the Railbelt, TAGS might again enhance the intertie case. I would certainly appreciate an opportunity for a member of our review team to formally discuss these possibilities with you, and I will contact your office by phone in the near future. Sincerely, Wiiber Yi Mike Irwin, Commissioner Department of Community and Regional Affairs 21-PilH TONY KNOWLES, GOVERNOR O P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 \ | | UwUt > MP AANnER winte (| AN m\®) | JU DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS © 393 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 f PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. John Morgan, President BP Exploration P.O. Box 196612 Anchorage, Alaska 99519 Subject: Sutton-Glennallen Intertie Dear Mr. Morgan: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the long term future of oil operations in Valdez is critical to the intertie investment decision. The intertie feasibility study completed a year ago referred to a well-known report issued in 1993 by the U.S. General Accounting Office entitled “Trans-Alaska Pipeline -- Projections of Long- Term Viability Are Uncertain.” The report is often cited in support of the view that TAPS will be shut down by 2020, a consequence of declining North Slope oil production. This is a view that has the status of conventional wisdom in much of Alaska. If used as the basis for long-term planning, the case for building the Sutton-Glennallen intertie is considerably weakened because shutting down the pipeline implies a significant contraction of power demand in Valdez. Assuming that TAPS will continue to operate well beyond 2020 does not seal the case in favor of the intertie, but assuming it will shut down by 2020 very nearly seals the case against it. If top management in the Alaska oil industry believes that TAPS shut down by 2020 is more likely to occur than not, then we certainly need to hear that early on in the context of our intertie deliberations. However, if the pipeline is likely to operate well beyond 2020, we will need to base our intertie evaluation on other factors. I would certainly appreciate an opportunity for a member of our review team to formally discuss the long-term oil production outlook with you, and I will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs TONY KNOWLES, GOVERNOR 0 P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 / FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND / REGIONAL AFFAIRS / O 333 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Ken Thompson, President ARCO Alaska P.O. Box 100360 Anchorage, Alaska 99510-0360 Subject: Sutton-Glennallen Intertie Dear Mr. Thompson: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the long term future of oil operations in Valdez is critical to the intertie investment decision. The intertie feasibility study completed a year ago referred to a well-known report issued in 1993 by the U.S. General Accounting Office entitled “Trans-Alaska Pipeline -- Projections of Long- Term Viability Are Uncertain.” The report is often cited in support of the view that TAPS will be shut down by 2020, a consequence of declining North Slope oil production. This is a view that has the status of conventional wisdom in much of Alaska. If used as the basis for long-term planning, the case for building the Sutton-Glennallen intertie is considerably weakened because shutting down the pipeline implies a significant contraction of power demand in Valdez. Assuming that TAPS will continue to operate well beyond 2020 does not seal the case in favor of the intertie, but assuming it will shut down by 2020 very nearly seals the case against it. If top management in the Alaska oil industry believes that TAPS shut down by 2020 is more likely to occur than not, then we certainly need to hear that early on in the context of our intertie deliberations. However, if the pipeline is likely to operate well beyond 2020, we will need to base our intertie evaluation on other factors. I would certainly appreciate an opportunity for a member of our review team to formally discuss the long-term oil production outlook with you, and I will contact your office by phone in the near future. Sincerely, Fnihe Wat Mike Irwin, Commissioner Department of Community and Regional Affairs 21-P1LH JUN-UY-¥5 FRI 14:39 ADEA FAX NO. 9075618998 P, 01/27 x Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503-6690 Date _ June 9, 1995 RECEIVED Number of pages including cover sheet 28 JUN 09 RECD DIVISION OF ENERGY/DCRA To: From: Percy Frisby D. Randy Simmons Phone (907) 269-4640 Phone (907) 561-8050 FaxPhone _ (907) 269-4645 __ Fax Phone —_(907') 561-8998 ce: Urgent O Foryourreview (] Reply ASAP [) Please comment For your information. This is draft of what we go from CH2M HILL. We haven't made any | adjustments to proposed scope. Shively and Irwin have copies. JUN-08-95 FRI 14:39 AIDEA FAX NO, 9075618998 P, 02/27 ALASKA INDUSTRIAL DEVELOPMENT & AND EXPORT AUTHORITY f= ALASKA QE ENERGY AUTHORITY 480 WEST TUDOR = ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 MEMORANDUM. TO: Mike Irwin, Commissioner Department of Community and Regional Affairs John Shively, Commissioner Department of Natural Resources FROM: ng Birdy a bo * Executive Director DATE: June 6, 1995 RE; Sutton-Glennallen Intertie Attached is a draft scope of work, schedule and project estimate for reassessing the feasibility of the Copper Valley Intertie. We took the liberty of asking CH2M HILL to provide this to us since we have them on contract. Hopefiilly, this will be 2 good starting point for our discussions and gives us another option from what was discussed earlier. You'll notice that the initial phase cannot be accomplished until early August, which is outside the timeline the Governor gave us. I'll be out of the state through June &. I would be available to discuss this with you, either in person or by teleconference, on or afler June 9. Attachment JUN-O9-95 FRI 14:40 AIDEA FAX NO. 9075618998 P, 03/27 Enginees FAX Planners Economists Seattle Offices MEE Scientists TEL: (208) 483-5005, ext5245, FAX: (206) 462-5957 NE toe. 99, 2 Fax A? So/- 8778 Verification #: Total Pages: Z Te: Riley Sneil From: Dawe, Graz, Company: Alaska Trnd. Deve + Expert Auth. Date: «| 9/45 a Message: Y he information in this fax ts confidential and proprietary and is intended only for the individual or entity named on the cover sheet. H you bere nat the intended recipient. disclosure. copying, distribution cr use of this information is prohibited, If you do not receive e jes or have received this fax in error, please notify us immediately at the acove telephone number. TA'd Ate WYST:6 SeEt ‘S NOL 8565 19S 225 701 OSS-TIIK WEHD :WOds JUN-08-95 FRI 14:40 AIDEA FAX NO. 9075618998 P, 04/27 Engineers Planners Economists Scientists June 2, 1995 Me. Riley Snell Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99303 Dear Rilcy: Thank you for the opportunity to come to Anchorage to plan additional feasibility analysis of the Copper Valley Intertie, I enjoyed meeting you and Randy Simmons, Based on our discussions, I understand that Govemor Knowles has tasked a blue ribbon committee comprised of you, Mike Irwin, and John Shively to reassess the feasibility of the Copper Valley Intertic and recommend a course of action relative tc the $35 million loan appropriated by the state legislature. You have asked CH2M HILI. to provide feasibility analysis lo support the committee’s efforts. Fe T have prepared a two-phase approach for our work. Phaxe | is designed to directly addcess the two new developments that are fundamental to the feusibility of the Copper Valley Intertie: 1.) Petro Star’s announced plan to Icave the Copper Valley Electric Association (CVEA) system and possibly sell power to CVEA under the terms of PURPA, and 2.) Alyeska’s interest in possibly connecting its relatively latge load to the CVEA system. On the basis of our findings in Phase 1, the committee may decide that it has enough information to formulate its recommendation to the governor and therefore not procced with a second phase, or it may choose to proceed with additional analysis in Phase 2. As currently envisioned, Phase 2 would include more detailed seasitivity analysis and formal decision analysis. Decision analysis and associated documentation may be particularly uscful if significant involvement of project stakeholders is contemplated. Phase 2 would culminate with a comprehensive report on the feasibility of the Intertie. If the committee chooses to proceed with Phase 2, its scope would likely be revised on the basis of information developed in Phase 1, Drafts of the scope of work and workplan for this project are atlached for your review as Attachments 1 and 2, respectively. The sample decision analysis concept we discussed on Thursday is also attached (Attachment 3) for your easy reference. Please note that the last page of this attachment is not in context of the Intertic. f is simply a sample of a risk Seattle Office 277 108In Avenue NE, Bellovue, WA HKKM-S) 18 200 103°S000 ©) P.O. Box 91500, Bellovse, WA 98009-2050 iax Ne. 206 454 $957 y Z2'd dTt4t WeAT:G SEET ‘S AT 8668 t9S 226 7OL MSS-TIIH WEHS :WwOds JUN-09-95 FRI 14:40 AIDEA FAX NO, 9075618998 P, 06/27 profile that would be developed for the intertie decision or for assactated documentation, As shown in Attachment 4, the cost estimate for Phage 1 of this work is $45,200. An order of magnitude estimate for Phase 2 costs is $44,300. A better estimate of Phasc 2 costs can be developed once information from Phase | is available. These estimates are based on the assumption that our analysis can overlay the existing Beck and Bradford analyses using the Beck model without compatibility problems. I witl manage the project, assisted by Bob Brooks, Dan Pitzler, Mark Veliccr, and Jeff Haight. Mr. Brooks will be responsible for project modelling and interface with R.W. Beck. Mr. Pitzlec will be responsible for assisting Mr. Brooks with model runs and data management. Mr Velicer will be responsible for leading the decision analysis activities in Phase 2. Mr, Velicer will be assisted by Mr. Haight. Resumes for team members arc provided in Attachment 5. We expect that the draft technical memorandum for Phase | can be completed by August 9. With a one-week period for review and comments, we will complete the final product by August 21. This assumes that we are able to meet with project stakeholders to complete Task 2 during the week of June 12. As I mentioned to you, other commitments will prevent me from meeting in Anchorage between June 19 and July 14. Assuming that by the first or second week of August the committee would know whether Phase 2 is necessary and be able to approve a workplan, we could present initial results by September 5, a Phase 2 draft report by September 27, and. assuming a one-week period for review and comments, a final comprehensive report during the sccond week of October. - f lock forward to working with you and Randy on this project and will call you next week to discuss our plan for project execution, In the meantime, if you have any questions or comments, pleasc call me. Sincerely, CH21 \ HILL Velo fe David A. Gray Project Manager / SO'd LTdH WeLT:6 S6EEt ‘S NAL 6E6S 5S 22s :0L YES<TIH WEHD WOuS JUN-09-95 FRI 14:41 ALDEA FAX NO, 9075618998 P, 06/27 Attachment L Copper Vailey Intertic Feasibility Update Draft Scope of Work The scope of this project will be to reassess the feasibility of the Sutton to Glcnnallen 138kV transmission line (Copper Valley Intertic) based on certain conditions that have changed since original feasibility studies on this project were completed. To the extent practical, assumptions and analysis used in the R.W. Beck feasibility study (Feasibility Study--Copper Valley Intertie, January, 1994), the Copper Valley Intcrtic Plan of Ifinance by J. C. Bradford (May 3, 1994), and Robert Wilkinson testimony on CVEA avoided cost Will be uscd with changes made only as necessary to reflect changed conditions, The project will be conducted in two phases. Phase 1--Update of Summary Analysis In Phase 1, the existing Copper Valley Intertie feasibility analysis will be updated with data to reflect two new conditions: 1.) Petro Star’s announced plan to leave the Copper Valley Electric Association (CVEA) system and possibly sell power to CYEA under the terms of the Public Utility Regulatory Policics Act of 1978 (PURPA), and 2.) Alyeska’s interest in possibly connecting its relatively large load to the CYEA system. The product of Phase 1 will be updates of table 1-5 of the R.W, Beck feasibility study and Tables J though IY Of the Bradford plan of finance. These will be presented as part of 2 - technical memorandum at the conclusion of Phase 1. This work will include conducting sensitivity analysis Cor: = Load growth * Oil prices - Interest rate on loans associated with the project C 4-Dam Poo! charge rate for output from Allison Lake , Long-term power supply costs for power from the Railbelt The loud forecasts scasitivitics will be limited to a medium load forecast (the medium-low or the medium-high scenario) from the R.W. Beck study (for reference) and consideration of the following load developments: . Loss of Petro Star as a customer of CVFA vO'd dTcR WUBT:6 SE6t ‘Ss NO Bees TSS 126 701 BSS-—THIH WEHD:WOeS JUN-09-95 FRI 14:41 AIDEA FAX NO, 9075618998 P, 07/27 * Addition of Alyeska as a customer of CVLA assuming the existence of a Copper Valley intertie (This will include the addition of Alyeska’s existing requirements (approximately 8 MW); also uncettainty surrounding the term of the power supply to Alyeska will be addressed) The load forecast scenarios will likely consist of the following: . Low: Medium forecast less Petro Star Load ° Medium: We will select either Beck’s medium-low o: medium-high forecast ° High: Modium forecast plus Alyeska load Input valucs for oil price forecasts will be reassessed and agreed to with AIDFA before proceeding with the analysis, Analysis of power supply options for CVEA will be limited to the following five development scenatios: ° All diesel * Copper Valley intertie ° Allison Lake ° lfobbs coal-fired generation at Valdez . Petro Star supply CH2M HILL will work with R.W, Beck to arrange tunning the updaced analyses on the financial modcl R.W, Beck used in its 1993-94 analysis of the Copper Valley Intertie. Analysis will include evaluation of 1.) least cost power supply in terms of present value (consistent with the Beck report) and 2.) first year nominal supply cests (consistent with the Bradford report) assuming: . No state assistance e Minimum state assistance, ic. amount necessary only to set first-year rate equal to the base case. ° A $35 million loan from the State of Alaska at vero interest Phase | will be conducted with input from the various stakeholders (CVEA, CEA, ML&P, MLA, Hobbs, Petro Star, and Alyeska) and with close coordination with AIDEA. © SO's 21dh WeET:6& S6GT ‘Ss NO Sasa t9S 486 201 Y3BS-TNIR WZHD : Woes JUN-09-95 FRI 14:42 AIDEA FAX NO. 9075618998 P, 08/27 Phase 2--More Detailed Study and Decision Analysis If, at conclusion of Phase 1, a clear course of action is not apparent, Phasé 2 will provide the additional analysis needed to make a decision regarding the feasibility of the Copper Valley Intertie. In Phase 2, any important residual issucs not considered through the Beek model will be evaluated, and formal decision analysis will be performed to mors directly address future uncertainties. Among the issues that may require quantification through more detailed analysis in Phase 2 are reliability differences among the various power supply options, This analysis would consider the costs to put reliability associated with each supply option on a comparable basis with the Intertie option. As part of this analysis, costs to firm-up the Allison Lake resource option will be dircetly assessed. A separate analysis could also be conducted of the likely schedule for the Copper Valley Intertie with realistic consideration given to the time requirements for environmental permitting and line construction. Phase 2 will also include formal decision analysis, The primary benctiis of this project component will be 1.) to provide an avenuc for stakeholder’s to have formal input on probabilities associated with uncertainties associated with the project, 2.) to explicidy quantify uncertainty associated with the project, 3.) determine the expseted value of costs associated with cach supply altemative and the risk profile associated with cach. Most of the cost and utility system data for the decision analysis will havc been developed in Phase |. In Phase 2, uncertainties will be rechecked through an in‘luence diagram. probubilitics associated with uncertainties will be estimated, and a decision tree constructed. From tlie decision tree model, the expected value of costs and risk profiles a mentioned above will be derived. The influence diagram and probability assessments will be developed though a workshop and individual interviews with key Intertic project stakeholders. Upon complction of Phase 2, a formal report will be prepared. This :cport will summarize the findings of the study and document the process used to evaluate the Intertic and other CYEA resource options. © 9O'd 2TH W6T:6 SE6t ‘S NN S668 19S Lz6 OL @ES-THH WOHD =WONS JUN-08-95 FRI 14:42 AIDEA FAX NO. 9075618998 P, 08/27 Attachment 2 Copper Valley Intertie Feasibility Update Draft Workplan (Labor days and schedule for each task shown in paret.thescs) Phase 1 ts Revicw project background and develop scope and workplan with AIDEA. (3 days; May 31-June 8) 2 Meet with key stakcholders to get input regarding key issues and probabilities associated with related uncertainties: CVEA - Petco Star Alyeska CEA MEA ML&P Hobbs (4 days; June 12-16) as e686 © 6 © 3. Meet with R.W, Beck to review financial model. Mect with J.C. Bradford & Co. to get input re financial plan approach. Obtain Beck model and/or arrange for - custom runs for feasibility update. Do not recheck existing numbers or assumptions in existing Bock model. Continue to usc 1993 dollars as base price levels. (3 days; June 12-16) 4. Reassess analytical needs with AIDFA given findings in Tasks 2 and 3; revise workplan as necessury, (0,5 days; June 28) 3 Obtain additional data needed for update of Beck and Bradford analysis. (6 days; July 3-24) ‘ 6, Conduct analysis using R.W. Beck model! (15 days--This docs not include time for R,W. Beck assistance; Joly 17-31) ies Prepare a technical memorandum on analytical results, Reecive comments. (5 days; July 31-August 9) 8. Prepare final technical memorandum. (2.5 days; August 17-21) G 43's didek WST:G S66ET ‘S NOS BEER TSS 226 201 WSS-TIITH WEH :WOMS JUN-09-85 FRI 14:42 AIDEA FAX NO. 9075618998 P. 10/27 Phase 2 1 Review scope and workplan in lightof findings/needs from Fhase 1. (1 day; August 4) ay Obtain additional cost and systems data needed for analysis. (4 days; August 7-18) a Workshop with key stakeholders to develop influence diagram. outline decision tree and preliminarily assess probabilities associated with certain uncestaiatics, (3 days; August 14-18) 4, Conduct interview regarding probabilities, (3 days; August 14-18) S Link Beck mode! output to decision analysis model. (2 days; August 14-18) 6. Conduct decision tree and risk profile analysis. (10 days; August 21-September {) dis Prosent results of first-cut to AIDEA. Obtain critical review and direetion. (2 days; September 5-8) 8. Revise analysis in response to critical review in Task 7, (3 days; September 15-22) 9. Present revised results in draft comprehensive report for Phases 1 and 2, (6 days; September 20-27) 10, Obtain feedback in workshop with AIDA and other stakeholders, (2 days; - October 2-4) {1. Prepare final report. (5 days; October 4-13) @ BA'd 2TLH bke:6 Ceet 'S NMOL S668 TSS 226 sOL BES-—TIIH WeHD Woes JUN-U8-95 FRI 14:43 ALDEA FAX NO, 9075618998 P, 11/27 Attachment 3 ine Li ission Decision Analysis Conceptual Approach CH2M HILL 5/31/95 Sutton to Glennallen Transm Y SO'd LTdt We@Z:6 CeET ‘S NMS S665 19S 226 7OL GES-TIH WEHD :WOUS JUN S, 1995 9:2@AM #717 P.1a 9@7 561 g9se TO: FROM? CH2M HILL=-SER | Sutton to Glennallen Transmission Line | Influence Diagram | | 5/31/95 _—, Economic Development / — — Decision to uild ao | Line = or nee | Load / Resource . ea ela \ Pees) @ €p:bl Tea S6-60-NNP YadI¥ B66819SL06 ‘ON XVI Lé/el ‘d JUN 5, 1995 3:21AM #717 P11 927 S61 esse TO: FROM: CH2M HILL-SER f —— — i | Sutton to Glennallen Transmission Line | Decision Tree - | Rates <1 i 5/31/95 | Economic - Ceridian Development / Petro Star ~ Build Transmissi pad Grow! Load / Resource Alyeska Railbelt Line Load/ Resource Avalanches Prices ow is ZT MW Build / [ tow Frequent Low cof 7\_Med 7A_ Four MW/-~ 7X Reliability ~~ ‘Do Not Bui VY, A. High: A Infrequent \ High \_ High \ Eight MV. Reliability Rates €bipl ud $6-60-NNP val ‘ON X¥d 9668195206 Le/el‘d JUN S: 13535 9:21AM 8717 P12 $@7 S6i S998 To: FROM: CH2M HILL-SEA Risk profiles can be used to compare the risks of different policies Which policy is riskier? Which has a greater chance of making money (positive profits)? Cumulative Probability GofContinue a oe -2000 -1000 0 1900 2000 3000 4000 5000 6000 Profits => ® ne Evaluating Alternatives epibl 18d 98-B0-NN ¥aal¥ BBB8IS9SL06 ‘ON XVA 12/91 'd JUN-09-95 FRI 14:44 AIDEA FAX NO, 9075618998 P, 15/27 Attachment 4+ Copper Valley Intertie Feasibility Update Estimated Budget Phase 1 Labor (39 professional labor days at average rate of $800) $31,200 Support and expenses (25 percent of labor) 7,300 Contingency (20 percent of labor) 6.200 Total $45,200 Phase 2 Labor (41 professional labor days at average rate of $800) $32,800 Support and expenses (25 percent of labor) 8,200 Contingency (10 percent of labor) 3:30 Total | $44,300 Total $89,500 LF) @ ET'd ATs WetZ:G Ssét ‘Ss NOC 8668 TSS 286 OL BAS—TIIH WEHD:WOeS JUN-08-95 FRI 14:44 AIDEA PT'd Ate Woee:6 Sest ‘s NNO FAX NO, 9076618998 Resumes 8668 T9S 426 :01 P, 16/27 Altachment 5 GAS-TTHH WEHD :WOds JUN-09-95 FRI 14:44 AIDEA FAX NO, 9075618998 P. 17/27 St'd tak DAVID A, GRAY Senior Energy Economist Education B.A., Economics and Mathematics, Westem Washington University Graduate Studies, Economics and Business Administration, University of Washington and Western Washington University Experience Mr, Gray is an economic and financial consultant who serves as a project manager and advisor on energy, regional, and business economics studies. lis expertise also includes financial, utility, transportation, and impact analysis. He develops and presents cxpert witness testimony before regulatary bodies. Mr. Gray advises clients on a wide range of energy and utilicy matters. He conducts utility cost-of-service and rate design studics, load research studies, load forecasts, feasibility analyses, demand-side management and integrated resource plunning studies, and contact analyses for a variety of clients. Mr Gray has evaluated the economic feasibility of numerous energy projects in Alaska. Hor Golden Valicy Electric Association (GVEA), he evaluated the economic feasibility of | participation in the Bradley Lake Hydroelectric Project by Golden Valley Electric Association and supervised the production of an integrated resource plan that supported the utility’s decision regarding the feasibility of the Healy Clean Coal Project. He has also studied the feasibility of energy conservation resource development for GVEA and for Alaska Electric Light and Power Company (ARLP). Mr. Gray also conducted the feasibility studies leading to the installation of AELP’s load management program. He has also conducted seconnaissance-level feasibility studics of a number of smal! hydroelectric projects in Alaska, His electric ratemaking experience includes testimony on cost-of-service and rate design before the Alaska Public Utilitics Commission. Hv has prepared cosi-uf-scrvice and rate studies for Scattle City Light, Modesto Irrigation District, AEP, Glacier Highway Electric Association, and Ketchikan Public Utilities. He managed the environmental impact analysis of rate design changes to the Bonneville Power Administration. Mr, Gray has performed load forecasts for GVEA, AGL&P, Central Electric Cooperative, Inc., in Oregon; the City of Richland, Washington; the Southwest Gas Corporation in Nevada; the Intermountain Gas Company in Idaho; and a number of small towns in southeast Alaska, He has also advised Anchorage Municipal Light and Power, Snohomish County PUD in Washington, and Grant County PUD in Washington on load forecasting as part of a critical revicw of these utility's load forecasting techniques. Mr. Gray has WUSZ:6 SEST 'S NIL B668 TSS 226 7OL YES-TNIH WEHD :WOuS JUN-08-95 FRI 14:45 AIDEA FAX NO, 9075618998 P, 18/27 DAVID A. GRAY represented the Direct Service Industrial Customers of the Bonneville Power Administration in the preparation of regional load forecasts for the Pacific Northwest. For AELP, Mr. Gray designed the innovative rates to help implement the utility’s conservation and load management programs, These rates included a dual-fuel rate for customers who could have electric heating scrvice interrupted by shifting to an alternate heating source, a water heating control rate, 4 clean air rate for customers who could use surplus hydroclcctric power to displace wood heat, and a heat storage rate, IIe has ulso advised AEL&P on its strategy to market temporary electric service during periods of hydroelectric surplus to promote conservation during periods of hydroelectric deficits. For GVEA, Mr. Gray has prepared four successive power requirement studies (1985, 1987, 1990, and 1993), conducted an innovative load research project, and prepared the utility’s demand-side management and conservation plans. The conservation plan received the National Energy Award from the U.S. Department of Encegy in 1994 for utility technology. He managed an intensive study of energy markets and balances in the state of Kansas to establish a policy for curtailing natural gas during periods of short supply. Mr. Gray testified on the study findings before the State Corporation Commission of Kansus. He also planned this commission's major investigation into electric utility load management, rate design, and conservation. Mr. Gray performs market feasibility studies for public and private projects including port projects, cncrgy facilitics, and real estate development. For example, he recently conducted @ market study that supported a $95 million bond issue for a wood-waste cogeneration facility, His real estate economics background includes warehouse siting analysis and market and financial feasibility analysis of office park development, Ie alsa routinely provides least-cost and financial analyses for major public works projects. Mi. Gray has performed a number of transportation development studies, For the Port of Tacoma, Washington, he managed the feasibility study for a successful $60 million bond issuc. He has performed economic analyses for a number of other port developments including developments at the Port of Portland, Oregon; the City of Saxman, Alaska; and the Alaska Marine Highway system in Ketchikan, Alaska. For Seattle Metro he prepared an analysis of the potential economic impact of a bus strike. He advised in the preparation of a major trade forecast by the Chicago, Milwaukee, St. Paul, and Pacifie Railroad to assist in zoning Changes for switchyard development near ‘Tacoma, Washington, [fc alse prepared a report documenting the potential economic impact of Rock Island Railroad abandonment in northwest Kansas. This report was submitted in evidence before the U.S. District Court for the Northern Division of Illinois. @ ST'd dbek WHZ:G SGET ‘Ss NO 8668 19S 425 201 ¥BS<TIH WEHO :WOds JUN-09-95 FRI 14:45 AIDEA FAX NO, 9075618998 P, 19/27 DAVID A, GRAY Mc, Gray has performed numerous economic base and development studies including analyses of economic impact resulting from both major construction of new facilities and closure of existing facilities. Mr. Gray regularly performs feasibility studies for public and private projects, Papers and Publications Practical, Low-Cost Load Research for Electric Utililies. Public Utilities fortnightly. August I, i994, Load Forecasting for Small Utilities: Credibility Without a Black Box, Presented at NWPPA Consultants Workshop and Rates Symposium, Seattle, Washington. 1985. "The Economies of a Regional Approach to Load Research." Public Utilities Fortnightly. January 1, 1931, Fully Allocated Average Cost of Service Based on Porceast Loads and Revenuc Requirc- ments. Presented at NWPPA Rate Symposium, Seattle, Washington. 1978. @ 2U'd é¢Tet Weee:6 est ‘S NI 8668 79S 286 104, ¥SS-TIH HEHO :WOus JUN-09-96 FRI 14:45 AIDEA FAX NO. 9075618998 P, 20/27 ROBERT G. BROOKS Senior Economist Education Graduate Studies in Business Administration, Suffolk University B.A,, Economics, University of Colorado Experience Mr. Brooks specializes in utility planning and analytical studies, including integrated resource planning, financial forecasting, cost of service, and rate design studies for electric, gas, water, sewer, and solid waste utilides, [is background includes the design and development of software for both mainframe and microcomputers. Mr. Brooks recently testified on an integrated resource planning study for the Golden Valley Ulectric Association. Ee developed a dispaich simulation model to evaluate supply» and demand-side resources and presented expert witness testimony before the Alaska Public Utilities Commission, He also served as the lead economist on an integrated resource planning study for the Juneau Alaska area. Rarlicr, Mr. Brooks pertormed power supply planning studics for Ketchikan Public Utilities, Lake Worth Utilities Authority, and Anchorage Municipal Light and Powe: Company.. Ie hag assisted ‘the Omuha Public Power District in evaluating their demand-side management programs, and performed a study of solar power and conservation wehnologies for the Gas b Company of New Mexico (now part of Public Service Company of New Moxivu). Ms. Brooks was the project manager responsible for the development of MICROCOS™. CH2M HILL’s microcomputer-based cost of service program. He also designed and developed the firm’s detailed financial forecasting program for utiliies (VLNCAST). Mr. Brooks routincly manages and cxecutes cost of service and rate design studies for clients including the Modesto Irrigation District, Alaska Electric Light and Power Company, Ketchikan Public Utilitics, and the Public Utility District No. t of Grays Harbor County (electric); the City of Aurora, Colorado, and the Sale Lake County Water Conservancy Disuict (water); the City of Alexander City, Alabama (sewer); and the City of Centralia, Washington, Kitsap County, Washington. and the Matanuska-Susitna Borough, Alaska (solid waste); and the cities of Decatur, {inois and Corpus Christi, Texas (gas). As lead economist on a cost of service and regulatory intervention on behalf of the City of Saskatoon, Saskatchewun, his responsibilities included the anulysis and critique of the wholesale supplicr’s cost of service and cate design study, and assistance in the preparation of expert witness testimony for presentation before the provincial Public Utilities Review Commission. Bt'd dTet Wuke:6 SeeT ‘Ss NOT S668 TSS 206 10L 83S=-TIH HZHD Woes 18, JUN-09-95 FRI 14:46 AIDEA FAX NO, 9075618998 P, 21/27 ROBERT G. BROOKS Page 2 “Prior to joining CH2M HULL, Mr. Brooks worked for a large consulting firm where he was involved-in financial forecasting and load research fur electric utilities. For the Kingdom of Saudi Arabia, he conducted field surveys of electric utilities and assisted in the design of a large-scale computer-based financial modeling system. This scries of computer programs integrated load forecast and system plan data with financial and operating statistics and projected the Kingdom's clectrical requirements for 25 years. As an analyst on load management research, Mr. Brooks developed specialized computer programs to anzlyze the cost-etfectiveness of vurious load management techniques for South Carolina Public Service Authority, As Programming Consultant to the Economie Council of Canada, he designed and developed a computerized load dispatch sinulativn model and presented results cost summaries by province for cach year of a $-year planning period. ‘The tnodel performed generation scheduling to minimize operational costs, subject co user-selected constraints. As Project Administrator on a 345-kV transmission interconnection project for the New York Power Authority, Mr. Brooks was responsible for progress monitoring and reporting; devel- opment and implementation of project procedures; coordination of spevifications, drawings, and contract documents; and accounting and cost control. Membership in Professional Organizations National Association of Business Economists AREE/Demand-Side Management Society @D Gt'd dTék Were:6 S66T ‘S NOW 8668 tS 426 701 v3S-—THH W2HD :WoaS Lk Reine ne OE Ce Ri cae meee JUN-09-95 FRI 14:46 AIDEA FAX NO, 9075618998 P, 22/27 MARK A, YELICER Management Systems Analyst Education M.S. Engineering Management and Enyironmental Systems, Cornelt University BS. Civil-Environmental Engineering and International Studies, Univ. of Ulinois Summary Mr, Velicer specializes in environmental systems management for CLIZM WILL’s Bellevue office, His expertise lies in the areas of integrated management planning and implementation, quantitative management methods, organizational analysis, economic feasibility analysis, and management information systems, Le has formal training and project expcrience in environmental systems modeling, decision analysis, uncertainty analysis, and other computerized decision aids. Experience Mr. Velicer was the lead management systems analyst for a Fortune 200 manufacturing firm’s management assessment of company-wide remediation systems. This review included asscssment of corporate remediation costs, risks, and liabilities, evaluation of corporate environmental strategics to reduce risk and liability, internal communication processes, an organizational assessment, and staffing analysis relative to risk at varions plant sites. = Mr. Velicer was recently task leader for the decision and unecrtainty analysis for a Fortune 500 energy firm. This project involved reatistic assessment of the risks and uncertainties associated with managing over 300 of the companies hazzrdous waste sites. Mr, Vetliccr guided a tcam of engineers to perform approriate cost estirnutes, conducted a decision and uncertainty analysis, and communicated the results in a clear and understandable format to upper management. The results of this analysis were used in successful insurance cost recovery negotiations. Mr. Velicer is currently performing a decision analysis tu assist a Fortune 500 cil and gas production firm in its decision to relocate a local municipalities water supply well system, This analysis involves a comprehensive analysis of the financial and public image risks faced by the company, and employs 2 multi-attribute decision technique to combine both quantitative and non-quantitative risk considerations. Mr. Velicer recently managed a strategic, risk-based biomedical waste management plan for Swedish Medical Center (SMC), the largest medical facility in Seattle. ‘This comprchensive assessment is driven by simultancously changing organizational, technological, regulatory, and economic influences affecting SMC. This project includes an audit of staffing levels and budgets for current waste management practices. Recommendations for reduced costs and improved operations are based on waste stream ed 7 @e'd atd# Were:6 seet ‘S NN 8668 TSS 226 :0L BSS—TTIH WHO : WOR JUN-09-95 FRI 14:47 AIDEA FAX NO, 9075618998 Pesaran projections, a treatment and disposal technology review, cconomic analysis, and regulatory strategy. Mr. Velicer is currently performing an effectiveness and organizational evaluatiuu of hazardous and moderate risk waste managemicnt programs implemented by four agencies in King County, WA, in conjunction with SERA, Inc, ‘rhis evaluation is designed to assess how existing program activities are meeting stated objectives and budgets, and design new evaiuation procedures to measure progeam performance in the (uture. Evaluation methods and success indicators will be designed and implernented for all programs, including recommendations regarding methods of data collection, compilation, presentation, and analysis. Mr, Velicer is currently assistant project manager for the Regional Needs Assessment in King County, Washington. This project fs a consensus based decision process to implement a new walershed/ecosystem approach to surface water management in the region. This project involves establishment of existing environmental conditions and modeling of future water resource conditions; consensus building decision approaches for stakeholders, surface water managers, and elected officials; evaluation of the economic implications of surface water regulations; evaluation of institutional alternatives; and implementation of 4 iia regional arrangement for storm and surface water management. Mr. Velicer is currently structuring @ consensus based alternatives analysis and decision process for the Washington State Ferry system, using the Nomina! Group Technique. This ferry terminal master planning process will formal! develop siting and development critcria for both technical and community concerns, develop value tradeolts and criteria weights through en interactive and community based process, and sclect a development alternative for recommendation to policy makers. Mr, Velicer was assistant project manager for the {ull development process for the Lewis County transfer station. This process included comprehensive system planning, cconamic feasibility analysis, siting, and conceptual through ful! design. The siting process was structured to allow full Solid Waste Advisory Committee (SWAC) involvement in criteria setting, scoring, and evaluating for a broad screcning process to narrow the number of feasible sites to three before detailed engineering investigations took place, Mz, Velicer assisted the County in a bid procurement for waste export services, anc. was tesponsible for export and transfer system compatibility issues. “(his process included bid options for other Counties in the region to participate in a shared export arrangement. Mr. Velicer was project manager for conceptual design and siting of the Kitsap County moderate risk waste management facility. This facility will accept houschold hazardous and small quantity business wastes from all County residents. For four western Washington counties, Mr. Velicer has developed comprehensive solid waste management plans, including administrative and financial strategies. In each case he lead the development of system cost assessments detailing the funding and financing Té'd dATdR WeSe:6 ge6e6T ‘S NOL S665 TSS 486 :OL BES-THIH W2HD :HOds JUN-U9-85 FRI 14:48 ALDEA FAX NO, 9075618998 P, 24/27 mechanisms for all operating and capital costs components over a detailed 6-year implementation horizon. Ile also contributed to a regional plan for system of 8 counties .- in southwestern Washington. wr Mr. Velicer has worked several western Washington jurisdictions regarding the procurement of contracted private services for construction and operation of solid waste Management programs and facilities. His negotiating and procurcment cxpericnee includes the joint Lewis/Grays [arbor waste export contract awarded for a value of $38 million over a 20 yeur poriod, and the Grays Harbor transfer station construction and operation services contract worth $21 million. Mr, Velicer has developed several customized computer decision aids for use in environmental systems management planning. He worked with the Te!lus and Cornell Waste Management Institutes to develop the WastePlan (¢) cost model and develop in- house municipal and County staff expertise in New York State, and currently is responsble for training CH2M HILL staff in all offices in the use of WastcPlan. Mr, Velicer has customized the EXTEND graphic simulation model for usc in water resources and solid waste system-wide planning and analysis, and has also applied the mucel io specific technical problems such as pollutant loading analysis. Mr. Velicer has practical experience in the application of simulation packages Stella and Ithink, the VP-Expert expert system shell, multi-objective decision tools BestChoice and Multi-Objective Reasoning Environment (MORE), uncertainty and risk analysis tools including At-Risk and Crystal Rall, and decision tree analysis for risk management using NPL. Prior to joining CII2M HILL, Mr, Velicer developed diverse environmental systems experience, including solid waste system software development and implementation for = Cornell’s Waste Management Institute, hydropower and environmental modeling for Pacific Gas and Electric, international training in water resources cnginvering, and instream flow methodology work for the Illinois Natural }listory Survey. Affiliations We Association of Northwest Environmental Professionals Governmental Refuse Collection and Disposal Association Association of Hospital Engineers King County Municipal League Alki Foundation Publications Choosing a Medical Waste Treatment Technology. With Terrill Chang, P.C, Air and Waste Management Pacific Northwest International Section, November, 1993. Managing Integration: A Local Government Guide to Cost-Lifficient Program {mplementation, or, “What Wasn’t Written in Your Solid Waste Management Plan.” Biecycle Contcrence Presentation, March 1993 and Biovycle Magazine, April 1993, GP ag 9 fed dTé# WeSe:6 SoET ‘S NIL B6E8 T9S 226 701 ¥35-TNH vee a JUN-09-85 FRI 14:48 AIDEA FAX NO, 9075618998 P, 25/27 Avoided Costs of Waste Reduction and Recycling in New York State. With Dr. Daryl Ditz, Cornell University Waste Management Institute. (ebruary 1991, Avoided Costs From Recycling Investment. Cornell University Waste Management Institute. July 1990, The Tompkins County WastePlan (c) Report. Enginecring Management Vroject Repart. Cornell University. May 1990. Guidelines for Minimizing Environmental Impacts From River Diversions. With EE, Herricks, University of Illinois, For Illinois Department of ‘Transpestation. August 1987. 10 22. fed aTok WHSE:6 Seer ‘Ss NI REBR TSS 226 :OL USS=<THH WH :WOdS JUN-09-95 FRI 14:48 AIDEA FAX NO, 9075618998 P, 26/e! . JEFF A. HAIGHT Solid Waste Engincer Education M.S., Engincering Management, Cornel! University B.S., Environmental Engineering, Cornell University Experience Mr. Haight is a member of the solid waste department in CII2M MHILL’s Scattle regional office. His respensibilitics include system planning, cost modeling, lacility design, and recycling plan development. For the city of Istanbul, Turkey he assisted with the evaluation of specific multi-family recycling options for Istanbul’s recycling initiative. For BC Uydro, Vancouver, Canada, Mr. Haight assisted in the final solid waste management plan, including incorporation of detailed cos/bencfit information, In addition, Mr. Haight has assisted with the planning and design of a landfill gas drainage system for the closure of the Kent Ifighlands Cand#ill in Kent, Washington. Currently, Mr, Haight is working with Lewis County, Washington, in the preliminary design of a new solid waste transfer station, [lis rcsponsibilities include assistunce in cost estimation and operational impacts on design. Prior to joining CH2M HILL, Mr. Haight acquired diverse cnvironmental planning experience. As a maritime devclopment advisor, he prepared cost and feasibility assessments for maritime development projects in the Washington D.C. area. While working for the Center for Environmental Research ut Cornell University, Mr, [aight developed water-level management plans for Skancatcles Lake In New York, These plans outlined annual dam operation schedules in order to satisty environmental, flood, and re- creational needs. For both assignments, his recommendations involved striking delicate balances between political, economic, and environmental considerations. AS a graduate student at Cornell University, Mr. Haight created a decision model for the utilization and disposal of waste ash for Monree County, New York. ‘he first part of this model involved comprehensive economic and feasibility studies for the uses of ash generated from the incineration of the County's waste treatment sludge. The second part formulated alternatives through joint linear and integer programming. All the recommendations were then examined in an extensive sensitivity analysis before presentation to the County. Memhership in Professional Organizations Government Refuse Collection and Disposal Association ey seu12220. pi a 1/19/92 pe'd LTdéH Wod2:— SEET 'S NO 8668 19S 426 :OL BBS-TIIH WEHD : Wows wots Pp. 2t/2t FAX NO. 9075618998 0 JUN-09-95 FRI 14:49 AIDEA c: DANIEL. &, PITZLER Economist Mstinguishing Qualifications . Experienced leader of feasibility studies for many types of projects * Conducted over Z0 cost of service and rate design studies Related Experience Mr. Pitzler provides strategic planning and technical assistance to public- and private-sector clients on a wide range of energy und waste management issues, Flis areas of expertise include feusibility analysis, cost of service and rute design, computer modeling. financial management and analysis, procurement, and forecasting. Representative Projects . Lead technical analyst for a demand side management plan, multi-quarter toad research program, and rate analysis for Alaska Blectric Light and Power, . ‘Vechnical anulyst and lead computer modcier for power supply planning and cost of service studics for Ketchikan Public Utilities. e Task leader for a cost of service study and rate analysis for Glucier Llighway Hlectric Association. = . ‘Task leader for marginal cost cate analysis and yarious other rale issues for Omaha Public Power District (NL). e Lead computer modeler and technical analyst for a cost of service and retail rate study for Central Electcic Power Coup. (SC). e Technical analyst for a cost of service analysis for the City of Saskatoon, Saskatchewan. . Technical analyst for a cate analysts for revenue bond issuc, Grant Co, PUD, (WA). . Task leader for a cost of service study for Midstate Electric Cooperative (OR). ° Technical analyst tor a cost of service study for Modesto Irrigation District (CA), ° Task leader for an analysis of solid waste rite strticturc altcrnatives for the Matanuska-Susitua Borough. 12 Sed L2Téh WeeZ:6 S6ST ‘S NU S668 19S 226 s0L BSS-THR WeHo Woes Prey P25 Alyeska pipeli a yes Q Pipe! Ine 1835 SOUTH BRAGAW STREET, ANCHORAGE, ALASKA 99512 David Pritchard President & CEO RECEIV ED June 13, 1995 JUN 16 RECD DIVISION OF ENERG Mr. Mike Irwin, Commissioner APSC Letter # 95-3009-G ERGY/DCRA Department of Community and Regional Affairs 333 W. 4th Avenue, Suite 220 7 Snes: Anchorage, ‘Alaska 99501-2341 PEGE W ‘S| [} JUN 15 $995 Subject: Sutton - Glennallen Intertie COMMISSIONER'S UFFICE Dear Commissioner Irwin: COMMUNITY & REGIONAL AFFAIRS We have received your letter dated June 2, 1995 regarding the Sutton - Glennallen Intertie. We appreciate the inclusion of Alyeska in the Governor's review process for this project. The issue of power import or export for the Valdez Marine Terminal is a complex issue and one which we are currently reviewing in the light of the anticipated regulations for tanker vapor control. The following represents our perspective on the Sutton - Glennallen Intertie and the questions posed in your letter. The Valdez Marine Terminal (VMT) was designed and has been operated since start-up as a stand alone facility in terms of electrical power. The VMT power is generated by steam driven turbines with the steam being created in boilers fired by a combination of diesel fuel and hydrocarbon vapors from the tank farm vapor control system. There are three boiler/steam turbine generator trains each capable of producing 12.5 Megawatts (MW) of power for a theoretical total of 37.5 MW. Actual VMT power need/usage is currently in the range of 6-9 MW. This is expected to increase to 7-11 MW when tanker vapor control is implemented at year end 1997. The design of the VMT power facilities is such that the power generation and existing vapor control systems are integrated. As such, by-products from the power generation operation - steam and inert (flue) gas, are used as key elements of the vapor control system. This philosophy will be continued when tanker vapor controls are added at the terminal. Alyeska is keenly interested in running its operation as cost effectively as possible. As such, the cost of operating the power and vapor control system has and will continue to be studied periodically in the light of changing fuel costs, alternate power sources, power export potential, improved technology, etc. Import and/or export of power may be of interest, but only based on of a rigorous understanding of the technical, economic, reliability, legal and tax issues involved. Technical and economic considerations require the cost of changing the existing power/vapor system, to allow vapor control to be accomplished essentially on a stand-alone basis, to be attractive relative to the cost of HOM . Commish (AL Clic Mr. Mike Erwin, Commissioner Sutton-Glennallen Intertie June 13, 1995 Page 2 imported power when taking into account the remaining life of the VMT. Reliability questions regarding imported power are another significant factor to Alyeska given the vulnerability of remote transmission lines particularly through the Thompson Pass area. Given the complexity of the VMT situation it is unrealistic to expect that the necessary power purchase price and availability information could be known with sufficient certainty until significantly later in the implementation phase of bringing the state power grid to Valdez. Accordingly, Alyeska has taken the position that the decision on whether or not to proceed with the intertie should be addressed without account of whether Alyeska will buy or sell electricity, or remain a stand alone facility. This remains our position. We would welcome an opportunity to meet with you and your staff to discuss this further. Please contact Norman Ingram (265-8730) Sincerely, SLIPS. David Pritchard President & CEO DP:NI/csc 21-1 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS OFFICE OF THE COMMISSIONER June 23, 1995 Mr. Robert Hufman Executive Manager Alaska Electric Generation and Transmission, Inc. 1018 Galena Street Fairbanks, Alaska 99709 Dear Mr. Hufman: RECORD COPY TONY KNOWLES, GOVERNOR 0 P.O. BOX 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 / OG) 333 W. 4THAVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 FAX: (907) 269-4520 Thank you for your letter of June 14, 1995, regarding the Sutton-Glennallen intertie. As you know, the Governor has asked for a review of the project’s feasibility including another look at the analysis and the underlying assumptions. We will consider the information provided by Copper Valley Electric Association and by others during the course of this re-examination. The Alaska Industrial Development and Export Authority has retained CH2M Hill to assist in our review. This will provide an independent check on the original feasibility assessment and will allow for the use of any revised assumptions that the review team decides to consider. I appreciate your comments on this important issue. Sin oh LE WAS ike Irwin Commissioner ALASKA ELECTRIC GENERATION AND TRANSMISSION, INC. June 14, 1995 Mr. Mike Irwin, Commissioner JUN 16 1995 Dept. of Community & Regional Affairs P. O. Box 112100 COMMISSIONER'S UFriCE Juneau, Alaska 99811-2100 SOMMIINITY & REGIONAL AFFAIRS RECEIVED Subject: CVEA Transmission Intertie JUN. 1 RECD Dear Mr. Irwin: DIVISION OF ENERGY/DCRA I understand that Clayton Hurless, General Manager of Copper Valley Electric Association, recently submitted updated information on the Glennallen Railbelt Intertie to you for evaluation. I am hopeful that the data recently received, in combination with studies and data previously available, will lead to an expedited recommendation to proceed with the project. My personal involvement in Alaskan Railbelt electric utility issues spans over four decades, therefore I feel reasonably qualified to evaluate the data provided by CVEA, consultants, and others. In my opinion, a Copper Valley transmission tie with the Railbelt System is head and shoulders above other options and alternatives. This project is designed to be a long term solution. Admittedly, some short term options may, by comparison, appear attractive but they are short term. Once the Copper Valley Railbelt tie is completed, I firmly believe an extension to the Golden Valley Electric transmission line at Big Delta will be built within the following 10 years. Once the loop is completed, the entire Railbelt Grid will have transmission system capabilities to better serve over 2/3 of our state’s population for the foreseeable future. The Copper Valley tie is a vital link in the future Railbelt Integrated System. I urge you to support the loan in favor of Copper Valley Electric and the entire Railbelt community. Sincerely, Bebth pro Robert Hufman, Exec. Mgr. ALASKA ELECTRIC GENERATION AND TRANSMISSION, INC. PHONE: (907) S320 » . 474-0549 1018 Galena St. Fairbanks, AK 99709 Mo {uae Te EEL eM LL JUN 2 6 RECD ICTRIC ASSOCIATION INC. Box 71249, Fairbanks, Alaskp RON U2 BRERaY? DERIO7-452-1 151 RECEIVE) Retun O —_ or Toss we Tony Knowies JUN 23 1995 to CHS ED COMMISSIONER'S OFFI = | CE com BSF leo COMMUNITY & REGIONAL AFFAIRS guncau an yvc11-0001 > Stare of Alaska Dear Governor Knowles: Although the Valdez/Copper Basin is far from our service territory, the Copper Valley Electric Association is our sister co-op. We've maintained close ties with their board and management as they have struggled time and again to reduce rates that are over 2 '4 times what GVEA members pay. Several years ago we even jointly studied merger. They are tied to diese! generation and prevented by !aw from receiving PCE. The hydro power they receive supplies only a small portion of their load end is largely summer-seasonal. The Copper Basin desperately needs the Sutton-Glenallen intertie as the basic infrastructure to solve their power supply and power cost problems. No other solution wil! have the positive short-term and long-term impacts of the intertie. Al! other fixes are bandaids. ‘Prior to your election I understand you heard complaints from a group of "agin'ers" and they may now expect your assistance to kill the line. I understand the pressure you must feel. However, this is not a zero-sum, win-lose prospect. The legitimate environmental challenges in the Glenn Corridor should be relatively easy to mitigate. We believe that both sides can win and that this intertie should proceed immediately to design and construction. Golden Valley's board and management pledges to help in any way we can: engineering expertise, project management support, contract administration assistance, etc. This line really should be built now and strong State assistance for this critica! infrastructure is very appropriate. Please Jet us know if we can help in any way. Kincest regards, “Mor. Michael P. Kelly General Manager cc: Commissioner Mike Inwvin Clayton Hurless-CVEA GVEA Board of Directors teres) (ITE o1puu io u A\ i / = (U } ih n\c} } O P.o. Box 112100 UU tts Ns UULSDYU UL i ‘ JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 DEPARTMENT OF COMMUNITY AND / REGIONAL AFFAIRS / Wa 939 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 fre An Vn (9) IC /n\ it I\ e V7 if / TONY KNOWLES, GOVERNOR hit Slit | ‘ f L FAX: (907) 465-2948 June 20, 1995 Mr. Pershing J. Hill, Ph.D. Associate Professor of Economics University of Alaska Anchorage 3211 Providence Drive Anchorage, Alaska 99508 Dear Professor Hill: Thank you for your letter of May 17, 1995, about the proposed Sutton-Glennallen intertie. As you may know, Governor Knowles appointed a cabinet-level committee to review the project and to consider our policy direction on the issue. To that end, | appreciate your professional assessments and insights. Our approach to the review of the intertie will be largely driven by any new or reconsidered information relative to the project feasibility, most notably the growth scenarios. By the information you provided in your letter, | think you will agree with this approach. Chief among the newest pieces of information is the recent announcement by Petro Star that you mention. As soon as we have confirmed the information on which the growth scenario assumptions are based, we will change those assumptions where necessary. At that point we will be able to perform an updated feasibility analysis for Governor Knowles’ consideration. | would also like to thank you for your views regarding the public sector's role in development of energy projects. Though no formal action has yet been taken, the Knowles Administration recognizes the need for a comprehensive energy policy for Alaska. The points you raise are good examples of the myriad questions that must be asked in considering policy that makes sense economically and that brings benefit to all Alaskan families. Sincerely, Mike Irwin Commissioner cc: Percy Frisby, Director, Division of Energy Dick Emerman, Senior Economist, Division of Energy UNIVERSITY OF ALASKA ANCHORAGE 3211 Providence Drive Anchorage, Alaska 99508 SCHOOL OF PUBLIC AFFAIRS ECONOMICS DEPARTMENT (907) 786-1770 FAX (907) 786-7739 — DIEGEIVE) MAY 22 1995 Commissioner Michael Irwin . Department of Community & Regional Affairs COMMISSIONER'S OFFICE P. O. Box 112100 COMMUNITY & REGIONAL AFFAIRS Juneau, AK 99811-0001 Dear Commissioner Irwin, I am a professor of economics at the University of Alaska Anchorage. In my capacity there I teach a course in public fiance which deals with government taxation and spending policy. The activities of the public sector is one of my areas of specialty, in which I have spent a great deal of time and study. I am writing you as a professional economist. I strongly urge you to reject the participation of the State of Alaska in the Sutton-Glenallen intertie. I realize that state government has been heavily involved in electrical public utility projects in the past; the four-dam pool, Bradley Lake, Terror Lake, and the Railbelt Intertie. However, past involvement is no reason for continued involvement. It strikes me that this proposal is dubious from two standpoints. First, it appears doubtful that the proposal has economic feasibility. The growth scenarios are overly optimistic, and it is highly likely that the costs are understated. The analysis is not robust, in that any changes in assumptions or basic conditions are fatal. There is a confusion in what are considered costs and benefits in the analysis. The economic feasibility of this project has become even more disputable now that Petro Star is planning on generating its own electricity, and will be able to feed its excess capacity back into the CVEA grid. Secondly, and this is the most important reason, the production of electricity (and all private goods) is best left to the private market. Governments have been involved in the past, and there are still instances in which they are currently, but their record is not good. Think of the debacle that took place with the WPPSS, and recall the initial projections for power demand that led to the early feasibility studies of the Susitna project (That $250 million dollars could have been very useful in many other endeavors---thank God we did not build that $10 billion dollar project). The reason A DIVISION OF THE LINTVERSITY OF AL ACV A CTATEWINE CVCTEA Ar ratirn ernie that private goods end up the responsibility of governments is because these projects are incapable of withstanding the scrutiny of the private sector; they are not economically feasible. Alaska is facing an uncertain financial future. The Fiscal Gap is real, and on our doorstep. The time has come to start eliminating weak claims on the public purse. Goods that can be efficiently produced by the private sector should be the first candidates for elimination. Please ignore the power company lobbies and the construction lobbies. Their voice has been heard all too often in the halls in Juneau. The opportunity cost of this project is essentially the foregone interest on the 50 year $35 million interest free loan. The present value of that foregone interest is virtually $35 million dollars. This is an expenditure that the people of Alaska can ill afford. A $35 million dollar expenditure for the 3000 customers of the CVEA buys them very little. It certainly does not buy them a guarantee of uninterrupted power. If the State of Alaska wants to buy them a guarantee, go to CostCo in Anchorage and buy three thousand 5000 watt generators---the cost of such a purchase is only $1.5 million. Please, I urge you to reject this expenditure. Please take the State of Alaska out of the public utility business. In the current budget round a $600 million deficit is forecast. Although $35 million dollars doesn't fill that gap, it is a start in the right direction. Please reject this project. I thank you very much for your time and consideration. Sincerely yours, Lon. Jn, 7 fobet! Pershing J. Hill, Ph.D. Associate Professor of Economics UNIVERSITY OF ALASKA ANCHORAGE 3211 Providence Drive Anchorage, Alaska 99508 SCHOOL OF PUBLIC AFFAIRS ECONOMICS DEPARTMENT (907) 786-1770 FAX (907) 786-7739 aii RECEIVED) MAY 22 1995 Commissioner Michael Irwin , Department of Community & Regional Affairs COMMISSIONER'S OFFICE P. 0. Box | 112100 COMMUNITY & REGIONAL AFFAIRS Juneau, AK 99811-0001 Dear Commissioner Irwin, I am a professor of economics at the University of Alaska Anchorage. In my capacity there I teach a course in public fiance which deals with government taxation and spending policy. The activities of the public sector is one of my areas of specialty, in which I have spent a great deal of time and study. I am writing you as a professional economist. I strongly urge you to reject the participation of the State of Alaska in the Sutton-Glenallen intertie. I realize that state government has been heavily involved in electrical public utility projects in the past; the four-dam pool, Bradley Lake, Terror Lake, and the Railbelt Intertie. However, past involvement is no reason for continued involvement. It strikes me that this proposal is dubious from two standpoints. First, it appears doubtful that the proposal has economic feasibility. The growth scenarios are overly optimistic, and it is highly likely that the costs are understated. The analysis is not robust, in that any changes in assumptions or basic conditions are fatal. There is a confusion in what are considered costs and benefits in the analysis. The economic feasibility of this project has become even more disputable now that Petro Star is planning on generating its own electricity, and will be able to feed its excess capacity back into the CVEA grid. Secondly, and this is the most important reason, the production of electricity (and all private goods) is best left to the private market. Governments have been involved in the past, and there are still instances in which they are currently, but their record is not good. Think of the debacle that took place with the WPPSS, and recall the initial projections for power demand that led to the early feasibility studies of the Susitna project (That $250 million dollars could have been very useful in many other endeavors---thank God we did not build that $10 billion dollar project). The reason A DIVISION OF THE UNIVERSITY OF ALASKA STATEWIDE SYSTEM OF HIGHER EDUCATION that private goods end up the responsibility of governments is because these projects are incapable of withstanding the scrutiny of the private sector; they are not economically feasible. Alaska is facing an uncertain financial future. The Fiscal Gap is real, and on our doorstep. The time has come to start eliminating weak claims on the public purse. Goods that can be efficiently produced by the private sector should be the first candidates for elimination. Please ignore the power company lobbies and the construction lobbies. Their voice has been heard all too often in the halls in Juneau. The opportunity cost of this project is essentially the foregone interest on the 50 year $35 million interest free loan. The present value of that foregone interest is virtually $35 million dollars. This is an expenditure that the people of Alaska can ill afford. A $35 million dollar expenditure for the 3000 customers of the CVEA buys them very little. It certainly does not buy them a guarantee of uninterrupted power. If the State of Alaska wants to buy them a guarantee, go to CostCo in Anchorage and buy three thousand 5000 watt generators---the cost of such a purchase is only $1.5 million. Please, I urge you to reject this expenditure. Please take the State of Alaska out of the public utility business. In the current budget round a $600 million deficit is forecast. Although $35 million dollars doesn't fill that gap, it is a start in the right direction. Please reject this project. I thank you very much for your time and consideration. Sincerely yours, Le oboy 7, bee? Pershing J. Hill, Ph.D. Associate Professor of Economics May 31, 1995 To: Percy 4s From: — Dick CS Subject: Sutton-Glennallen intertie feasibility review I think it will be difficult for the interagency review team to meet the July 1 deadline established by the Governor. The letters to the five industry managers will not be received until the week of June 5. If the review team follows my suggested plan, they will need to have their 5 discussions and then have a meeting with Clayton Hurless before getting together to decide what changes they want to make in the study assumptions. You and I should be invited to the meeting at which those decisions are made -- having directed the study, I might know something they don’t. And if they’re going to communicate revised assumptions to me, it is essential that those instructions are clearly understood -- not relayed to me second hand. The plan then calls for changes in the study assumptions to be communicated to R.W. Beck, and for Beck to re-run the economic model. To ensure consistency with the previous analysis, these instructions should be communicated to Beck by me. The model is complicated and its output must be thoroughly checked to see that everything is properly specified before accepting the results. I might go to Beck’s offices for a day to oversee their work directly at the computer terminal. Following this, the group will presumably want to meet to finalize their position and then meet with the Governor to present their recommendation -- again, you and I should be at that meeting. If the Governor wants to change the administrative finding, I suspect I will be assigned the task of rewriting it (since I wrote the original finding). But Mary Gilson could probably do it, too. As you know, I am going on vacation from June 30 to July 20. I suspect that everything is going to get compressed towards the end of the month. The only way to avoid that is to try to get this process moving in high gear -- now. Example of problem: the five letters could have been signed and mailed on Tuesday of this week -- Mike’s changes to the drafts are very minor. But he plans to sign them on Friday because of his travel plans. We have just lost about a week for no reason. 21-P1LH TONY KNOWLES, GOVERNOR 0) P.o. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS O 939 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 May 30, 1995 Ms. Grace Budka P.O. Box B Copper Center, Alaska 99573 Dear Ms. Budka: Thank you for your letter about the cost of electricity in the Copper Valley region, and about your hope that the proposed Sutton-Glennallen intertie will help reduce those costs in the future. I have received a lot of correspondence from people in the Glennallen-Valdez area describing the economic burden caused by these high power costs. As proposed by your local electric utility, the Sutton-Glennallen intertie could provide the benefit that you and your neighbors are looking for if the government puts enough money into the project and if the remaining cost borne by local consumers can be spread over a high volume of power sales. If the volume of power sales is not high enough, paying off the local share of cost for the line could make the situation worse with respect to consumer rates. Now that the 1995 legislative session is over, we will be looking carefully at the intertie project and at other alternatives for reducing electricity costs in your region. Sincerely, Mike Irwin — / CG Commissioner Fe my P ( Wrel ipf + pes P.O.Box B Copper Center Alaska 99573 April 27, 1995 Commissioner Mike Irwin — mF Pa ii me Department of Community & Regional Affairs D EGE } P.O.Box 112100 ™ = U} MAY 02 1995 Juneau, AK 99811-2100 oo ; COMMISSIONER'S OFFICE Dear Commissioner Irwin: COMMUNITY & REGIONAL AFFAIRS I am writing about the proposed Copper Valley Electric Association power transmission line. It is my understanding that residents of the Sutton- Chickaloon-Matanuska Glacier area have been very vocal in their opposition to the transmission line. They have certainly taken the trouble to write letters to our local newspaper telling us why they think the transmission line is a bad idea for us. I for one would like to suggest that all of their arguments begin and end with a sign visible from the Glenn Highway near the Matanuska Glacier, which reads: "1-ACRE VIEW LOTS. PRICES START AT $20,000." The people living in the Glacier area receive power from Mat-Su at rates half those that we pay, and I really think that they could care less about the people who live in Valdez and the Copper River Basin and that, like most people, the only people they really care about are themselves. I believe that environmental groups and others have also criticized the transmission line, largely on aesthetic grounds. Most of these people, if not all of them, live in Anchorage and the Mat-Su area and probably drive the Glenn Highway twice a year. I drive it every month when I go to Anchorage to buy groceries. That the Glenn Highway is a shitty disgrace is really beside the point, but I know I would feel much happier about it if when I looked off I could see the transmission line and think that someday the amount I spend on my light bill might actually float down to the same amount I spend on gas to drive to Anchorage. My grandmother, who lived in a small house and used energy efficiently, used to spend over a third of her Social Security pension on her electricity bill. Whether the transmission line would be visible at all from the highway is a question in itself; the design of the Solomon Gulch- Glennallen transmission line is very environmentally sensitive, and usually it’s difficult to see the line at all unless you know where to look. Furthermore, I'm sick and tired of people who live in Anchorage and enjoy most modern amenities, including cheap power, viewing those of us who live in rural Alaska as their private theme park. ("It’s so unspoiled and quaint! Almost everyone still chops wood! Why? Because they can’t afford the electricity to run their furnaces in those long, -50 below winters, which we so admire but never actually venture out into!") I was born in Glennallen and have lived in the Copper River Basin-Valdez area all my life. I would like cheaper power. For most people out here, and there are thousands of us lurking in the woods, the electricity bill is a larger average monthly bill than the heating fuel bill. The average length of residency in Anchorage is about four years, which means that most people in Anchorage don’t care about living up here very much, even when they live where there is cheap power. It also means that most of them won’t even be here when the next gubernatorial election is held, so who cares what they think. Since I’ve reached the inevitable subject of the Governor, who always seems to crop up, let me say that I voted for Governor Knowles in this election and the 1990 election for reasons based largely on his promises for better things for rural Alaska. It was my understanding that this meant that rural Alaska would not be sacrificed to the interests of commercial rapists and that more projects to improve quality of life in rural Alaska would be brought forward. In my opinion, the CVEA power transmission line is definitely a quality of life improver. It is likely to reduce power rates for thousands of people in the Copper River Basin-Valdez area, and the line could eventually be extended to include Tok, Delta, Cordova, and every place else out here that currently runs on diesel generators. In 1990, I remember that the highlight of Governor Knowles'’s concession speech was the grateful phrase: "You’ve taken us into your homes! You've fed us!" I’d like to respectfully suggest that if power rates out here don’t get cheaper, on Governor Knowles’s next trip through, he may find himself eating canned food in a down coat by candlelight, because no one out here can afford to run the refrigerator, the furnace, or the lights. Please report in favor of the CVEA power transmission line. Thank you for your attention. Sincerely, Cuvee Bob Grace Budka MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Jim Ayers, Chief of Staff DATE: March 7, 1995 Office of the Governor FILE: PHONE NO: 465-4700 FROM: Mike Irwin, Commissioner SUBJECT: Briefing Document -- Department of Community and Regional Sutton-Glennallen Intertie Affairs This briefing document provides an overview of the Sutton-Glennallen intertie issue, and is presented in the format you prescribed in your January 23, 1995 memorandum: SUMMARY OF THE ISSUE 1. tm we Copper Valley Electric Association (CVEA) serves Valdez and Glennallen, which are connected to each other via an existing transmission line. The utility supplies power to about 3000 customers including the Petro Star Valdez oil refinery. It does not supply power to the Alyeska marine terminal, which has always generated its own power on site. There are no transmission lines connecting CVEA to any other utility system. In 1992, the year before the Petro Star refinery began operations, roughly 60 million kWh were generated to serve the utility's load as follows: A. about 40 million kWh from the State-owned Solomon Gulch hydro project; B. about 20 million kWh from CVEA diesel generators. Assuming moderate future expansion, the Petro Star refinery will require about 20 million kWh or more per year which, if supplied by the utility, would come mostly from additional diesel generation. Total diesel generation requirements for the utility are therefore projected in the range of 40-50 million kWh per year. There are several alternatives to replace diesel generation in the CVEA system: A. The proposed Sutton-Glennallen intertie would give CVEA access to Anchorage area power sufficient to supply any plausible requirements beyond the capability of the existing Solomon Gulch hydro project. As defined in a 1994 feasibility study conducted for the State, the intertie: Jim Ayers March 7. 1995 Page 2 i. would be approximately 135 miles long; ii. would cost about $47.6 million in 1993 dollars; ili. would be routed through undeveloped backcountry north of the Glenn Highway; iv. would be visible from backcountry trails, but (with brief exceptions) is not expected to be visible from the highway. B. The proposed Allison Lake hydroelectric project. Based on a 1992 reconnaissance study conducted for the State, Allison Lake: i. would supply about 27 million kWh per year of additional hydroelectric energy, which would then be supplemented with diesel generation to meet the projected utility requirement; ii. would cost about $32.2 million in 1993 dollars; C. Others including: i. alternatives considered in the 1994 intertie feasibility study -- a coal-fired power plant in Valdez, a hydro project at Silver Lake; ii. alternatives not developed in the feasibility study for lack of information but which have since been noted as possibilities by CVEA -- cogeneration at the Petro Star refinery and cogeneration at the Alyeska marine terminal. 4. The 1993 legislature appropriated $35 million for a zero interest, 50-year loan to CVEA for the Sutton-Glennallen intertie, but made the appropriation “contingent upon completion of a feasibility study and finance plan satisfactory to the Department of Community and Regional Affairs:” A. The feasibility study concluded that, under mid-range assumptions, the intertie and Allison Lake scenarios were the two least cost alternatives (with the Allison Lake scenario coming in at slightly lower cost than the intertie). B. In July 1994, the Commissioner of DCRA issued a finding that the feasibility study and plan of finance were “satisfactory,” and directed the Division of Energy to proceed with issuance of the intertie loan to CVEA. Jim Ayers March 7, 1995 Page 3 C. In August 1994. a collection of environmental groups filed an administrative appeal in State court challenging the Commissioner’s finding. Although stalled for several months, the appeal process is now beginning to move forward again. D. A lawsuit was filed in federal court by the developer seeking to build a coal-fired power plant in Valdez. The court initially imposed a preliminary injunction blocking issuance of the $35 million loan, but that injunction has now been lifted. E. The Division of Energy drafted a loan agreement and proposed it to CVEA in November 1994. To date, CVEA has not agreed to its terms and the proposed agreement is still on the table. None of the $35 million has yet been spent. Our existing policy is to go forward with CVEA and execute the loan agreement for development of the intertie. The Administration could reconsider or reverse the administrative finding that the studies were “satisfactory.” The issue is whether to go forward now with execution of a loan agreement, or to reconsider and possibly reverse the administrative finding needed to release the appropriation. WHY THE ISSUE IS TIMELY OR IMPORTANT There is continuing controversy surrounding this project. LIST OF ENTITIES INVOLVED IN THE ISSUE, STATE PERSONNEL, FISCAL IMPLICATIONS CVEA is a committed advocate of the intertie project and is very much against any alternative such as Allison Lake. Sentiment in Glennallen and Valdez is heavily in favor of the intertie. Ahtna Corporation owns some of the right-of-way and supports the project. Environmental groups (e.g. Trustees for Alaska) oppose the project. Vocal opposition from residents along the Glenn Highway (mostly in the Mat-Su Borough), and from the Chickaloons. Mat-Su Borough Assembly passed a resolution opposing the intertie. Division of Energy personnel are involved. At issue is the $35 million loan appropriation. CONSTITUENCIES INVOLVED See above. GOVERNOR’S POLICY OR DEPARTMENTAL POLICY Jim Ayers March 7, 1995 Page 4 The project would support economic development in the Glennallen-Valdez region. A policy question is whether the environmental impact is of enough consequence to choose a different power supply alternative. OBJECTIVE TO BE REACHED CVEA has retail rates about twice the level in the Railbelt and is not eligible for Power Cost Equalization. The objective is to help reduce power costs in Valdez/Glennallen while staying within acceptable environmental parameters. STRATEGIES Options include: L Go forward with the intertie and with defense in legal actions. 2. Withdraw the administrative finding, which would lock up once again the $35 million appropriation. Require the legislature to take additional action for the project to go forward -- e.g. remove the language that makes the appropriation contingent on an administrative finding. 3. Withdraw the administrative finding, and propose that funds be appropriated (or otherwise be made available) for a full feasibility study of Allison Lake either to confirm that it offers a competitive alternative or to determine that it is not as attractive upon closer examination. CVEA will oppose this vigorously, having argued all along against Allison Lake as an alternative to the intertie. Though staff has not prepared an estimate, the feasibility study cost would probably exceed $300,000. 4. Withdraw the administrative finding, and augment the feasibility study to include the cogeneration options involving the Alyeska terminal and the Petro Star refinery. Though staff has not prepared an estimate, this could probably be done for about $50,000 depending on the level of cooperation from Alyeska and Petro Star. RECOMMENDATION Go forward with the intertie loan to support economic development. PRESS COVERAGE Because of the high level of public scrutiny on this issue, a press release should be issued once the Administration’s position is clearly established. A Fax From The Department of Community & Regional Affairs Division of Fnergy 333 West 4th Avenue, Suite 220 333 West 4th Avenue, ‘Suite 220 Anchorage, AK 99501-23417 Anchorage, AK 99507-2347 Main Telephone Number: (907) 269-4500 Olrector's Fax Number: (907) £69-4645 Engineering Fax Number: (907) 269-4686 Cot ale Gar _ Deliver Fax to: Company Name Company Acaress.: Fax Phone #: LES - WHT BP AED 7 ; Senger: Berrie AF Me peg ae _ - Sender's Phone i# Met — Ser C7 = — # Of Pages Sent: = a Date Fax Sent: aa. TLD — — ff you don't receive ali of this fax, please cali sendar DIRECTLY. SPECIAL INSTRUCTIONS TO FAX RECIPIENT: __ Cate oles rt — Ae LE Ee - Gree ar “ic gules at Dau a sigacas teen Bsrck =fo-3 Ba ANE A ann Rhofens CAB Ia) ——— _ _ TRANSMISSION REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) *& COUNT **x TOTAL PAGES SCANNED > 5 TOTAL PAGES CONFIRMED : 5 seek SEND ick No. | REMOTE STATION START TIME [DURATION #PAGES | MODE RESULTS 1| 9074652948| 9-27-95 11:39 | 2°22"| 5/ B|EC COMPLETED | 9600 TOTAL -0:02°22") 5 NOTE: : ERROR CORRECT — G2: G2 COMMUNICATION No. : OPERATION NUMBER 48 : 4800BPS SELECTED EC S . 2 ) PD : POLLED BY REMOTE SF : STORE & FORWARD RI =: RELAY INITIATE RS : RELAY STATION MB : SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI-POLLING RM + RECEIVE TO MEMORY 4 Fax From The Department of Cornmunity & Regional Affairs Division of Energy Matiina Address: Coysical Address: 333 West 4th Avenue, Sulte 220 333 West 4th Avenue, Suite 220 Anchorage, AK 99601-23414 Anchorage, AK 99501-2341 Main Telephone Number: (B07) 269-4600 : | Director's Fax Number: (207) 269-4645 Engineering Fax Number: (907) 269-4685 { Deliver Fax to: Many GQuaser — = a Company Name: ae pt oD, Fred. a Company Address: a oe Fax Phone #: eS = OCs a Sender: Dem or Dick Enarmary Sender's Phone # SCRA -~ SAeya _ # of Pages Sent: Ss __Udastudes this cover page) . 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SPECIAL INSTRUCTIONS TO Fax RECIPIENT-_\\\@ oA, FMD tea Yo = Oty — i One, Dr iy “bm ch ay, : i T —_ TRANSMISSION REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) *%« COUNT **« TOTAL PAGES SCANNED 5 TOTAL PAGES CONFIRMED 5 2% ~SEND > No. REMOTE STATION START TIME DURATION | #PAGES MODE RESULTS 1 258 0760} 3- 7-95 5:02PM | 2°46" 5/ S\EC COMPLETED 9600 TOTAL 0:02°46" 5 NOTE: No. : OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION PD : POLLED BY REMOTE SF : STORE & FORWARD RI = RELAY INITIATE RS =: RELAY STATION MB =: SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI -POLLING RM : RECEIVE TO MEMORY A Fax From The Department of Community & Regional Affairs Division of Energy = JcalA 333 West 4th Avenue, Suite 220 333 West 4th Avenue, ‘Suite 220 Anchorage, AK 99501-2341 Anchorage, AK 99501-2341 Main Telephone Number: (907) 249-4500 Director's Fax Number: (307) 269-4645 Engineering Fax Number: (S07) 269-4688 Deliver Fax to: FZ: Le Zw fy Company Name: Ocrert Company Address: = = a Fax Phone #: SFE 5-297 SE Sender: £41 54 Aon eo Sender's Phone # 2-6 = KE ee Lo # of Pages Sent: Date Fax Sent: Mf you don't receive all of this fax, please call sender DIRECTLY. SPECIAL INSTRUCTIONS Me, RECIPIENT. Sa Son Ge en cape fSe Get any eariicceetea CAH no Gorey cn 2a CALs Quen. pc __ | TRANSMISSION REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE - SEE DETAILS BELOW) *%« COUNT **« TOTAL PAGES SCANNED TOTAL PAGES CONFIRMED 5 5 2K SEND 2% No. REMOTE STATION | START TIME DURATION | #PAGES MODE RESULTS 1 9074652948] 3- 7-95 11:13AM 2°25"| 5/ 5\EC COMPLETED | | 9600 | TOTAL 0:02'°25" 5 NOTE: No. : OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION PD : POLLED BY REMOTE SF : STORE & FORWARD RI : RELAY INITIATE RS : RELAY STATION MB : SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI -POLLING RM : RECEIVE TO MEMORY -_-- —"= Scam sue. Vek ee uEmaL uu cuutUt II cf Oo TONY KNOWLES P.O. Bax 110001 GOVERNOR Juneau, Alaska 99811-0001 (907) 465-3500 Fax (907) 465-3532 STATE OF ALASKA OFFICE OF THE GOVERNOR JUNEAU MEMORANDUM TO: Commissioner Mike Irwin Department of Community and Regional Affairs Commissioner John Shively Department of Natural Resources Reilly Snell, Director Alaska Industrial Development and Expprt Authority FROM: Governor Tony Knowles , ILA DATE: April 6, 1995 RE: Sutton-Glcnnallen intertie Upon review of your April 5 memo regarding the Sutton-Glennallen intertie, I am directing you to lead an interagency review of key issues in connection with the project. Those issues include: 1. Long-term future of the trans-Alaska pipeline. 2. Power demand and cogeneration options for the Petro Star Valdez Refinery. 3. Future options for the trans-Alaska Gas System. 4. Cogeneration and possible power purchase options for the Alyeska Marine Terminal. 5. Loan agreement options. The other team members are the Alaska Department of Natural Resources and the Alaska Industrial Development and Export Authority. This review should include obtaining the most current data upon which a decision can be made regarding the intertie project. The review should be completed no later than July 1, 1995, SENT BY: 4- 6-95 ; 2:11PM: GOV. OFFICE-JLNEAL- 907 2694645:# 3/ 5 MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Tony Knowles DATE: April 5, 1995 Governor FILE: Thru Jim Ayers Chief of Staff : PHONE NO: 465-4700 FROM: Mike a Jake he SUBJECT: Sutton-Glennalien Intertie Commissioner Dept. of Community and Regional Affairs As you know, the 1993 legislature appropriated $35 million to be used as a zero-interest loan for the Sutton-Glennallcn intertie but made the appropriation contingent on completion of a feasibility study and plan of finance “satisfactory” to this department. My predecessor issued a finding in July 1994 that the required studies were satisfactory in his judgment, and directed the Division of Energy to move forward with issuance of the loan. To date, however, agreement has not becn reached on the terms of the loan and none of the appropriation has yet been spent. Based on our March 17 briefing with you and subsequent discussions with other members of our administration about this project, we have concluded that additional information is needed before a well informed decision about proceeding is possible. What follows are a list of issues about which further information is needed. The issues will be reviewed in the context of: 1. What approach best protects the long term interest of the consumers; 2. The statutory terms of the proposed loan; 3. The continued financial feasibility of the project; and 4. Sound management practices. 1. PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power supply, although Petro Star may not have developed clear long-term plans at this point. Two basic issues that require review and analysis are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? _ , SENT BY: 4- 6-95 : 2:11PM i GOV. OFFICE-JLNEAL- 907 2694645;# 4/ 5 Tony Knowles, Governor April 5, 1995 Page 2 Il. LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The uncertainty associated with predictions of pipeline shut down should be addressed by soliciting views directly from top management of the major oil companies operating on the North Slope. Discussion: If the pipeline and marine terminal are shut down by 2020, very possibly taking the Petro Star refinery with it, the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. Il. TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of TAGS construction 10 years from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. There are two main questions that should addressed: A. Is TAGS likely to be built in the time frame identified in the intertie feasibility study? B. If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand, intertie viability is enhanced. If the primary effect is to introduce a new local power supply, the intertie may become unnecessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however, is very small in relation to Railbelt power requirements. IV. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either " purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the State should contact top management at Alyeska. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alyeska has always decided in the end to remain isolated electrically. One reason commonly cited for Alyeska’s historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself to APUC regulation with regard to such power sales. A. Will Alyeska generate power for its own use and for sale into the utility grid? SENI BY: 4- 6-95 ; 2:12PM ; GOV. OFFICE-JUNEAL- 907 2694645:# 5/ 5 Tony Knowies, Governor April 5, 1995 Page 3 B. Will Alyeska purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? V. PROVISIONS OF PROPOSED LOAN AGREEMENT. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. It should be noted that the Administration does not have the statutory authority to forgive repayment of the loan, even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT We recommend that top State officials undertake the recommended discussions with industry management, with relevant department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability. The Department of Community and Regional Affairs is of course ready to assist in any way you deem appropriate, ¢- o-vo + Z-lurm + UuUv. UPPILC-JUNDAL~ yu7 26946045: 1/ 3 FAY TRANSMITTAL UWAEET RECEIVED STATE OF ALASKA a TONY KNOWLES,: GOVERNOR APR 06 RECD ‘ CIVIS!oN CF ENERGY/DCRA Office of the Governor an PHONE: (907) 465-3500 P.O. Box 110001 FAX: (907) 465-3532 Juneau, AK 99811-0001 Please deliver to: Pa = ta Lat h t fs Location: DteRA [fur wg Fax number: ale - 4 le YS Phone number: Number of pages including transmittal sheet:__ 5 Comments:_____ Fu / Flcvil Taivtt beta tbe —— $$$ Date: tH, From: kilts Phone: __X_: B90 Cc edd MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Percy Frisby DATE: April 5, 1995 Director Division of Energy FILE: 4 raf ] gt PHONE NO: 269-4644 + nae FROM: Richard Emerman {L (x SUBJECT: Sutton-Glennallen Senior Economist Intertie Division of Energy A recent newspaper article indicated that the Petro Star refinery in Valdez plans to discontinue purchasing power from Copper Valley Electric Association (CVEA) within the next couple of years and plans to generate its own power instead. In addition to meeting its own needs, the refinery may decide to sell surplus power to the utility as well. Because the Petro Star electrical load is an important factor in the economic feasibility of the Sutton-Glennallen intertie, this development would seriously erode the economic case for the intertie in the absence of any other compensating factors. This in turn could lead to reconsideration and possible reversal of the July 5, 1994 administrative finding, in which the DCRA Commissioner declared that a “reasonable demonstration” had been made that the intertie is economically feasible. In view of this development, I suggest that the Administration proceed as follows: Iu In our March 17, 1995 meeting with the Governor, a preliminary consensus was reached that top officials should look into certain issues of particular importance in judging the feasibility of the intertie, specifically: A. the long-term future of oil production on the North Slope and of the oil pipeline to Valdez; B. power supply plans of the Petro Star Valdez refinery; C. possibilities associated with the proposed natural gas pipeline to Valdez, and; D. power supply plans of the Alyeska marine terminal in Valdez. Percy Frisby April 5, 1995 Page 2 Ii Ul. IV. This recommended course of action was formalized in the attached memorandum dated March 24, 1995 to the Governor from Commissioner Irwin. This course of action still makes sense today and should be undertaken as planned: A. With regard to Petro Star, the Administration should contact top management directly to inquire about its plans, as proposed in the March 24 memorandum. We cannot assume that the newspaper article contains complete and accurate information. B. There may be compensating factors. For example, if Alyeska decides to purchase utility power for the marine terminal in the event the intertie is built, the effect of losing Petro Star as a utility customer might be offset. Top management at Alyeska should still be contacted directly by Administration officials for insight into their power supply plans. iC; Overall, it is best to consider these issues in a careful and deliberate manner. The State is presently in litigation with respect to the Commissioner’s July 5, 1994 administrative finding, and may be involved in additional litigation if that finding is amended or revoked. D: After the consultations recommended in the March 24 memorandum are completed, the Administration should invite CVEA to come in and make its case. CVEA may be able to convey additional information or ideas that the Administration should consider. If the Administration is considering a policy reversal on the intertie after the process outlined above has been completed, the next step should be to direct our consultant to produce one or more new runs of the computer model that was developed for the economic feasibility analysis. For example, if the only significant change to the previous assumptions is that Petro Star will remove itself as a utility customer, the comparison of the intertie with the diesel “base case” should be re-run to determine formally how this changes the long-term economics. If the Administration at this point decides to disapprove the intertie, the Commissioner of DCRA would issue a new administrative finding declaring the State’s revised conclusion and describing the review process that led up to it, including the consultations and revised economic projections noted above. A new Percy Frisby April 5, 1995 Page 3 finding might also be based in part on a revised weighting of environmental criteria. As you know, the $35 million appropriation for the zero-interest loan was contingent on completion of a feasibility study and plan of finance “satisfactory” to DCRA. A revised finding would essentially declare that the studies had not produced a satisfactory demonstration of the intertie’s feasibility. If the Administration disapproves the intertie, CVEA consumers will still be burdened with rates that are roughly twice the level paid in Anchorage and in the larger communities of Southeast Alaska. A proposal to use part or all of the $35 million to help reduce rates for CVEA consumers could be put forward by the Administration: A. Use of these funds to subsidize a different power supply alternative might not be appropriate if Petro Star does proceed to sell power to the utility. Surplus power from Petro Star could be an attractive alternative to diesel without State subsidy. B. The State-owned Solomon Gulch hydro project will continue to provide a major share of CVEA’s power requirements. Wholesale power rates of 7.0 cents/kWh or more will be paid under the existing power sales contract which extends until the year 2030. It may be impractical to reduce this obligation contractually because Solomon Gulch is tied into the Four Dam Pool, and it would be very difficult to affect the obligations of one participant without affecting the others. Even so, the clearest and most direct approach to reducing rates over the long term for CVEA consumers would be to somehow reduce their payment obligation for Solomon Gulch power. One idea would be to invest some or all of the $35 million over a 35 year term and use the earnings of the investment to pay a portion of the wholesale power cost for Solomon Gulch otherwise payable by CVEA consumers. For illustration, assume that CVEA consumers presently purchase 45 million kWh from Solomon Gulch at $0.07 per kWh -- about $3.1 million per year. If $35 million were invested at 7.5%, interest earnings alone would be $2.6 million per year. Less than $35 million could be invested and still provide very significant long-term rate reduction. Perhaps Percy Frisby April 5. 1995 Page 4 AEA/AIDEA, as owner of the hydro project, could invest the funds and enter into a long-term rate reduction agreement of this nature. Attachment MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Tony Knowles DATE: March 24. 1995 Governor FILE: if PHONE NO: +65-4700 FROM: Mike win ey y SUBJECT: Sutton-Glennallen Intertie Commissiéher’ Y, Dept. of Community and Regional Affairs \s you know. the 1993 legislature appropriated $35 million to be used as a zero-interest loan for the Sutton-Glennailen intertie but made the appropriation contingent on completion of a teasibility study and plan of finance “satisfactory” to this department. My predecessor issued a finding in July 1994 that the required studies were satisfactory in his judgment. and directed the Division of Energy to move forward with issuance of the loan. To date. however. agreement has not been reached on the terms of the loan and none of the appropriation has yet been spent. At this point, this administration has several options. One is for this department to continue to negotiate a loan agreement with Copper Valley Electric Association (CVEA). Another is having this department reconsider our policy on this intertie project. Regardless of which option is pursued. we believe that additional information is necessary before a well-informed decision is possible. As we discussed with you on March 17. there are a number of issues which we believe you should consider carefully in evaluating the proposed Sutton-Glennallen intertie. In each case, we recommend that you or a top administration official undertake discussions with top management in the identified industries to seek a greater measure of insight and confidence in forecasting long-term developments. We believe that those high-level contacts are more likely to promote openness and candor from the private interests than could be achieved through this department’s Division of Energy. As always, this department is ready to assist you in any way you deem appropriate. [. LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The uncertainty associated with predictions of pipeline shut down should be addressed by soliciting views directly from top management of the major oil companies operating on the North Slope. Tony Knowles. Governor March Page 2 24. 1995 Discussion: If the pipeline and marine terminal are shut down by 2020. very possibly taking the Petro Star refinery with it. the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study. only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. A judgment on the long-term viability of the intertie therefore rests to a great extent on one’s vision of the long-term future of the pipeline and. therefore. of oil production on the North Slope. As stated in the following excerpt from the feasibility study, neither the Division of Energy nor our contractors can help very much with this underlying vision: “The authors of this report have not attempted to attach any probability estimates to factors like the prospects for continued oil pipeline operations after 2018. or to related factors such as the long-term oil price and prospects for major additions to North Slope oil production. or to the long-term likelihood of building a natural gas pipeline into Valdez. These are major uncertainties that continue to be debated by informed observers and participants. and which we cannot begin to resolve within an intertie feasibility study. Consequently, this study does not identify any one of the four scenarios as the “expected case” or “most likely case.” but rather presents the analytical results for each case for consideration and judgment by Alaska decision- makers.” (p. 1-14. Volume 1) By way of background on this issue. the feasibility study does include the following information: “In April 1993. the United States General Accounting Office (GAO) issued a report entitled “Trans-Alaska Pipeline -- Projections of Long-Term Viability Are Uncertain.” In its report. the GAO focused much of its effort on the review of projections made in 1991 in a report prepared by the United States Department of Energy (DOE), of the year in which the Trans-Alaska pipeline would be shut down. DOE concluded that the pipeline will shut down between 2006 and 2011, with 2009 identified as the “most likely” year considering projected oil availability on the North Slope, the pipeline’s minimum operating levels, and other factors. GAO indicated that although the shut down could actually be predicted to occur anytime between 2001 and 2021 by varying the basic assumptions, it could not estimate a more reliable termination date than DOE. It is important to note that both DOE and GAO assume new oil field development in making their projections. but neither has assumed development of oil fields in the Arctic National Wildlife Refuge (ANWR).” (p. VIII- 5, Volume 1) Tony Knowles. Governor Maren 24. 1995 Page 3 IT. III. PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power supply. although Petro Star may not have developed clear long-term plans at this point. Discussion: Two basic issues are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term. and sign a power purchase agreement locking in substantial minimum purchases? In a letter to our consultant dated November 2. 1993. the Engineering Manager at Petro Star Valdez stated that on-site cogeneration was not an attractive alternative: “Petro Star has investigated the installed cost and operating cost of on-site cogeneration to supply power to the refinery. This was looked at with using the lowest grade oil for fuel and the possibility of using waste heat from the refinery process. Several factors make it an unattractive alternative to Copper Valley Electric utility power... In addition to these reasons. cogeneration is less reliable and reliability is of the utmost importance to safety and production in a refinery.” This position appears to have changed. In documents filed with the Alaska Public Utilities Commission (APUC) on January 27. 1995. CVEA states the following: “CVEA has also recently been approached by Petro Star Valdez Refinery concerning the possibility of using the waste gases from the refinery for the generation of electricity. There are numerous questions which remain to be answered with respect to this potential energy resource. However, indications are that such a resource is feasible. CVEA has been informed that Petro Star Valdez Refinery will be petitioning to intervene in this proceeding in order to protect its interest with respect to being able to supply power to CVEA.” TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of TAGS construction 10 years from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well. such as Arlon Tussing. Questions on the likelihood and amount of excess power production could also be asked. Discussion: In the feasibility study, construction of TAGS in the 2000-2010 time frame was assumed in the “High” case. The scenario developed was that TAGS would generate Tony Knowles. Governor March Page 4+ IV. 24.1995 power for its own use at the Valdez terminal. but would neither sell excess power to the uulity nor purchase any additional power trom the uulity. We understand. however, that Jeff Lowentels of Yukon Pacitic has suggested that TAGS may in tact have a considerable amount of excess power to sell beyond what it would need for its own operations. There are two main questions. then: A. Is TAGS likely to be built in something like the time frame identified in the intertie feasibility study? B. If TAGS is built. will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local. low-cost supply of power trom the TAGS terminal operation? If the pnmary etfect is to increase demand. intertie viability is enhanced. If the primary effect is to introduce a new local power supply, the intertie may become unnecessary for purposes of supplying CVEA customers. In this event. perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted. however. is very small in relation to Railbelt power requirements. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the State should contact top management at Alyeska. Although the subject has been reviewed and negotiated on numerous occasions in the past. Alyeska has always decided in the end to remain isolated electrically. One reason commonly cited for Alyeska’s historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself to APUC regulation with regard to such power sales. HIGH ALTITUDE AURORAL RESEARCH PROJECT (HAARP) Recommended Action: No action is recommended. The HAARP project is presently excluded from all cases considered in the feasibility study. Because full funding and construction of the HAARP project is considered speculative. the only case it could be included within is the “High” case. Since the intertie is already identified as the least cost alternative in the “High” case, adding the HAARP load would not change the outcome of the feasibility study. Discussion: This subject was raised by the Commissioner of DOTPF. HAARP is a federal project under development by the military near Gakona and has been sponsored thus far by Senator Stevens. A $20 million prototype facility has been completed. The Tony Knowles. Governor March 24. 1998 Page 5 VI. full project would require about $70 million more in federai funds. If connected to the uulity gnd. the full project would add an annual demand of about 5 million kWh. (The total energy requirement for the utility in 1993 was 70 million kWh.) During the feasibility study. the Division of Energy spoke on several occasions with a Mr. John Hecksher. who represented federal management on the project -- telephone (617) 377-5121. Mr. Hecksher consistently stated that this was a “Congressional project.” that it did not represent an initiative of the military, and that its prospects for full funding should be considered speculative. This assessment was shared by the Governor’s office in Washington D.C. We were informed. however, that Senator Stevens intended to request $20 million per year for the project. and would continue to support it. PROVISIONS OF PROPOSED LOAN AGREEMENT. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction. supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of contidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. Note that the Administration does not have the statutory authority to forgive repayment of the loan. even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT As noted at the top of this memo, we recommend that top State officials undertake the recommended discussions with industry management, with relevant department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability. The Division of Energy is of course ready to assist in any way you deem appropriate. BECOBD coPyY MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Mike Irwin DATE: March 29, 1995 Commissioner af OG FILE: THRU: Percy Frisby, Director, ZL git Division of Energy Q WU PHONE NO: 269-4644 i FROM: Richard Emerman, Senor Economist SUBJECT: Sutton-Glennallen Division of Energy Intertie Feasibility This memorandum provides an overview of the following subjects: I The basic methodology of the economic feasibility analysis; I. The scenarios of future electricity demand (i.e. the “load forecasts”) used in the analysis; WI. The results of the economic feasibility analysis for each load forecast scenario; IV. The estimated impact of building the intertie and then experiencing a decline in electricity demand as represented in the “Low” load forecast scenario; V. Information on the record of public comment. I. BASIC METHODOLOGY OF THE ECONOMIC FEASIBILITY ANALYSIS The methodology of the Sutton-Glennallen intertie economic feasibility analysis is conventional for such studies and conforms with the requirements of prior statutes and regulations of the Alaska Energy Authority: Mike Irwin March 29, 1995 Page 2 A. The cost of supplying electricity to the utility’s customers over the long term is estimated and compared under varying sets of assumptions, including: IP the assumption that the intertie is built, and power transmitted from the Anchorage area supplements the power supplied from the existing Solomon Gulch hydro project in Valdez; 2. the intertie is not built, and diesel generators supply all power requirements not supplied from Solomon Gulch; 3: the Allison Lake hydro project is built, and all power requirements not supplied from Solomon Gulch are supplied first from Allison Lake and then, to the necessary extent, from diesel generators; 4. other scenarios involving construction of a hydro project at Silver Lake, construction of a coal-fired power plant in Valdez, and increased electric energy conservation. The time frame over which these costs are compared covers the estimated economic life of the intertie in order to capture its long term costs or benefits. This time period was assumed to be 50 years from a projected on-line date of 1999. Since cost projections become ever more speculative the further out they go, the analysis period is divided into two parts: 1. Explicit cost projections are made for the first 20 years of the expected project life, i.e. 1999 - 2018. 2 For the remaining 30 years of the analysis period, costs of each scenario are assumed to remain constant in real terms. The idea behind this standard approach is to reconcile the analytical requirement of a long evaluation period with the highly speculative nature of long-range forecasting. The first step in projecting power supply costs over the initial 20- year period is to develop forecasts of electricity demand through the Mike Irwin March 29, 1995 Page 3 year 2018. Four such load forecast scenarios were developed for the Sutton-Glennallen intertie study -- each is described briefly in Section II below. For each load forecast, in combination with other sets of assumptions such as fuel prices, costs for each alternative are projected over the initial 20-year period and then extended over the balance of the 50- year period. In each case, the present value of future costs is calculated by applying a discount rate. Costs that are common to all scenarios, such as administrative costs or depreciation of existing plant, are excluded from the analysis. For each load forecast scenario, the alternative with the lowest present value of future cost represents the least cost option. The base case may be defined as the one in which diesel generation provides all power not supplied by Solomon Gulch -- this is what would be expected if none of the proposed capital projects are built. For several load forecast scenarios, more than one capital project alternative leads to lower costs than the diesel base case. HM: SCENARIOS OF FUTURE ELECTRICITY DEMAND Attachment 1 to this memorandum provides a graph that displays the four load forecast scenarios developed for the Sutton-Glennallen intertie study. For purposes of the cost projections, the study assumed that higher oil prices (and consequently higher prices for diesel fuel) are associated with the High and Medium-High load forecasts, while lower oil prices corresponding to Department of Revenue projections are associated with the Medium-Low and Low load forecasts. Other assumptions behind each of these load forecast scenarios are summarized as follows: A. 1. Sufficient additional oil production is maintained at the North Slope to allow the Trans-Alaska oil pipeline to continue to function through 2018, the last year of the load forecast. Mike Irwin March 29, 1995 Page 4 Because costs of supplying power in 2018 are assumed to remain constant in real terms for the following 30 years of the analysis period, this load forecast scenario in effect assumes either: a. the pipeline will remain operational through 2048, or b. although the pipeline may shut down at some point beyond 2018 during the 30-year extension period, other unspecified economic activity will compensate for this loss at least in terms of electricity demand. The Petro Star Valdez refinery will expand from a present throughput level of 30,000 barrels per day to 50,000 barrels per day, as projected in an expansion assessment conducted for the Division of Energy. The refinery will continue to purchase all of its power requirements from the utility, and will either: a. remain in operation through 2048, or b. be replaced in terms of its electricity demand by other unspecified growth in the event the refinery closes during the 30-year extension period. Other population growth over the next 20 years will average about 1.5% per year in Valdez and 0.9% per year in the Copper River area. B. Medium-Low Scenario. ie The Medium-Low scenario differs from the Medium-High only in its treatment of the Petro Star refinery. In the Medium-Low scenario, the refinery is assumed to shut down in 2018 due to cut-off of crude oil availability. The oil pipeline is assumed in this case to close down in 2018 as well, but the impact of such closure on the area economy Mike Irwin March 29, 1995 Page 5 and on utility electricity demand is assumed to be replaced by other unspecified economic growth. As noted above, the Medium-Low case projections were run in conjunction with a lower oil price forecast (2010 price of $21/barrel in 1992 dollars), while the Medium-High case was run in conjunction with a higher oil price forecast (2010 price of $30/barrel in 1992 dollars). The difference this makes in projected diesel fuel prices accounts for much of the difference in the diesel scenario costs between these two cases. ee High Scenario. The two main differences between the High scenario and the Medium-High scenario are as follows: Is The TAGS project is assumed to be constructed between 2005 and 2009. This creates temporary boom conditions in the region. With respect to TAGS operations, the High scenario assumes that the TAGS marine terminal will self-generate to supply its own power requirements, but will neither sell excess power to the utility nor purchase any power from the utility. The underlying rate of population growth is assumed to be about 2.5% per year in Valdez and 1.2% per year in the Copper River area. D. Low Scenario. IE The Petro Star refinery is assumed to increase throughput from the current level of 30,000 barrels/day to 40,000 barrels/day -- half the increase assumed in the other cases. The refinery is again assumed to purchase all of its power requirements from the utility in lieu of self-generation. The oil pipeline is assumed to shut down in 2013, and the Petro Star refinery is assumed to shut down at the same time. Mike Irwin March 29, 1995 Page 6 Il. No TAGS line is assumed to be built, and no unspecified growth is assumed to compensate for these losses. 3. Underlying population change over the next 20 years is assumed to be a minus 1.0% per year in Valdez and plus 0.5% in the Copper River area. As shown in the graph, electricity demand in Valdez in the Low case is projected to return to roughly 1985 levels after these closures take effect roughly 20 years from now. RESULTS OF THE ECONOMIC FEASIBILITY ANALYSIS Attachment 2 to this memorandum provides a table summarizing the results of the economic feasibility analysis. Following are conclusions that can be drawn from the table: A. If future electricity demand for the Copper Valley electric utility corresponds to the Low case, and future oil prices correspond to the long-term Department of Revenue expectation, the least cost alternative for supplying power to the utility would be the diesel case. This result is apparent from reviewing the bottom row of numbers in the table. The present value of future costs under the Low scenario is: 1. $39,565,000 in the diesel case; DF $50,042,000 in the intertie case; 3. $44,808,000 in the Allison Lake case. If the expectation adopted for planning and decision-making is that the future will conform generally to the Low scenario, then the intertie project would have to be judged economically infeasible according to these projections -- the intertie would not be the least cost alternative nor would it be less costly than the diesel base case. Mike Irwin March 29, 1995 Page 7 If future electricity demand corresponds to the Medium-Low case, and again future oil prices correspond to Department of Revenue projections, the least cost alternative would be the Allison Lake case according to these projections. Again referring to the table, the present value of future costs under the Medium-Low scenario is: Ie $67,853,000 in the diesel case; Ds $63,415,000 in the intertie case; Bh $60,596,000 in the Allison Lake case. If the expectation adopted for planning and decision-making is that the future will conform generally to the Medium-Low scenario, then the intertie project could be judged economically feasible according to these projections depending on definitions. Although Allison Lake emerges as the least cost alternative, both Allison Lake and the intertie come in at lower cost than the diesel base case. Our July 1994 finding argues that more than one project could be considered “economically feasible” providing that each project would reduce costs relative to the diesel base case. Under the High case, the intertie is clearly the least cost alternative and would therefore clearly be judged economically feasible based on the High outlook. IV. IMPACT OF THE INTERTIE UNDER THE LOW SCENARIO In addition to the feasibility study, a plan of finance was prepared under the direction of the Division of Energy that sheds some light on questions of rate impact. Power production costs for the Copper Valley electric utility were projected in the years 2000 and 2010 under a number of assumptions, including the following: A. No State assistance is provided in the diesel base case. Mike I March Page 8 rwin 29, 1995 B. The intertie is partially financed with a $35 million, zero-interest State loan. CG: The Low scenario is experienced with respect to future loads and oil prices. Given these and other assumptions, the Plan of Finance indicates that retail rates for the Copper Valley electric utility would be higher in the year 2000 by about 0.5 cents/kWh in the intertie case than they would be in the unassisted diesel base case. Variations in intertie capital costs, as well as the interest rate on supplemental financing for the intertie, could move this estimate in either direction. Based on these same assumptions, retail rates in the year 2010 would be about 0.5 cents/kWh lower in the intertie case than in the unassisted diesel case. Although loads are assumed to be gradually declining in the Low case between 2000 and 2010, nominal oil prices are assumed to be increasing at somewhat above the rate of inflation. Still, 2010 is before the significant drop in electricity demand that occurs in the Low case in the year 2013. What would happen if the bottom fell out along these lines in 2013? I do not have access on short notice to the models used in developing these projections, but based on rough estimates I believe that the upward impact on retail rates would likely be in the neighborhood of 2 - 3 cents per kWh compared with retail rates in 2010. This assumes that transfers over the intertie would drop in the Low case from 27.9 million kWh in 2010 to 9.4 million kWh in 2013. The impact of this development on retail rates would be mitigated by the fact that about 80% of Copper Valley’s power requirements would again be supplied by Solomon Gulch, and by the continuing benefit of the State’s zero-interest intertie loan. PUBLIC COMMENT I read in the newspaper that the Governor’s office is now receiving a lot of mail on this issue, nearly all of it coming from project opponents. I believe you should know that our experience in the Division of Energy over the last two years on this issue is that we receive a lot of mail from one side and then the other in waves. I believe we received roughly the same volume Mike Irwin March 29, 1995 Page 9 from each side prior to publication of the feasibility study in April 1994. Since then, however, we have received hundreds of postcards from Copper Valley electric consumers -- all in favor of the intertie. Conclusions on public sentiment should not be drawn solely from the most recent batch of correspondence received on this issue. Attachments ATTACHMENT 1 Historical Annual kWh (Millions) 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 —— Medium Case High ~-- Medium Case Low —— High Case ~~~ Low Case Figure I-1: Historical and Projected Energy Requirements ATTACHMENT 2 Table I-5 Summary of Economic Analysis Results Cumulative Present Value of Comparable System Costs and Benefit/Cost Ratios(1) ($000) Load Forecast and Fuel Power Supply Scenario Price Escalation Scenario All Diesel_ _Intertie_ _ Allison Lake Silver Lake A__Coal Facility Conservation Medium-High Load Growth (2) High Fuel Price Escalation. $84,771 $72,604 $71,989 $74,929 $76,567 $84,098 Benefit/Cost Ratio 1.0 ibe 4 1.2 Tel 1.1 1.0 Medium-Low Load Growth(3) Low Fuel Price Escalation .............:sses0s 67,853 63,415 60,596 70,508 77,062 67,777 Benefit/Cost Ratio ...........sscsessesssessesseeneeee 1.0 11 1.1 1.0 0.9 1.0 High Load Growth(4) High Fuel Price Escalatio: 121,562 = 91,227 108,298 108,376 98,898 120,690 Benefit/Cost Ratio 1.0 13 1-1 il 12 1.0 Low Load Growth(5) Low Fuel Price Escalation 39,565 50,042 44,808 63,462 61,432 39,775 Benefit/Cost Ratio 1.0 0.8 0.9 0.6 0.6 1.0 (1) Benefit/cost ratios are calculated as the cumulative present value of the All Diesel case divided by the cumulative present value of the specific altemative. (2) Assumes medium population growth m CVEA's service territory and operation of the Trans-Alaska oil pipeline and Petro Star refinery through the end of the smdy period. (3) Assumes medium population growth n CVEA's service territory, shut down of the Trans-Alaska oil pipeline and Petro Star refinery in 2018. New industrial activity with comparable power requirements on CVEA to the oil pipeline continues through the remainder of the study period. (4) Assumes high population growth in CVEA's service territory, operation of the Trans-Alaska oil pipeline and Petro Star refinery through the end of the study period and construction of a North Slope natural gas pipeline. (5) Assumes low population growth im the CVEA service ternitory, limited expansion of Petro Star refinery, and closure of the Trans-Alaska oil pipeline and the Petro Star refinery in 2013. A Fax From The Department of Community & Regional Affairs Division of Energy Matting Address: 333 West 4th Avenue, Suite 220 Anchorage, AK 99507-2347 Chysicat Address: 333 West 4th Avenue, Suite 220 Anchorage, AK 99501-2341 Main Telephone Number: (8907) 269-4500 (907) 269-4645 Engineering Fax Number: (907) 269-4685 Vere, brvshy YES DOYS Deh Err 1 2E7?- SFT 2 Olrector’s Fax Number: Deliver Fax to: Company Name: Company Acdress: Fax Phone #: Senger: Sender's Phone # # of Pages Sent: == Jace. is oo Date Fax Sent: 3 /2- if you don't receive all of this fax, please call sender DIRECTLY. SPECIAL INSTRUCTIONS TO FAX RECIPIENT: TRANSMISSION REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE SHE DETAILS BELOY) *%« COUNT *%*« TOTAL PAGES SCANNED TOTAL PAGES CONFIRMED 12 12 ee ee 2 SEND 2K (No. | REMOTE STATION | START TIME DURATION|#PAGES | MODE RESULTS | 1| 9074652948| 3-29-95 14:23 4°39"| 12/7 12/EC COMPLETED | 9600 TOTAL 0:04'39" 12 NOTE: No. : OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION PD : POLLED BY REMOTE SF : STORE & FORWARD RI : RELAY INITIATE RS : RELAY STATION MB : SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI-POLLING | RM : RECEIVE TO MEMORY FYL MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Tony Knowles DATE: March 24, 1995 Governor FILE: Yi PHONE NO: 465-4700 FROM: Mike Irwin y l ds SUBJECT: Sutton-Glennallen Intertie Commissiéner/ | Dept. of Community and Regional Affairs As you know, the 1993 legislature appropriated $35 million to be used as a zero-interest loan for the Sutton-Glennallen intertie but made the appropriation contingent on completion of a feasibility study and plan of finance “satisfactory” to this department. My predecessor issued a finding in July 1994 that the required studies were satisfactory in his judgment, and directed the Division of Energy to move forward with issuance of the loan. To date, however, agreement has not been reached on the terms of the loan and none of the appropriation has yet been spent. At this point, this administration has several options. One is for this department to continue to negotiate a loan agreement with Copper Valley Electric Association (CVEA). Another is having this department reconsider our policy on this intertie project. Regardless of which option is pursued, we believe that additional information is necessary before a well-informed decision is possible. As we discussed with you on March 17, there are a number of issues which we believe you should consider carefully in evaluating the proposed Sutton-Glennallen intertie. In each case, we recommend that you or a top administration official undertake discussions with top management in the identified industries to seek a greater measure of insight and confidence in forecasting long-term developments. We believe that those high-level contacts are more likely to promote openness and candor from the private interests than could be achieved through this department’s Division of Energy. As always, this department is ready to assist you in any way you deem appropriate. I, LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The uncertainty associated with predictions of pipeline shut down should be addressed by soliciting views directly from top management of the major oil companies operating on the North Slope. Tony Knowles. Governor March 24. 1995 Page 2 Discussion: If the pipeline and marine terminal are shut down by 2020. very possibly taking the Petro Star refinery with it, the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. A judgment on the long-term viability of the intertie therefore rests to a great extent on one’s vision of the long-term future of the pipeline and, therefore, of oil production on the North Slope. As stated in the following excerpt from the feasibility study, neither the Division of Energy nor our contractors can help very much with this underlying vision: “The authors of this report have not attempted to attach any probability estimates to factors like the prospects for continued oil pipeline operations after 2018, or to related factors such as the long-term oil price and prospects for major additions to North Slope oil production, or to the long-term likelihood of building a natural gas pipeline into Valdez. These are major uncertainties that continue to be debated by informed observers and participants, and which we cannot begin to resolve within an intertie feasibility study. Consequently, this study does not identify any one of the four scenarios as the “expected case” or “most likely case,” but rather presents the analytical results for each case for consideration and judgment by Alaska decision- makers.” (p. 1-14, Volume 1) By way of background on this issue, the feasibility study does include the following information: “In April 1993, the United States General Accounting Office (GAO) issued a report entitled “Trans-Alaska Pipeline -- Projections of Long-Term Viability Are Uncertain.” In its report, the GAO focused much of its effort on the review of projections made in 1991 in a report prepared by the United States Department of Energy (DOE), of the year in which the Trans-Alaska pipeline would be shut down. DOE concluded that the pipeline will shut down between 2006 and 2011, with 2009 identified as the “most likely” year considering projected oil availability on the North Slope, the pipeline’s minimum operating levels, and other factors. GAO indicated that although the shut down could actually be predicted to occur anytime between 2001 and 2021 by varying the basic assumptions, it could not estimate a more reliable termination date than DOE. It is important to note that both DOE and GAO assume new oil field development in making their projections, but neither has assumed development of oil fields in the Arctic National Wildlife Refuge (ANWR).” (p. VIII- 5, Volume 1) Tony Knowles. Governor March 24, 1995 Page 3 II. HI. PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power supply. although Petro Star may not have developed clear long-term plans at this point. Discussion: Two basic issues are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? In a letter to our consultant dated November 2, 1993, the Engineering Manager at Petro Star Valdez stated that on-site cogeneration was not an attractive alternative: “Petro Star has investigated the installed cost and operating cost of on-site cogeneration to supply power to the refinery. This was looked at with using the lowest grade oil for fuel and the possibility of using waste heat from the refinery process. Several factors make it an unattractive alternative to Copper Valley Electric utility power... In addition to these reasons, cogeneration is less reliable and reliability is of the utmost importance to safety and production in a refinery.” This position appears to have changed. In documents filed with the Alaska Public Utilities Commission (APUC) on January 27, 1995, CVEA states the following: “CVEA has also recently been approached by Petro Star Valdez Refinery concerning the possibility of using the waste gases from the refinery for the generation of electricity. There are numerous questions which remain to be answered with respect to this potential energy resource. However, indications are that such a resource is feasible. CVEA has been informed that Petro Star Valdez Refinery will be petitioning to intervene in this proceeding in order to protect its interest with respect to being able to supply power to CVEA..” TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of TAGS construction 10 years from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. Questions on the likelihood and amount of excess power production could also be asked. Discussion: In the feasibility study, construction of TAGS in the 2000-2010 time frame was assumed in the “High” case. The scenario developed was that TAGS would generate Tony Knowles, Governor March 24, 1995 Page 4 IV. power for its own use at the Valdez terminal, but would neither sell excess power to the utility nor purchase any additional power from the utility. We understand, however, that Jeff Lowenfels of Yukon Pacific has suggested that TAGS may in fact have a considerable amount of excess power to sell beyond what it would need for its own operations. There are two main questions, then: A. Is TAGS likely to be built in something like the time frame identified in the intertie feasibility study? B. If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand, intertie viability is enhanced. If the primary effect is to introduce a new local power supply, the intertie may become unnecessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however, is very small in relation to Railbelt power requirements. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the State should contact top management at Alyeska. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alyeska has always decided in the end to remain isolated electrically. One reason commonly cited for Alyeska’s historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself to APUC regulation with regard to such power sales. HIGH ALTITUDE AURORAL RESEARCH PROJECT (HAARP) Recommended Action: No action is recommended. The HAARP project is presently excluded from all cases considered in the feasibility study. Because full funding and construction of the HAARP project is considered speculative, the only case it could be included within is the “High” case. Since the intertie is already identified as the least cost alternative in the “High” case, adding the HAARP load would not change the outcome of the feasibility study. Discussion: This subject was raised by the Commissioner of DOTPF. HAARP is a federal project under development by the military near Gakona and has been sponsored thus far by Senator Stevens. A $20 million prototype facility has been completed. The Tony Knowles, Governor March 24, 1995 Page 5 VI. full project would require about $70 million more in federal funds. If connected to the utility grid, the full project would add an annual demand of about 5 million kWh. (The total energy requirement for the utility in 1993 was 70 million kWh.) During the feasibility study, the Division of Energy spoke on several occasions with a Mr. John Hecksher, who represented federal management on the project -- telephone (617) 377-5121. Mr. Hecksher consistently stated that this was a “Congressional project,” that it did not represent an initiative of the military, and that its prospects for full funding should be considered speculative. This assessment was shared by the Governor’s office in Washington D.C. We were informed, however, that Senator Stevens intended to request $20 million per year for the project, and would continue to support it. PROVISIONS OF PROPOSED LOAN AGREEMENT. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. Note that the Administration does not have the statutory authority to forgive repayment of the loan, even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT As noted at the top of this memo, we recommend that top State officials undertake the recommended discussions with industry management, with relevant department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability. The Division of Energy is of course ready to assist in any way you deem appropriate. O| 0 Ca yet = MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Mike Irwin DATE: May 30, 1995 Commissioner FILE: THRU: Percy Frisby, Director )Z Division of Energy PHONE NO: 269-4644 FROM: Richard Emerman hi pw SUBJECT: Sutton-Glennallen Intertie Senior Economist }~4 Attached for your use are the following: f. Memo to you from the Governor dated April 6 directing you to head up an interagency ' review of the Sutton-Glennallen intertie feasibility. 2: Memo from you to the Governor dated April 5 recommending such review. 35 Memo from Emerman to Frisby dated April 5 setting out a plan for handling the issue. The basic elements of the plan are as follows: A. Discuss selected major issues with top industry management, including rf major oil companies ii. Petro Star iii. Alyeska Pipeline iv. Yukon Pacific B. After these discussions, invite management from Copper Valley Electric Association to come in and make their case before the interagency review team. Cc Direct our feasibility study contractor to re-run the economic models taking into account any changes in major assumptions specified by the review team (for example, Petro Star cogeneration). Dz. Depending on these results and the direction of the Administration, issue a new finding on project feasibility. Mike Irwin May 30, 1995 Page 2 E. If a new finding is issued in opposition to the intertie, consider alternative approaches to reducing energy costs in the Valdez-Glennallen region. 4. Memo from you to the Governor dated March 24 recommending project review -- just an expanded version of the memo issued a couple of weeks later. 55 Five draft letters from you to the top managers of the selected industries, briefly explaining the intertie problem and asking for some of their time to discuss it. Though it will take a little extra time, sending these letters in advance of direct discussions strikes us as a courteous approach that gives the industry managers a chance to consult with staff and think it over. If you agree, the next step would be to consider which of the interagency review members should follow up with which companies. We in the Division of Energy are of course available to provide additional background to any of the review team members upon request. We understand that some discussions between review team members and _ industry representatives have already occurred. In meeting with the other members, you will need to determine whether our recommended approach has already been passed by in one or more cases. Please let us know how we can be of further assistance. Attachments SENI BY: 4- 6-95 : 2:10PM : GOV. OFFICE-JUNEAL- 907 2694645:# 2/ 5 TONY KNOWLES P.O. Box 110001 GOVERNOR Juneau, Alaska 99811-0001 - (907) 465-3500 Fax (007) 465-3632 STATE OF ALASKA OFFICE OF THE GOVERNOR JUNEAU MEMORANDUM TO: Commissioner Mike Irwin Department of Community and Regional Affairs Commissioner John Shively Department of Natural Resources Reilly Snell, Director _. . . ——— Alaska Industrial Development and pe FROM: Governor Tony Knowles , j ‘DATE: April 6, 1995 RE: Sutton-Glennallen intertie Upon review of your April 5 memo regarding the Sutton-Glennallen intertie, I am directing you to lead an interagency review of key issues in connection with the project. Those issues include: 1. Long-term future of the trans-Alaska pipeline. 2. Power demand and cogeneration options for the Petro Star Valdez Refinery. 3. Future options for the trans-Alaska Gas System. : 4. Cogeneration and possible power purchase options for the Alyeska Marine Terminal. 5. Loan agreement options. The other team members are the Alaska Department of Natural Resources and the Alaska Industrial Development and Export Authority. This review should include obtaining the most current data upon which a decision can be made regarding the intertie project. The review should be completed no later than July 1, 1995. GOV. OFFICE-JLNEAU+ 907 2694645:# 3/ 5 SENT BY: 4- 6-95 © 2:11PM; MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Tony Knowles DATE: April 5, 1995 Governor FILE: Thru Jim Ayers Chief of Staff : PHONE NO: 465-4700 FROM: rae flop SUBJECT: Sutton-Glennallen Intertie Commissioner Dept. of Community and Regional Affairs As you know, the 1993 legislature appropriated $35 million to be used as a zero-interest loan for the Sutton-Glennallcn intertie but made the appropriation contingent on completion of a feasibility study and plan of finance “satisfactory” to this department. My predecessor issued a finding in July 1994 that the required studies were satisfactory in his judgment, and directed the Division of Energy to move forward with issuance of the loan. To date, however, agreement has not becn reached on the terms of the loan and none of the appropriation has yet been spent. Based on our March 17 briefing with you and subsequent discussions with other members of our administration about this project, we have concluded that additional information is needed before a well informed decision about proceeding is possible. What follows are a list of issues about which further information is needed. The issues will be reviewed in the context of: 1. What approach best protects the long term interest of the consumers; 2. The statutory terms of the proposed loan; 3. The continued financial feasibility of the project; and 4. Sound management practices. 1 PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power. supply, although Petro Star may not have developed clear long-term plans at this point. Two basic issues that require review and analysis are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? SENT BY: 4- 6-95 : 2:11PM : GOV. OFFICE-JLNEAL+ 907 2694645;# 4/ 5 Tony Knowles, Governor April 5, 1995 Page 2 Il. LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The uncertainty associated with predictions of pipeline shut down should be addressed by soliciting views directly from top management of the major oil companies operating on the North Slope. . Discussion: If the pipeline and marine terminal are shut down by 2020, very possibly taking the Petro Star refinery with it, the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. I. TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of TAGS construction 10 years from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. There are two main questions that should addressed: A. Is TAGS likely to be built in the time frame identified in the intertie feasibility study? B. If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS teriminal operation? If the primary effect is to increase demand, intertie viability is enhanced. If the primary effect is to introduce a new local power supply, the intertie may become unnecessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however, is very small in relation to Railbelt power requirements. IV. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either "purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the State should contact top management at Alyeska. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alyeska has always decided in the end to remain isolated electrically. One reason commonly cited for Alyeska’s historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself to APUC regulation with regard to such power sales. A. Will Alyeska generate power for its own use and for sale inta the utility grid? _ SENT BY: 4- 6-95 ; 2:12PyY ;: GOV. OFFICE-JUNEAL- 907 2694645;# 5/ 5 Tony Knowies, Governor April 5, 1995 Page 3 B. Will Alyeska purchase power from the utility over the long term, and sign a power purchase agreement locking in substantia] minimum purchases? V. PROVISIONS OF PROPOSED LOAN AGREEMENT. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. It should be noted that the Administration does not have the statutory authority to forgive repayment of the loan, even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT We recommend that top State officials undertake the recommended discussions with industry management, with relevant department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability. The Department of Community and Regional Affairs is of course ready to assist in any way you deem appropriate. MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Percy Frisby DATE: April 5, 1995 Director Division of Energy FILE: 1 ae PHONE NO: 269-4644 FROM: Richard Emerman {. f wv SUBJECT: Sutton-Glennallen Senior Economist Intertie Division of Energy A recent newspaper article indicated that the Petro Star refinery in Valdez plans to discontinue purchasing power from Copper Valley Electric Association (CVEA) within the next couple of years and plans to generate its own power instead. In addition to meeting its own needs, the refinery may decide to sell surplus power to the utility as well. Because the Petro Star electrical load is an important factor in the economic feasibility of the Sutton-Glennallen intertie, this development would seriously erode the economic case for the intertie in the absence of any other compensating factors. This in turn could lead to reconsideration and possible reversal of the July 5, 1994 administrative finding, in which the DCRA Commissioner declared that a “reasonable demonstration” had been made that the intertie is economically feasible. In view of this development, I suggest that the Administration proceed as follows: lL. In our March 17, 1995 meeting with the Governor, a preliminary consensus was reached that top officials should look into certain issues of particular importance in judging the feasibility of the intertie, specifically: A. the long-term future of oil production on the North Slope and of the oil pipeline to Valdez; B: power supply plans of the Petro Star Valdez refinery; GC. possibilities associated with the proposed natural gas pipeline to Valdez, and; D. power supply plans of the Alyeska marine terminal in Valdez. Percy Frisby April 5. 1995 Page 2 I: Il. IV. This recommended course of action was formalized in the attached memorandum dated March 24, 1995 to the Governor from Commissioner Irwin. This course of action still makes sense today and should be undertaken as planned: A. With regard to Petro Star, the Administration should contact top management directly to inquire about its plans, as proposed in the March 24 memorandum. We cannot assume that the newspaper article contains complete and accurate information. B. There may be compensating factors. For example, if Alyeska decides to purchase utility power for the marine terminal in the event the intertie is built, the effect of losing Petro Star as a utility customer might be offset. Top management at Alyeska should still be contacted directly by Administration officials for insight into their power supply plans. ce Overall, it is best to consider these issues in a careful and deliberate manner. The State is presently in litigation with respect to the Commissioner’s July 5, 1994 administrative finding, and may be involved in additional litigation if that finding is amended or revoked. D. After the consultations recommended in the March 24 memorandum are completed, the Administration should invite CVEA to come in and make its case. CVEA may be able to convey additional information or ideas that the Administration should consider. If the Administration is considering a policy reversal on the intertie after the process outlined above has been completed, the next step should be to direct our consultant to produce one or more new runs of the computer model that was developed for the economic feasibility analysis. For example, if the only significant change to the previous assumptions is that Petro Star will remove itself as a utility customer, the comparison of the intertie with the diesel “base case” should be re-run to determine formally how this changes the long-term economics. If the Administration at this point decides to disapprove the intertie, the Commissioner of DCRA would issue a new administrative finding declaring the State’s revised conclusion and describing the review process that led up to it, including the consultations and revised economic projections noted above. A new Percy Frisby April 5. 1995 Page 3 finding might also be based in part on a revised weighting of environmental criteria. As you know, the $35 million appropriation for the zero-interest loan was contingent on completion of a feasibility study and plan of finance “satisfactory” to DCRA. A revised finding would essentially declare that the studies had not produced a satisfactory demonstration of the intertie’s feasibility. If the Administration disapproves the intertie. CVEA consumers will still be burdened with rates that are roughly twice the level paid in Anchorage and in the larger communities of Southeast Alaska. A proposal to use part or all of the $35 million to help reduce rates for CVEA consumers could be put forward by the Administration: A. Use of these funds to subsidize a different power supply alternative might not be appropriate if Petro Star does proceed to sell power to the utility. Surplus power from Petro Star could be an attractive alternative to diesel without State subsidy. B. The State-owned Solomon Gulch hydro project will continue to provide a major share of CVEA’s power requirements. Wholesale power rates of 7.0 cents/kWh or more will be paid under the existing power sales contract which extends until the year 2030. It may be impractical to reduce this obligation contractually because Solomon Gulch is tied into the Four Dam Pool, and it would be very difficult to affect the obligations of one participant without affecting the others. Even so, the clearest and most direct approach to reducing rates over the long term for CVEA consumers would be to somehow reduce their payment obligation for Solomon Gulch power. One idea would be to invest some or all of the $35 million over a 35 year term and use the earnings of the investment to pay a portion of the wholesale power cost for Solomon Gulch otherwise payable by CVEA consumers. For illustration, assume that CVEA consumers presently purchase 45 million kWh from Solomon Gulch at $0.07 per kWh -- about $3.1 million per year. If $35 million were invested at 7.5%, interest earnings alone would be $2.6 million per year. Less than $35 million could be invested and still provide very significant long-term rate reduction. Perhaps Percy Frisby April 5, 1995 Page 4 AEA/AIDEA, as owner of the hydro project, could invest the funds and enter into a long-term rate reduction agreement of this nature. Attachment MEMORANDUM STATE OF ALASKA Community and Regional A ffairs TO: Tony Knowles DATE: March 24, 1995 Govemor IPE: /t PHONE NO: 465-4700 FROM: Mike Irwin he SUBJECT: Sutton-Glennallen Intertie Commissiéher Dept. of Community and Regional Affairs As you know. the 1993 legislature appropriated $35 million to be used as a zero-interest loan for the Sutton-Glennallen intertie but made the appropriation contingent on completion of a feasibility study and plan of finance “satisfactory” to this department. My predecessor issued a finding in July 1994 that the required studies were satisfactory in his judgment, and directed the Division of Energy to move forward with issuance of the loan. To date, however, agreement has not been reached on the terms of the loan and none of the appropriation has yet been spent. At this poirt, this administration has several options. One is for this department to continue to negotiate a loan agreement with Copper Valley Electric Association (CVEA). Another is having this department reconsider our policy on this intertie project. Regardless of which option is pursued, we believe that additional information is necessary before a well-informed decision is possible. As we discussed with you on March 17, there are a number of issues which we believe you should consider carefully in evaluating the proposed Sutton-Glennallen intertie. In each case, we recommend that you or a top administration official undertake discussions with top management in the identified industries to seek a greater measure of insight and confidence in forecasting long-term developments. We believe that those high-level contacts are more likely to promote openness and candor from the private interests than could be achieved through this department’s Division of Energy. As always, this department is ready to assist you in any way you deem appropriate. I. LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The uncertainty associated with predictions of pipeline shut down should be addressed by soliciting views directly from top management of the major oil companies operating on the North Slope. Tony Knowles. Governor March 24. 1995 Page 2 Discussion: If the pipeline and marine terminal are shut down by 2020. very possibly taking the Petro Star retinery with it. the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. A judgment on the long-term viability of the intertie therefore rests to a great extent on one’s vision of the long-term future of the pipeline and, therefore, of oil production on the North Slope. As stated in the following excerpt from the feasibility study, neither the Division of Energy nor our contractors can help very much with this underlying vision: “The authors of this report have not attempted to attach any probability estimates to factors like the prospects for continued oil pipeline operations after 2018. or to related factors such as the long-term oil price and prospects for major additions to North Slope oil production. or to the long-term likelihood of building a natural gas pipeline into Valdez. These are major uncertainties that continue to be debated by informed observers and participants. and which we cannot begin to resolve within an intertie feasibility study. Consequently, this study does not identify any one of the four scenarios as the “expected case” or “most likely case,” but rather presents the analytical results for each case for consideration and judgment by Alaska decision- makers.” (p. 1-14, Volume 1) By way of background on this issue, the feasibility study does include the following information: “In April 1993, the United States General Accounting Office (GAO) issued a report entitled “Trans-Alaska Pipeline -- Projections of Long-Term Viability Are Uncertain.” In its report. the GAO focused much of its effort on the review of projections made in 1991 in a report prepared by the United States Department of Energy (DOE), of the year in which the Trans-Alaska pipeline would be shut down. DOE concluded that the pipeline will shut down between 2006 and 2011, with 2009 identified as the “most likely” year considering projected oil availability on the North Slope, the pipeline’s minimum operating levels, and other factors. GAO indicated that although the shut down could actually be predicted to occur anytime between 2001 and 2021 by varying the basic assumptions, it could not estimate a more reliable termination date than DOE. It is important to note that both DOE and GAO assume new oil field development in making their projections, but neither has assumed development of oil fields in the Arctic National Wildlife Refuge (ANWR).” (p. VIII- 5, Volume 1) Tony Knowles. Governor March Page 3 I. Ill. 24.1995 PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended _ Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power supply. although Petro Star may not have developed clear long-term plans at this point. Discussion: Two basic issues are: A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term. and sign a power purchase agreement locking in substantial minimum purchases? In a letter to our consultant dated November 2. 1993. the Engineering Manager at Petro Star Valdez stated that on-site cogeneration was not an attractive alternative: “Petro Star has investigated the installed cost and operating cost of on-site cogeneration to supply power to the refinery. This was looked at with using the lowest grade oil for fuel and the possibility of using waste heat from the refinery process. Several factors make it an unattractive alternative to Copper Valley Electric utility power... In addition to these reasons, cogeneration is less reliable and reliability is of the utmost importance to safety and production in a refinery.” This position appears to have changed. In documents filed with the Alaska Public Utilities Commission (APUC) on January 27, 1995, CVEA states the following: “CVEA has also recently been approached by Petro Star Valdez Refinery concerning the possibility of using the waste gases from the refinery for the generation of electricity. There are numerous questions which remain to be answered with respect to this potential energy resource. However, indications are that such a resource is feasible. CVEA has been informed that Petro Star Valdez Refinery will be petitioning to intervene in this proceeding in order to protect its interest with respect to being able to supply power to CVEA..” TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of TAGS construction 10 years from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. Questions on the likelihood and amount of excess power production could also be asked. Discussion: In the feasibility study, construction of TAGS in the 2000-2010 time frame was assumed in the “High” case. The scenario developed was that TAGS would generate Tony Knowles. Governor March Page 4 TV. at 1995 power for its own use at the Valdez terminal. but would neither sell excess power to the utility nor purchase any additional power from the utility. We understand. however, that Jeff Lowenfels of Yukon Pacific has suggested that TAGS may in fact have a considerable amount of excess power to sell beyond what it would need for its own operations. There are two main questions, then: A. Is TAGS likely to be built in something like the time frame identified in the intertie feasibility study? B. If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local. low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand. intertie viability is enhanced. If the primary effect is to introduce a new local power supply. the intertie may become unnecessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however. is very small in relation to Railbelt power requirements. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the State should contact top management at Alyeska. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alyeska has always decided in the end to remain isolated electrically. One reason commonly cited for Alyeska’s historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself to APUC regulation with regard to such power sales. HIGH ALTITUDE AURORAL RESEARCH PROJECT (HAARP) Recommended Action: No action is recommended. The. HAARP project is presently excluded from all cases considered in the feasibility study. Because full funding and construction of the HAARP project is considered speculative. the only case it could be included within is the “High” case. Since the intertie is already identified as the least cost alternative in the “High” case, adding the HAARP load would not change the outcome of the feasibility study. Discussion: This subject was raised by the Commissioner of DOTPF. HAARP is a federal project under development by the military near Gakona and has been sponsored thus far by Senator Stevens. A $20 million prototype facility has been completed. The Tony Knowles. Governor March 24. 1995 Page 5 VI. full project would require about $70 million more in federal funds. If connected to the utility grid. the full project would add an annual demand of about 5 million kWh. (The total energy requirement for the utility in 1993 was 70 million kWh.) During the feasibility study, the Division of Energy spoke on several occasions with a Mr. John Hecksher. who represented federal management on the project -- telephone (617) 377-5121. Mr. Hecksher consistently stated that this was a “Congressional project.” that it did not represent an initiative of the military, and that its prospects for full funding should be considered speculative. This assessment was shared by the Governor’s office in Washington D.C. We were informed, however, that Senator Stevens intended to request $20 million per year for the project, and would continue to support it. PROVISIONS OF PROPOSED LOAN AGREEMENT. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction. supplemental financing must be in place. For this to occur, there ‘ will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. Note that the Administration does not have the statutory authority to forgive repayment of the loan, even if the project is abandoned after completion of Phase |. SUMMARY COMMENT As noted at the top of this memo, we recommend that top State officials undertake the recommended discussions with industry management, with relevant department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability. The Division of Energy is of course ready to assist in any way you deem appropniate. TONY KNOWLES, GOVERNOR O P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS 0 333 W. 4THAVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. David Pritchard, President Alyeska Pipeline Service Company Mailstop 528 1835 South Bragaw Anchorage, Alaska 99512 Subject: Sutton-Glennallen Intertie Dear Mr. Pritchard: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the future source of power for Alyeska’s Valdez terminal is an important piece of the puzzle. In the intertie feasibility study completed a year ago, it was assumed in all scenarios that the Alyeska terminal would remain isolated indefinitely from the utility grid and would continue to self-generate all of the terminal’s power requirements. We understand, however, that utilities are interested in supplying power to the terminal -- power that would be generated in the Anchorage area and transmitted over the proposed intertie. A decision by Alyeska to purchase most or all of its Valdez terminal power supply over the intertie would be a dominant factor in the project economics, and therefore it is essential that we factor in to our analysis whatever you can tell us about the company’s future power supply plans. I understand there may be important technical issues in addition to considerations of reliability and cost. If you suggest that there is an even chance -- or a better than even chance -- of purchasing power for the terminal over the intertie, we would consider this an important factor in deciding whether the project development process should be kept alive. In the future, if project financing depends upon it, actual purchase commitments would clearly be needed before the start of project construction. If, on the other hand, you suggest that it is unlikely that Alyeska would purchase power over the proposed intertie, we would base our recommendations to the Governor on the project’s viability without regard to possible future interconnection of the Valdez terminal. I would certainly appreciate an opportunity for a member of our review team to formally discuss this matter with you, and I will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs V7 | f YO fal / TONY KNOWLES, GOVERNOR O P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS 0 999 W. 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Steven Lewis, Chairman and Chief Executive Officer Petro Star, Inc. Suite 200 201 Arctic Slope Avenue Anchorage, Alaska 99518-3030 Subject: Sutton-Glennallen Intertie Dear Mr. Lewis: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a ‘limited set of issues that are key to the intertie’s feasibility. Because the benefit of the intertie depends on the amount of power to be transmitted over the line, the power supply and power generation plans of the Petro Star Valdez refinery are important matters when considering public investment in the project. A decision by Petro Star to generate its own power in Valdez, and perhaps to supply power back to the utility grid as well, would be a key factor in the intertie economics, and therefore we would like to factor in to our thinking whatever you can tell us about the company’s future plans in this regard. We have of course been reading the newspaper accounts on the subject but would very much like to communicate with you directly. If you indicate that Petro Star is likely to generate its own power, we would consider this an important factor in deciding whether the project development process should be kept alive. Our intention is to re-run the economic analysis of the intertie with revised assumptions that are consistent with your company’s future plans. I would certainly appreciate an opportunity for a member of our review team to formally discuss this matter with you, and I will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs TONY KNOWLES, GOVERNOR = Ley ew) Ly OG P.o. Box 112100 py e : / JUNEAU, ALASKA 99811-2100 / PHONE: (907) 465-4700 DEPARTMENT OF COMMUNITY AND FAX: ~ (907) 465-2948 REGIONAL AFFAIRS = (9 fietistillahocs tn PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Jeff Lowenfels, President and Chief Executive Officer Yukon Pacific Corporation 1049 W. Sth Avenue Anchorage, Alaska 99501 Subject: Sutton-Glennallen Intertie Dear Mr. Lowenfels: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of up to 40 megawatts of bulk power between the Railbelt and Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the intertie depends on the amount of power to be transmitted over the line, the power supply and power generation plahs of Yukon Pacific with respect to a future Valdez terminal are of considerable importance. In the intertie feasibility study completed a year ago, it was assumed that a Valdez terminal for a TAGS line would be isolated electrically from the utility grid -- the company would generate sufficient power for all of its terminal requirements, and would neither purchase nor sell any additional power. We are aware of newspaper accounts, however, suggesting that Yukon Pacific might have a considerable amount of excess power, enough to supply the needs of the local utility and perhaps a significant amount to ship back to the Railbelt as well. At this point, we are unsure whether construction of the TAGS line and terminal as envisioned by Yukon Pacific is more likely to enhance or to weaken the case for the intertie. As a power purchaser, a Valdez TAGS terminal would enhance the intertie case. As a power supplier meeting the needs of the Copper Valley Electric utility, the TAGS terminal would weaken the intertie case. As a power supplier that meets the local utility needs and sells up to 40 megawatts of power back to the Railbelt, TAGS might again enhance the intertie case. I would certainly appreciate an opportunity for a member of our review team to formally discuss these possibilities with you, and I will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs orpuu 21-P11H (aS Nawn y (C I IA\ ic (Vi in\ / TONY KNOWLES, GOVERNOR . fA\C) IANA 0 P.0. Box 112100 a ee J f JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: ~ (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS OO) 993 W, 4TH AVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. John Morgan, President BP Exploration P.O. Box 196612 Anchorage, Alaska 99519 Subject: Sutton-Glennallen Intertie Dear Mr. Morgan: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the long term future of oil operations in Valdez is critical to the intertie investment decision. The intertie feasibility study completed a year ago referred to a well-known report issued in 1993 by the U.S. General Accounting Office entitled “Trans-Alaska Pipeline -- Projections of Long- Term Viability Are Uncertain.” The report is often cited in support of the view that TAPS will be shut down by 2020, a consequence of declining North Slope oil production. This is a view that has the status of conventional wisdom in much of Alaska. If used as the basis for long-term planning, the case for building the Sutton-Glennallen intertie is considerably weakened because shutting down the pipeline implies a significant contraction of power demand in Valdez. Assuming that TAPS will continue to operate well beyond 2020 does not seal the case in favor of the intertie, but assuming it will shut down by 2020 very nearly seals the case against it. If top management in the Alaska oil industry believes that TAPS shut down by 2020 is more likely to occur than not, then we certainly need to hear that early on in the context of our intertie deliberations. However, if the pipeline is likely to operate well beyond 2020, we will need to base our intertie evaluation on other factors. I would certainly appreciate an opportunity for a member of our review team to formally discuss the long-term oil production outlook with you, and I will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs 21-P1LH TONY KNOWLES, GOVERNOR O P.O. Box 112100 JUNEAU, ALASKA 99811-2100 PHONE: (907) 465-4700 FAX: - (907) 465-2948 DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS ©) 333 W. 4THAVENUE, SUITE 220 ANCHORAGE, ALASKA 99501-2341 PHONE: (907) 269-4500 OFFICE OF THE COMMISSIONER FAX: (907) 269-4520 June 2, 1995 Mr. Ken Thompson, President ARCO Alaska P.O. Box 100360 Anchorage, Alaska 99510-0360 Subject: Sutton-Glennallen Intertie Dear Mr. Thompson: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the long term future of oil operations in Valdez is critical to the intertie investment decision. The intertie feasibility study completed a year ago referred to a well-known report issued in 1993 by the U.S. General Accounting Office entitled “Trans-Alaska Pipeline -- Projections of Long- Term Viability Are Uncertain.” The report is often cited in support of the view that TAPS will be shut down by 2020, a consequence of declining North Slope oil production. This is a view that has the status of conventional wisdom in much of Alaska. If used as the basis for long-term planning, the case for building the Sutton-Glennallen intertie is considerably weakened because shutting down the pipeline implies a significant contraction of power demand in Valdez. Assuming that TAPS will continue to operate well beyond 2020 does not seal the case in favor of the intertie, but assuming it will shut down by 2020 very nearly seals the case against it. If top management in the Alaska oil industry believes that TAPS shut down by 2020 is more likely to occur than not, then we certainly need to hear that early on in the context of our intertie deliberations. However, if the pipeline is likely to operate well beyond 2020, we will need to base our intertie evaluation on other factors. I would certainly appreciate an opportunity for a member of our review team to formally discuss the long-term oil production outlook with you, and I will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs Cardle fn— soe COM €~ maul May 30, 1995 “pte heady +0 Mr. Ken Thompson, President ARCO Alaska NULL SaN- P.O. Box 100360 Anchorage, Alaska 99510-0360 = ce We Cnovs Whar Tra © Subject: Sutton-Glennallen Intertie Dear Mr. Thompson: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the long term future of oil operations in Valdez is critical to the intertie investment decision. The intertie feasibility study completed a year ago referred to a well-known report issued in 1993 by the U.S. General Accounting Office entitled “Trans-Alaska Pipeline -- Projections of Long- Term Viability Are Uncertain.” The report is often cited in support of the view that TAPS will be shut down by 2020, a consequence of declining North Slope oil production. This is a view that has the status of conventional wisdom in much of Alaska. If used as the basis for long-term planning, the case for building the Sutton-Glennallen intertie is considerably weakened because shutting down the pipeline implies a significant contraction of power demand in Valdez. Assuming that TAPS will continue to operate well beyond 2020 does not seal the case in favor of the intertie, but assuming it will shut down by 2020 very nearly seals the case against it. If top management in the Alaska oil industry believes that TAPS shut down by 2020 is more likely to occur than not, then we certainly need to hear that early on in the context of our intertie deliberations. However, if the pipeline is likely to operate well beyond 2020, we will need to base our intertie evaluation on other factors. I would certainly appreciate an opportunity to discuss the long-term oil production outlook with you, and will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs May 30, 1995 Mr. John Morgan, President BP Exploration P.O. Box 196612 Anchorage, Alaska 99519 Subject: Sutton-Glennallen Intertie Dear Mr. Morgan: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the long term future of oil operations in Valdez is critical to the intertie investment decision. The intertie feasibility study completed a year ago referred to a well-known report issued in 1993 by the U.S. General Accounting Office entitled “Trans-Alaska Pipeline -- Projections of Long- Term Viability Are Uncertain.” The report is often cited in support of the view that TAPS will be shut down by 2020, a consequence of declining North Slope oil production. This is a view that has the status of conventional wisdom in much of Alaska. If used as the basis for long-term planning, the case for building the Sutton-Glennallen intertie is considerably weakened because shutting down the pipeline implies a significant contraction of power demand in Valdez. Assuming that TAPS will continue to operate well beyond 2020 does not seal the case in favor of the intertie, but assuming it will shut down by 2020 very nearly seals the case against it. If top management in the Alaska oil industry believes that TAPS shut down by 2020 is more likely to occur than not, then we certainly need to hear that early on in the context of our intertie deliberations. However, if the pipeline is likely to operate well beyond 2020, we will need to base our intertie evaluation on other factors. I would certainly appreciate an opportunity to discuss the long-term oil production outlook with you, and will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs May 30, 1995 Mr. Steven Lewis, Chairman and Chief Executive Officer Petro Star, Inc. Suite 200 201 Arctic Slope Avenue Anchorage, Alaska 99518-3030 Subject: Sutton-Glennallen Intertie Dear Mr. Lewis: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a ‘limited set of issues that are key to the intertie’s feasibility. Because the benefit of the intertie depends on the amount of power to be transmitted over the line, the power supply and power generation plans of the Petro Star Valdez refinery are important matters when considering public investment in the project. A decision by Petro Star to generate its own power in Valdez, and perhaps to supply power back to the utility grid as well, would be a key factor in the intertie economics, and therefore we would like to factor in to our thinking whatever you can tell us about the company’s future plans in this regard. We have of course been reading the newspaper accounts on the subject but would very much like to communicate with you directly. If you indicate that Petro Star is likely to generate its own power, we would consider this an important factor in deciding whether the project development process should be kept alive. Our intention is to re-run the economic analysis of the intertie with revised assumptions that are consistent with your company’s future plans. I would certainly appreciate an opportunity to discuss this matter with you, and will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs May 30, 1995 Mr. David Pritchard, President Alyeska Pipeline Service Company Mailstop 528 1835 South Bragaw Anchorage, Alaska 99512 Subject: Sutton-Glennallen Intertie Dear Mr. Pritchard: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of bulk power from the Anchorage area to ‘Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the project depends on the amount of power to be transmitted over the line, the future source of power for Alyeska’s Valdez terminal is an important piece of the puzzle. In the intertie feasibility study completed a year ago, it was assumed in all scenarios that the Alyeska terminal would remain isolated indefinitely from the utility grid and would continue to self-generate all of the terminal’s power requirements. We understand, however, that utilities are interested in supplying power to the terminal -- power that would be generated in the Anchorage area and transmitted over the proposed intertie. A decision by Alyeska to purchase most or all of its Valdez terminal power supply over the intertie would be a dominant factor in the project economics, and therefore we would like to factor in to our thinking whatever you can tell us about the company’s future power supply plans. I understand there may be important technical issues in addition to considerations of reliability and cost. If you suggest that there is an even chance -- or a better than even chance -- of purchasing power for the terminal over the intertie, we would consider this an important factor in deciding whether the project development process should be kept alive. In the future, if project financing depends upon it, actual purchase commitments would clearly be needed before the start of project construction. If, on the other hand, you suggest that it is unlikely that Alyeska would purchase power over the proposed intertie, we would base our recommendations to the Governor on the Mr. David Pritchard May 30, 1995 Page 2 project’s viability without regard to possible future interconnection of the Valdez terminal. I would certainly appreciate an opportunity to discuss this matter with you, and will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs May 30, 1995 Mr. Jeff Lowenfels, President and Chief Executive Officer Yukon Pacific Corporation 1049 W. Sth Avenue Anchorage, Alaska 99501 Subject: Sutton-Glennallen Intertie Dear Mr. Lowenfels: The State of Alaska is continuing to review the merits of the proposed Sutton-Glennallen intertie, which would allow transmission of up to 40 megawatts of bulk power between the Railbelt and Valdez. Governor Knowles has appointed a cabinet-level committee to re-examine a limited set of issues that are key to the intertie’s feasibility. Because the benefit of the intertie depends on the amount of power to be transmitted over the line, the power supply and power generation plans of Yukon Pacific with respect to a future Valdez terminal are of considerable importance. In the intertie feasibility study completed a year ago, it was assumed that a Valdez terminal for a TAGS line would be isolated electrically from the utility grid -- the company would generate sufficient power for all of its terminal requirements, and would neither purchase nor sell any additional power. We are aware of newspaper accounts, however, suggesting that Yukon Pacific might have a considerable amount of excess power, enough to supply the needs of the local utility and perhaps a significant amount to ship back to the Railbelt as well. At this point, we are unsure whether construction of the TAGS line and terminal as envisioned by Yukon Pacific is more likely to enhance or to weaken the case for the intertie. As a power purchaser, a Valdez TAGS terminal would enhance the intertie case. As a power supplier meeting the needs of the Copper Valley Electric utility, the TAGS terminal would weaken the intertie case. As a power supplier that meets the local utility needs and sells up to 40 megawatts of power back to the Railbelt, TAGS might again enhance the intertie case. I would certainly appreciate an opportunity to discuss these possibilities with you, and will contact your office by phone in the near future. Sincerely, Mike Irwin, Commissioner Department of Community and Regional Affairs A Fax From The Department of Cormrmunity & Regional Affairs Division of Energy Mating Address: 333 West 4th Avenue, Suite 220 Anchorage, AK 99501-2347 Main Telaphone Number: Director's Fax Number: Engineering Fax Number: 333 West 4th Aveniua, Suite 220 Anchorage, AK 99607-2341 (907) 269-4500 (907) 269-4645 (907) 269-4685 Deliver Fax to: Company Name: Company Address: Fax Phone #: Sender Sender's Phone # #of Pages Sent: Date Fax Sent: SPECIAL INSTRUCTIONS TO FAX RECIMIENT:__OQlU ACN Dete Ml Mute. Wrenn tee pots 4 pe OCE PS al Aa __S/aceas ff you don't recelve all of this fax, please call sender DiRECTLyY. TRANSMISSTON REPORT THIS DOCUMENT (REDUCED SAMPLE ABOVE *x« COUNT **« WAS CONFIRMED TOTAL PAGES SCANNED =| oe TOTAL PAGES CONFIRMED : 22 #:40% = SEND 0% « SEE DETAILS BELOW) st No. REMOTE STATION START TIME _[pcraTion #PAGES MODE | RESULTS 1 9074652948] 5-30-95 11:37 | 10°56"] 22/ 22)EC | COMPLETED 9600 TOTAL. 0:10°56" 22 NOTE: No. + OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION PD : MB: POLLED BY REMOTE SF SEND TO MAILBOX PG : : RELAY INITIATE MULT I -POLL {NG : STORE & FORWARD RI POLLING A REMOTE MP : RS : RM : RELAY STATION RECEIVE TO MEMORY Departement of Comrnaiunity & Regional Affairs Aaa tlinst A@Addee ss * 3223 West 4th Avenue, Suste® 220 Anchorage, AK Deliver Fax to: Company Name: Company Address: Fax Phone #: Sender. Sender's Phone # of Pages Sent Date Fax Sent: N\ SPECIAL INSTRUCTIONS TO FAX RECIPIENT. Acta. i tee) oa ine 2 Se ee ee . io “ti Oph On fhe ke te ce terror. eee Malin Telephone Number: Director's Fax Numitver: (907) 269-4645 &Gnginecoring Fax Numboer: S99SOT-234T A Fax Frormm The Division of Energy Cnvsicg! Addroms : 233 West 419 Avenuo, Suite 220 Anchorage, AK 99601-2347 (907) 268-4500 (907) 269-4685 ff you don't receive aif of thiz fax, please call sender OIRECTLY. TRANSMISSTON REPORT THIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE *k COUNT TOTAL 2 SEND 2% KK PAGES SCANNED : TOTAL PAGES CONFIRMED : SEE DETAILS BELOW) ve | 21 No. REMOTE STATION | START TIME BURAT ION | #PAGES | MODE | RESULTS | _ (| RESULTS | I | 9074652948 | 6- 1-95 13:39 10°24." 217 21 /EC COMPLETED ] | 9600 Le iL : {oT TOTAL 0:10'°24" 21 NOTE: No. : OPERATION NUMBER 48 : 4800BPS SELECTED EC : ERROR CORRECT G2 : G2 COMMUNICATION PD : POLLED BY REMOTE SF : STORE & FORWARD RI : RELAY INITIATE RS : RELAY STATION MB : SEND TO MAILBOX PG : POLLING A REMOTE MP : MULTI -POLLING RM : RECEIVE TO MEMORY