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Home My WebLink AboutGrant Lake Falls Creek Round IV Grant Application Renewable Energy Fund Round IV Grant Application AEA 11-005 Application Page 1 of 20 7/21/2010 Application Forms and Instructions The following forms and instructions are provided to assist you in preparing your application for a Renewable Energy Fund Grant. An electronic version of the Request for Applications (RFA) and the forms are available online at: http://www.akenergyauthority.org/RE_Fund-IV.html Grant Application Form GrantApp4.doc Application form in MS Word that includes an outline of information required to submit a complete application. Applicants should use the form to assure all information is provided and attach additional information as required. Application Cost Worksheet Costworksheet4.doc Summary of Cost information that should be addressed by applicants in preparing their application. Grant Budget Form GrantBudget4.doc A detailed grant budget that includes a breakdown of costs by milestone and a summary of funds available and requested to complete the work for which funds are being requested. Grant Budget Form Instructions GrantBudgetInstructions4.pdf Instructions for completing the above grant budget form. • If you are applying for grants for more than one project, provide separate application forms for each project. • Multiple phases for the same project may be submitted as one application. • If you are applying for grant funding for more than one phase of a project, provide milestones and grant budget for completion of each phase. • If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. • If you have additional information or reports you would like the Authority to consider in reviewing your application, either provide an electronic version of the document with your submission or reference a web link where it can be downloaded or reviewed. REMINDER: • Alaska Energy Authority is subject to the Public Records Act AS 40.25, and materials submitted to the Authority may be subject to disclosure requirements under the act if no statutory exemptions apply. • All applications received will be posted on the Authority web site after final recommendations are made to the legislature. • In accordance with 3 AAC 107.630 (b) Applicants may request trade secrets or proprietary company data be kept confidential subject to review and approval by the Authority. If you want information is to be kept confidential the applicant must: o Request the information be kept confidential. o Clearly identify the information that is the trade secret or proprietary in their application. o Receive concurrence from the Authority that the information will be kept confidential. If the Authority determines it is not confidential it will be treated as a public record in accordance with AS 40.25 or returned to the applicant upon request. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 2 of 20 7/21/2010 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Kenai Hydro, LLC Type of Entity: Independent Power Producer (sole member is the Homer Electric Association) Mailing Address 3977 Lake St Homer , AK 99603 Physical Address same Telephone 907-283-2375 Fax 907-335-6213 Email msalzetti@homerelectric.com 1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER Name Mike Salzetti Title Generation Engineer Mailing Address Homer Electric Assoc 3977 Lake St Homer, AK 99603 Telephone 907-283-2375 Fax 907-335-6213 Email msalzetti@homerelectric.com 1.2 APPLICANT MINIMUM REQUIREMENTS Please check as appropriate. If you do not to meet the minimum applicant requirements, your application will be rejected. 1.2.1 As an Applicant, we are: (put an X in the appropriate box) An electric utility holding a certificate of public convenience and necessity under AS 42.05, or x An independent power producer in accordance with 3 AAC 107.695 (a) (1), or A local government, or A governmental entity (which includes tribal councils and housing authorities); Yes 1.2.2. Attached to this application is formal approval and endorsement for its project by its board of directors, executive management, or other governing authority. If the applicant is a collaborative grouping, a formal approval from each participant’s governing authority is necessary. (Indicate Yes or No in the box ) Yes 1.2.3. As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement. Yes 1.2.4. If awarded the grant, we can comply with all terms and conditions of the attached grant form. (Any exceptions should be clearly noted and submitted with the application.) Yes 1.2.5 We intend to own and operate any project that may be constructed with grant funds for the benefit of the general public. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 3 of 20 7/21/2010 SECTION 2 – PROJECT SUMMARY This is intended to be no more than a 1-2 page overview of your project. 2.1 Project Title – (Provide a 4 to 5 word title for your project) Grant Lake Hydroelectric Facility 2.2 Project Location – Include the physical location of your project and name(s) of the community or communities that will benefit from your project. The project would be harnessing the hydro energy of the Grant Lake watershed located near Moose Pass, Alaska. Persons benefitted would be the utility customers in the Kenai Peninsula. 2.3 PROJECT TYPE Put X in boxes as appropriate 2.3.1 Renewable Resource Type Wind Biomass or Biofuels x Hydro, including run of river Transmission of Renewable Energy Geothermal, including Heat Pumps Small Natural Gas Heat Recovery from existing sources Hydrokinetic Solar Storage of Renewable Other (Describe) 2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply) Reconnaissance x Design and Permitting Feasibility Construction and Commissioning x Conceptual Design 2.4 PROJECT DESCRIPTION Provide a brief one paragraph description of your proposed project. The Grant Lake Hydroelectric Facility would consist of 5 MW of installed capacity with an average annual output of 20,600 MWh o f energy, installed on the Grant lake watershed near Moose Pass, Alaska. The proposed Project is comprised of a diversion dam at the outlet to Grant Lake (under consideration), an intake structure in Grant Lake, a tunnel, a surge tank, a penstock, a powerhouse, a tailrace detention pond, a switchyard with disconnect switch & step- up transformer, and an overhead or underground transmission line. The intake would be in Grant Lake near its outlet. Water would be conveyed from the intake through a 3200’ penstock to a powerhouse containing two Francis-type turbines. The powerhouse would be located near the bank of Grant Creek and would discharge through a second penstock into Grant Creek. A transmission line would connect the facility to the Railbelt grid near Moose Pass. Please see the attached Project Description that was filed with FERC on August 13th, 2010. Kenai Hydro LLC, whose sole member is the Homer Electric Association (HEA), was created in 2008 to evaluate and possibly develop this site as a low impact hydroelectric facility. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 4 of 20 7/21/2010 2.5 PROJECT BENEFIT Briefly discuss the financial and public benefits that will result from this project, (such as reduced fuel costs, lower energy costs, etc.) Energy from the project would reduce consumption of carbon-based energy sources, thereby helping to improve air quality in Kenai Peninsula Borough. This renewable energy would also stabilize the long term price of power to consumers, and it would be a significant step in diversifying HEA’s generation portfolio. It is estimated that nearly $239,579,449 can be saved in avoided fuel cost over a 50-year period. This represents a tremendous value to the rate payers of Alaska and a generation asset that would produce clean, renewable power for Alaskans throughout this century. 2.6 PROJECT BUDGET OVERVIEW Briefly discuss the amount of funds needed, the anticipated sources of funds, and the nature and source of other contributions to the project. Approximately $1,875,000 is needed to complete the Phase 2 studies that were commenced in 2009. We are calling the portion of Phase 2 work yet to be completed “Phase 2 Continuation”. The Phase 2 Continuation studies would be sufficient to culminate in a FERC license application expected to be submitted in 2013. Kenai Hydro is requesting that the Alaska Energy Authority (AEA) provide 80% of this amount, or $1,500,000 The initial draft study plans did not anticipate the increased breadth of scope recommended by some of the agency partners in early 2010. Subsequent to agency review of the 2009 Field Season results and receipt of public comments it was decided to revisit the scope of fisheries studies and other investigations to ensure that all concerns were sufficiently addressed. The 2010 Field Season had already begun when the decision was made to significantly alter its scope. It was felt that the current direction of the 2010 Field Season would not adequately redress the recent concerns expressed by agency partners, and therefore the most prudent course would be to suspend activities until such time as the scope of work could be revised to the satisfaction of the agency partners. Although the 2010 Field Season was abbreviated, a considerable amount of valuable information was obtained. This grant request is seeking funds so that a revised set of Phase 2 field studies, “Phase 2 Continuation”, can resume in 2011. Phase 1 Reconnaissance studies, which were completed in January 2009, were partially funded by a $100,000 AEA grant. AEA also provided a $816,000 grant award to fund Phase 2 activities from 2009 through July 2010. Results from these studies motivate Kenai Hydro to seek additional grant funding to support the continuation of Phase 2. Phase 2 Continuation funds will be drawn from a combination of grants and internal financing. The HEA Board of Directors recently authorized an internal appropriation (attachment HEA BOD R 10-25) of over $2,000,000 for continued funding of the Grant Lake hydro project enabling Kenai Hydro to provide the 20% matching funds in cash, and the in-kind match of management and administrative staffing costs. Kenai Hydro, LLC remains committed to the project while it continues to recommend itself as economically and environmentally viable. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 5 of 20 7/21/2010 2.7 COST AND BENEFIT SUMMARY Include a summary of grant request and your project’s total costs and benefits below. Grant Costs (Summary of funds requested) 2.7.1 Grant Funds Requested in this application. $1,500,000 2.7.2 Other Funds to be provided (Project match) $375,000 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $1,875,000 Project Costs & Benefits (Summary of total project costs including work to date and future cost estimates to get to a fully operational project) 2.7.4 Total Project Cost (Summary from Cost Worksheet including estimates through construction) $27,160,000 2.7.5 Estimated Direct Financial Benefit (Savings) $239,579,449 over a 50 year project lifetime 2.7.6 Other Public Benefit (If you can calculate the benefit in terms of dollars please provide that number here and explain how you calculated that number in your application (Section 5.) $ PROJECT COST SUMMARY The preliminary total cost estimate for the project through construction is $27,160,000. This estimate includes a $22,660,000 capital cost (based on a 5-MW project at an estimated $4,532/kW) and an estimated $4,500,000 for development costs. Description Preliminary Cost Estimate Phase 1 Reconnaissance 105,000$ Phase 2 Resource Assess/Feasibility Analysis/Concept Design 2,000,000$ Phase 3 FERC Licensing & Final Design 2,395,000$ Phase 4 Construction & Commissioning 22,660,000$ Total Preliminary Cost Estimate 27,160,000$ Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 6 of 20 7/21/2010 SECTION 3 – PROJECT MANAGEMENT PLAN Describe who will be responsible for managing the project and provide a plan for successfully completing the project within the scope, schedule and budget proposed in the application. 3.1 Project Manager Tell us who will be managing the project for the Grantee and include contact information, a resume and references for the manager(s). If the applicant does not have a project manager indicate how you intend to solicit project management support. If the applicant expects project management assistance from AEA or another government entity, state that in this section. Mr. Mike Salzetti (HEA) will oversee the development of this project with the assistance of Mr. Brad Zubeck (HEA). Their brief professional biographies are attached in Section 7, Attachment A as requested. Mr. Salzetti has the guidance, support and staffing of his parent organization for managing this project from its current state through design, construction and operation. Kenai Hydro, LLC has also contracted with qualified consultants to conduct the engineering studies and detailed design. 3.2 Project Schedule Include a schedule for the proposed work that will be funded by this grant. (You may include a chart or table attachment with a summary of dates below.) A summary of the dates is provided below: PHASE 2 Continuation – Schedule Summary Task Name Start Finish Task 6 – Field Studies 07/2011 3/2013 2011 - 2012 Field Studies 07/2011 10/31/2012 Milestone # 1: At conclusion of Field Studies 3/2013 Task 7 – Engineering/Project Scoping 7/2011 10/2012 2011 – 2012 Engineering/Project Scoping – Milestone #2 7/2011 10/2012 2012 Engineering Cost Analysis – Milestone #3 8/2012 10/2012 Task 8 – FERC License Application 7/15/2011 10/30/2013 Draft License Application 7/15/2011 5/30/2013 Milestone # 4: Final Decision to Make FERC License Application 10/1/2013 10/30/2013 See attached project schedule. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 7 of 20 7/21/2010 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. The Milestones must also be included on your budget worksheet to demonstrate how you propose to manage the project cash flow. (See Section 2 of the RFA or the Budget Form.) Milestone #1 would be the completion of the field studies / Environmental Assessments. The anticipated date of completion is 3/30/2013 although we would be seeking reimbursement on this milestone on an “as progress is made” basis. Field studies completed under this milestone would include terrestrial studies, cultural studies, recreational & visual studies, water resource studies, aquatic resource studies as well as study oversight and management. Milestone #2 Preliminary Engineering / Project Scoping. The anticipated completion date is 10/31/2012. This task would include the preliminary engineering required for the FERC exhibit F & G drawings. Milestone #3 Engineering Cost Analysis. The anticipated completion date is 10/31/2012. This task would include the engineering cost analysis required for exhibit A of the FERC license application. Milestone #4 FERC License Application and would be complete by 10/30/2013. This would include the preparation of both the draft and final license applications. 3.4 Project Resources Describe the personnel, contractors, equipment, and services you will use to accomplish the project. Include any partnerships or commitments with other entities you have or anticipate will be needed to complete your project. Describe any existing contracts and the selection process you may use for major equipment purchases or contracts. Include brief resumes and references for known, key personnel, contractors, and suppliers as an attachment to your application. Mr. Mike Salzetti will be responsible for management and direct oversight of the project development. He has the guidance, support and staffing of his parent organization for managing this project from its current state through design, construction and operation. Kenai Hydro LLC, whose sole member is the Homer Electric Association (HEA), was created to evaluate and develop the site as a low impact hydroelectric facility. Kenai Hydro, LLC has contracted well- qualified consultants to conduct the engineering, studies, permitting, process management and facilitation. Based on their recent FERC relicensing performance with the Cooper Lake hydro facility, Long View Associates (LVA) was hired to prepare FERC preliminary permit applications. The preliminary permit for this project was secured and issued by FERC October 7, 2008. LVA will be retained in various capacities, such as permitting or FERC license application management. HDR Alaska, Inc.(HDR) has provided engineering and consulting services for the feasibility Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 8 of 20 7/21/2010 phase of this project, and provided their services on a Task Order basis. HDR is a nation-wide engineering firm with a full-service office in Anchorage. HDR Alaska, Inc. has a long history in this state and offers a full spectrum of engineering, planning, and environmental services. Résumés of HDR’s key personnel are provided in Section 7 appendices. Additional consulting services will be provided as needed. An organizational chart is provided below representing the general tasks and planned assignments. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. The project manager will issue reports to AEA on a mutually agreeable schedule throughout the life of the grant. These reports can be customized to meet AEA needs. The expectation is that these reports could be a one page summary-type document submitted quarterly. The project would also expect to process requests for reimbursement on a monthly basis. The project consultants will provide weekly status reports, and other summaries and analyses on a pre- determined schedule. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 9 of 20 7/21/2010 3.6 Project Risk Discuss potential problems and how you would address them. 1. An important stakeholder issue might be overlooked during the preliminary permit phase and it could become a project impediment during the FERC license application. It was recently learned that the proposed Iditarod Commemorative Trail route may intersect project access and transmission line routing. We have met with the USFS and Alaska DNR to discuss the issue and we are working on plans to achieve a solution, and we don’t anticipate that this will pose a major hurdle in the project’s development. Kenai Hydro will continue to consult with potential stakeholders (i.e., agencies, NGOs, Native Corporations, and communities) to ensure that all significant concerns are addressed in the field studies in anticipation of the licensing process for the Grant Lake project. By continuing to work through and finalize issues, we hope to obviate any latent concerns and move into a FERC licensing application with the full support stakeholders. 2.Risk of not being able to successfully negotiate interconnection and transmission agreements. These agreements will be the subject of discussion on an ongoing basis, but it is the intent of Kenai Hydro that these agreements be executed in advance of a FERC license application. The cost of developing these agreements will not be underwritten by the grant funding. SECTION 4 – PROJECT DESCRIPTION AND TASKS • Tell us what the project is and how you will meet the requirements outlined in Section 2 of the RFA. • The level of information will vary according to phase(s) of the project you propose to undertake with grant funds. • If you are applying for grant funding for more than one phase of a project provide a plan and grant budget form for completion of each phase. • If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. 4.1 Proposed Energy Resource Describe the potential extent/amount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. Energy Potential Precisely quantifying the available energy from Grant Lake will be amongst the work performed with this grant request. However, initial estimates derived from hydrology data recommend a 5 MW installed with a Capacity Factor of ~50% or 20.6 GWh annually. The historical record for energy potential was garnered from USGS stream gage 15256000 Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 10 of 20 7/21/2010 records, located on Grant Creek approximately 1/3 mile upstream from the mouth which has an 11-year period of record from 1947 to 1958. This stream gage has a drainage basin of 44.2 square miles and the average annual flow for the period of record was 193-cfs. Pros Hydropower is renewable, long-lived, efficient, dispatchable and environmentally responsible energy that emits no greenhouse gases, waste or air pollution. It uses readily available technologies, it is low maintenance, displaces consumption of fossil fuels, and it provides long- term price stability to energy consumers. This particular facility could greatly enhance HEA’s spinning reserve capacity which provides a significant fuel savings. Hydropower opportunities on the Kenai Peninsula are extremely limited; potential resources have been catalogued by the US Geological Survey – Water Resources of Alaska. Proximity to the Railbelt grid, low impact , and available energy recommend a Grant Lake hydro facility to be atop the short list of viable Kenai Peninsula renewable resources. The most expedient solution to local energy needs is construction of natural gas-fired generation. These units are less expensive to procure and install, require a much shorter time to permit, and have a relatively small footprint compared to hydro power. However, gas-fired units are not sustainable, subject to market-driven fuel pricing and availability, shorter lived, cost more to operate and maintain, and emit greenhouse gases. Cons Disadvantages of hydropower include high initial investment, relatively long time required to permit/license, and potential impact on habitats and water quality. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. HEA has a 42 MW gas turbine( eff. ~ 40%) at Nikiski that was built in 2001, and it has an 11% share of the Bradley Lake hydro energy. HEA has recently undertaken to renovate its Nikiski unit to include an 18 MW steam turbine. This addition* will boost the facility’s capacity to 82 MW (*renovation will include refurbishing the extant duct firing capability of 22 MW) which is commensurate to an improvement of 46% in efficiency. Future system capacity may include one or more aero-derivative turbines at a HEA-owned Soldotna facility. The average HEA combined load is 62.4 MW (~546 GWh/yr), with winter peaks approaching 85 MW and summer lows occasionally less than 40 MW. 4.2.2 Existing Energy Resources Used Briefly discuss your understanding of the existing energy resources. Include a brief discussion of any impact the project may have on existing energy infrastructure and resources. HEA’s wholesale contracts expire at the end of 2013 and its Board of Directors has approved a path for HEA to develop assets that will achieve complete self-reliance. This requires that HEA nearly double its current generation capacity. A hydro facility at Grant lake would contribute to attaining that goal. HEA is also seeking to diversify its generation portfolio and moderate its reliance on natural gas. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 11 of 20 7/21/2010 Part of this diversification is to develop renewable generation. The proposed project would represent approximately 4 % of HEA’s future energy needs, and would be a significant step in adding renewable energy to its portfolio. Furthermore, the addition of hydroelectric facilities would facilitate development of other renewable resources such as wind. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The primary market for this project’s energy is HEA consumers, and a secondary market is other Railbelt utilities. A potential market may soon exist for Renewable Energy Credits that can be sold to utilities or industries seeking a means to comply with various Renewable Energy Standards or Policies. This project will have the following positive impacts on the existing energy system and its customers: 1. Incrementally stabilize the long-term price of power. 2. Provide approximately 4 % of HEA’s immediate generation needs from clean, renewable hydropower. 3. Offset and reduce greenhouse gas emissions. 4. Provide stored, dispatchable energy (spinning reserve). 5. Improve consumer confidence in its utility leadership and management. 4.3 Proposed System Include information necessary to describe the system you are intending to develop and address potential system design, land ownership, permits, and environmental issues. 4.3.1 System Design Provide the following information for the proposed renewable energy system: • A description of renewable energy technology specific to project location • Optimum installed capacity • Anticipated capacity factor • Anticipated annual generation • Anticipated barriers • Basic integration concept • Delivery methods The hydro project would be comprised of an impoundment dam at the outlet of Grant Lake, a 3200 foot 10’ diameter feed penstock, a surge tank, two Francis-type turbines with a combined 5 MW gross capacity power house, and a 200 foot discharge penstock. The dam (under consideration) would control outflow from the lake, creating or maintaining storage capacity. The intake tap, an above and below-grade penstock, would be in Grant Lake near its outlet. Water would be conveyed from the intake through the inlet feed penstock to a powerhouse located near the bank of Grant Creek, and would ultimately discharge through a second penstock into Grant Creek. A 7.5 MVA transformer would be used to convert the 13.8 kV generator voltage to 24.9 kV transmission voltage, and a 4100’ radial circuit would connect the facility to the Railbelt grid near Moose Pass. Historic Grant Creek flows recommend an optimal turbine of 5 MW and suggest a Capacity Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 12 of 20 7/21/2010 Factor of about 50%; this would yield an average annual energy output of ~21.4 GWh. A discharge pond is also being considered to enhance the spinning reserve potential of the facility. Phase 2 Continuation funds will facilitate engineering and field studies to further refine the design alternatives. 4.3.2 Land Ownership Identify potential land ownership issues, including whether site owners have agreed to the project or how you intend to approach land ownership and access issues. The legal description and ownership of lands (ADNR 2006) within the proposed project boundary are provided in the table below. All land is referenced to the Seward Meridian. Un-shaded rows pertain to the Grant Lake outlet and Grant Creek. Shaded rows include Grant Lake in its entirety and potential transmission areas. Township Range Section Ownership 5N 1W 36 Private 5N 1E 27 USDA Forest Service 5N 1E 28 USDA Forest Service 5N 1E 29 USDA Forest Service 5N 1E 30 State patented land 5N 1E 31 State patented land 5N 1E 32 State patented land 5N 1E 33 USDA Forest Service 5N 1E 34 USDA Forest Service 5N 1E 35 USDA Forest Service 5N 1E 36 USDA Forest Service 4N 1E 1 USDA Forest Service 4N 1E 2 USDA Forest Service 4N 1E 3 USDA Forest Service 4N 1E 5 USDA Forest Service 4N 1E 6 State patented land 4N 1E 7 State patented land 4N 1W 1 Private 4N 1W 12 Private 4.3.3 Permits Provide the following information as it may relate to permitting and how you intend to address outstanding permit issues. • List of applicable permits • Anticipated permitting timeline • Identify and discussion of potential barriers A comprehensive listing of permits was developed in Phase 1. Phase 2 efforts included preliminary applications for requisite permits in support of a FERC license application. This permitting application was accomplished during 2009-2010. A preliminary list of permits is provided below: o USDA Forest Service, Special Use Application (SUA) Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 13 of 20 7/21/2010 o Alaska Railroad Corp., Access Road & Transmission Line ROW Crossing of Tracks o Transmission Line Right-of-Way, lease or purchase agreements o AKDNR, Water Rights A permit to invoke the Traditional License Program was granted by FERC on Sept 15th, 2009. Kenai Hydro, LLC filed a preliminary permit application with FERC on April 28, 2008 and was issued a permit on October 7, 2008 (attachment FERC 10-7-08). The purpose of the preliminary permit term is to determine the feasibility of a proposed project on Grant Lake and Creek in the Kenai Peninsula Borough, Alaska, and would occupy federal lands managed by the Chugach National Forest. A Pre-Application Document (PAD) was filed with FERC on August 6, 2009. FERC approved the Traditional License Program (TLP) as the appropriate course with which to proceed and secure a FERC license (attachment FERCTLP 9-15-09). 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will be addressed: • Threatened or Endangered species • Habitat issues • Wetlands and other protected areas • Archaeological and historical resources • Land development constraints • Telecommunications interference • Aviation considerations • Visual, aesthetics impacts • Identify and discuss other potential barriers All of the issues identified in the initial portion of Phase 2 will continue to be addressed during Phase 2 Continuation studies; the revised scope of investigations has been tailored to directly address issues of concern recognized in 2009 work. 4.4 Proposed New System Costs and Projected Revenues (Total Estimated Costs and Projected Revenues) The level of cost information provided will vary according to the phase of funding requested and any previous work the applicant may have done on the project. Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer’s estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of the project. Cost information should include the following: • Total anticipated project cost, and cost for this phase • Requested grant funding • Applicant matching funds – loans, capital contributions, in-kind • Identification of other funding sources • Projected capital cost of proposed renewable energy system • Projected development cost of proposed renewable energy system Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 14 of 20 7/21/2010 Phase 2 Resource Assessment, Feasibility Analysis and Concept Design This grant application seeks funding to support continued Phase 2 studies and work. The cost estimate is based upon Phase 1 consultant costs, the costs encountered in the 2009 Phase 2 work, and an understanding of the scope of remaining work to be accomplished under the FERC preliminary permit. The costs requested in this application cover studies and work for the 2011 and 2012 field seasons, and FERC License Preparation & Application in2013. $1,875,000 is needed to complete a Phase 2 study and culminate in a FERC license application. Kenai Hydro requests as part of this application that AEA provide 80% of this amount, or $1,500,000. Phase 2 Continuation funds will be drawn from a combination of existing and future grant funding as well as internal financing. Kenai Hydro, LLC is committed to providing the 20% matching funds in cash, as well as the in-kind match for the cost of management and administrative staffing. Phase 3 FERC Licensing & Final Design The costs of final engineering and FERC Licensing are not precisely reckoned, but are estimated at approximately eleven (11%) percent of the projected construction cost or about $2.4-million. This would be the final engineering of preparing plans and specifications for construction. Phase 4 Construction and Commissioning The cost of construction and commissioning is conservatively estimated at $4,532/kW or $22,660,000 for a nominal 5 MW plant. Construction costs for recent, similarly-sized plants in remote Alaska have been approximately $3,000/kW. It is our hope that this project might ultimately improve upon the preliminary estimate of $4,532/kW. The final design concept achieved at the end of Phase 2 will refine the projected construction cost. Other Funding Sources Kenai Hydro will pursue other potential sources of funding while the project continues to achieve successive project milestones, positive economic and environmental reviews. Although no specific alternate sources of funding have yet been identified, among the possibilities are legislative appropriations. 4.4.2 Project Operating and Maintenance Costs Include anticipated O&M costs for new facilities constructed and how these would be funded by the applicant. (Note: Operational costs are not eligible for grant funds however grantees are required to meet ongoing reporting requirements for the purpose of reporting impacts of projects on the communities they serve.) Operations and maintenance will be financed through typical utility accounting procedures using revenue generated by the hydro facility and other utility cash flows. The facility would be essentially unmanned requiring only periodic inspection and routine maintenance. Annual O &M costs are anticipated to be about $100,000 (in 2010 dollar) escalating at 3% per year which is easily supported by the project’s expected annual revenue. 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following: Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 15 of 20 7/21/2010 • Identification of potential power buyer(s)/customer(s) • Potential power purchase/sales price - at a minimum indicate a price range • Proposed rate of return from grant-funded project Energy from the project will be sold to Homer Electric Association (HEA) for the benefit of its customers at prevailing rates. It should be noted that the project would incrementally stabilize long term electricity rates. It is likely that the acceptable rate-of-return will be kept to single-digit margins. 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Download the form, complete it, and submit it as an attachment. Document any conditions or sources your numbers are based on here. See the attached Cost Worksheet completed for the proposed Grant Lake project. The Grant Lake Hydro Benefit-cost Sept 2010 shows a benefit-cost ration of 1.42, whereas a previous study (Ebasco - 1984) had a ratio of 1.20 for a 7-MW project. SECTION 5– PROJECT BENEFIT Explain the economic and public benefits of your project. Include direct cost savings, and how the people of Alaska will benefit from the project. The benefits information should include the following: • Potential annual fuel displacement (gal and $) over the lifetime of the evaluated renewable energy project • Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price, RCA tariff, or cost based rate) • Potential additional annual incentives (i.e. tax credits) • Potential additional annual revenue streams (i.e. green tag sales or other renewable energy subsidies or programs that might be available) • Discuss the non-economic public benefits to Alaskans over the lifetime of the project Potential Fuel Displacement It is estimated that $239,579,449 can be saved in avoided fuel cost over a 50-year period (using a 2010 dollars metric). This represents a tremendous value to the rate payers of Alaska and a generation asset that will produce clean, renewable power for Alaskans throughout this century. Anticipated Annual Revenue Annual revenue minus the fuel savings cost accounted for above is estimated at approximately $7/MWh in 2010 dollars escalated at a 5% power price escalation factor. This equates to a revenue stream of $35,502,179 over a 50-year period. Potential Additional Annual Incentives The potential tax credits are purely speculative, and will depend on the form of the business entity that carries the project into licensing, construction and operation Potential Additional Annual Revenue Streams Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 16 of 20 7/21/2010 It may be possible to sell Renewable Energy Credits engendered by this project, but lack of an existing market renders a forecast purely speculative. The renewable energy will incrementally stabilize the long term price of power providing an attractive incentive to potential local businesses. It may also be possible to sell spinning reserve capacity from this asset when HEA is not utilizing the spin from this facility. Non-Economic Public Benefit The energy from the project would reduce consumption of carbon-based energy sources, and help to improve air quality in Kenai Peninsula Borough. The project would also be an important step in diversifying HEA’s future generation portfolio. A requisite public access road to the dam would substantially enhance recreational opportunities at Grant Lake. SECTION 6– SUSTAINABILITY Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum: • Proposed business structure(s) and concepts that may be considered. • How you propose to finance the maintenance and operations for the life of the project • Identification of operational issues that could arise. • A description of operational costs including on-going support for any back-up or existing systems that may be require to continue operation • Commitment to reporting the savings and benefits Operations and maintenance will be financed through typical utility accounting procedures using revenue generated by the hydro facility and other utility cash flows. The facility would be essentially unmanned requiring only periodic inspection and routine maintenance. Annual O &M costs are anticipated to be about $100,000 (in 2010 dollar) escalating at 3% per year which is easily supported by the project’s expected annual revenue. SECTION 7 – READINESS & COMPLIANCE WITH OTHER GRANTS Discuss what you have done to prepare for this award and how quickly you intend to proceed with work once your grant is approved. Tell us what you may have already accomplished on the project to date and identify other grants that may have been previously awarded for this project and the degree you have been able to meet the requirements of previous grants. Since a significant portion of work has already been completed, and draft study plans have been formulated, Kenai Hydro is prepared to resume activities immediately upon receipt of grant funding. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 17 of 20 7/21/2010 The reconnaissance Phase 1 was completed in 2009, the results of which suggested pursuing feasibility work. To that end, Field Studies were initiated in 2009 and executed through July of 2010. An authorization to proceed to licensing using the Traditional License Program was granted by FERC on 9/15/2009 – refer to attachment “FERCTLP 9-15-2009” Numerous agency and interested shareholder forums have been held, and public comment processes have been undertaken. The FERC scoping process has been completed and FERC issued Scoping Document 2 for this project on 8/23/2010 – refer to attachment “KHL_FERC_Scoping2”. Kenai Hydro has also maintained a website, www.kenaihydro.com that contains project information. Phase 1 Reconnaissance studies, which were completed in January 2009, were partially funded by a $100,000 AEA grant. AEA also provided a $816,000 grant award to fund Phase 2 activities from 2009 through July 2010. The results from these studies motivate Kenai Hydro to seek additional grant funding to support the continuation of Phase 2. SECTION 8– LOCAL SUPORT Discuss what local support or possible opposition there may be regarding your project. Include letters of support from the community that would benefit from this project. The project has encountered some not unexpected minor, local opposition, but initial reaction of this sort is common and misunderstanding tends to diminish as people become more knowledgeable with a project’s details and unsubstantiated rumors are dispelled. Among ongoing tasks are the receipt, cataloguing and redress of public comments. The HEA Board of Directors which represents 21,586 member - owners has shown consistent support for renewable energy projects. Attached you will find letters of support for this project from Speaker of the Alaska State House, Representative Mike Chenault; Alaska State Senate President, Senator Gary Stevens; and Alaska State Representative, Paul Seaton. SECTION 9 – GRANT BUDGET Tell us how much you want in grant funds Include any investments to date and funding sources, how much is being requested in grant funds, and additional investments you will make as an applicant. Include an estimate of budget costs by milestones using the form – GrantBudget3.doc Overview The Grant Lake hydro project has been the subject of several previous studies. The most recent and significant of these was published by Ebasco in 1984 - electronic copies of Ebasco’s complete report are provided with this application on CD-ROM. Ebasco’s effort was funded by the State of Alaska through AEA’s predecessor, the Alaska Power Authority. This extensive study ultimately recommended that the State file a FERC license application and proceed with further development of a project that would displace gas-fired generation. It is our position that this recommendation is even more valid considering the Railbelt’s heavy dependence on gas- fired generation. Phase 2 is broken into the following three general Tasks: • Task 6 – Field Studies Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 18 of 20 7/21/2010 • Task 7 – Engineering, Design & Management of Studies • Task 8 – FERC License Preparation & Application. Task numbers start at “6” because Phase 1 included Tasks 1 to 5. Phase 2 tasks are to be performed concurrently. Task 6 – Field Studies The budget proposed for Task 6 covers the following scope of studies: aqautic, water, cultural resources, recreational/visual and terrestrial. The aquatic resources, hydrology and geomorphology assessment, fish population and distribution surveys. Cultural studies will include consultation with various groups, entities or persons to collect and summarize existing information, and literature review. Recreational studies will include quantifying the use of the site and related resources and facilities. Terrestrial studies will include plant surveys; wetlands mapping; landbird, shorebird, and waterbird surveys; bat surveys; bear den survey; and moose winter habitat surveys. Task 7 – Engineering, Design & Management This budget is intended to cover the cost of engineering, planning, oversight, and surveying required to refine concept layouts and studies. Task 8 – FERC License Preparation & Application This budget is for a FERC licensing manager and costs or expenses related to developing the FERC draft and final license applications. The total cost of completing Phase 2 from its current state, including all State and Local Matching Cash and In-Kind funds, is $1,875,000. State Funds This application requests $1,875,000 to complete the activities associated with the Phase 2 Feasibility Analysis/Concept Design of the proposed project. This is to cover all applicable costs other than the Direct Labor and Benefits of Kenai Hydro, LLC management and administrative staff. It is anticipated that the State would provide 80% of the $1,875,000 for Phase 2 Continuation, or approximately $1,500,000. Local Match Funds (Cash) Kenai Hydro, LCC plans to honor a 20% match in cash, or $375,000 of the estimated Phase 2 Continuation total. Local Match Funds (In-Kind) Kenai Hydro, LLC will provide and fund project management and administrative staffing. Nature & Source of Funds Funds will initially be drawn from a combination of existing and future grant funding as well as internal financing. The Alaska Energy Authority has given notice of an award of $816,000 to this project that has helped to accomplish the reconnaissance phase of the project and a significant portion of the Phase 2 studies. It has passed the initial engineering assessment and reconnaissance, and now further feasibility work, Phase 2 Continuation, is needed. Kenai Hydro, LLC is committed to providing the 20% matching funds, plus management and administrative staffing while project remains economically and environmentally viable. Support for this was demonstrated by the HEA Board of Directors Resolution 10-25, dated June 1, 2010, that authorized an internal appropriation of over $2,000,000 for continued funding of the Grant Lake hydro project, see attachment HEA BOD 10-25. Continued project support was evidenced by the same BOD with resolution 10-41 of August 17th, see attachment HEA BOD 10-41. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 19 of 20 7/21/2010 SECTION 9 – ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION: A. Contact information and professional resumes of key personnel per application form Section 3.1 and 3.4. a. Homer Electric Association, Inc. b. Longview Associates c. HDR Alaska, Inc. B. Grant Lake/Falls Creek Hydroelectric Project TLP Schedule C. Grant Lake/Falls Creek Budget Form per application form Section 9 – Grant Budget D. FERC Order Issuing Preliminary Permit – October 7, 2008 E. Grant Lake/Falls Creek Project Cost/Benefit Worksheet per application form Section 4.4.4. F. Grant Lake/Falls Creek Benefit Cost Analysis – September 2010 G. FERC Authorization to use the TLP – September 15, 2009 H. FERC Scoping Document 2 for Grant Lake/Falls Creek – August 23, 2010 I. HEA Board of Directors Resolution 10-25 – January 1, 2010 J. HEA Board of Directors Resolution 10-41 – August 17, 2010 K. HEA General Manager Authorization – August 17, 2010 L. Letters demonstrating local support per application Section 8 a. Alaska State Senator, Gary Stevens b. Alaska State Representative, Mike Chenault c. Alaska State Representative, Paul Seaton M. Electronic version (CD-ROM) of grant application N. The EBASCO Grant Lake Feasibility Analysis (on CD-ROM only) Rene wab le En ergy Fun d Grant Ap plica tio n Roun d IV The undersigned certifies that this application for a renewable energy grant is truthful and correct, and that the applicant is in compliance with , and will continue to comply with , a" federal and state laws including existing credit and federal tax obligations. Print Name Bradl ey P . Ja norsc hke - Signature ~ .--::;::; V -~ \...- ..P Title Ge nera l Ma na ger Date Sept e mb er 14 . 2010 AEA 11-005 Grant Application Page 20 of 20 7/21 /2010 IDTask NameStartFinish1Prefiling Activities: Preliminary Permit IssuedTue 10/7/08Tue 10/7/082Preliminary Permit ManagementWed 10/1/08Mon 9/29/145PAD/NOI DevelopmentWed 4/1/09Mon 5/17/106PAD DevelopmentWed 4/1/09Wed 8/5/0915FERC PAD/NOI Review ProcessThu 8/6/09Mon 5/17/1025Study Program Mon 3/2/09Sat 3/30/13262009 Study Season Mon 3/2/09Fri 1/8/1034FERC Early Scoping ProcessTue 5/11/10Mon 8/23/1039Study ProgramSat 5/1/10Wed 10/31/1240Study Plan Development and Review ProcessTue 5/4/10Tue 3/29/11472010 Field ProgramSat 5/1/10Tue 9/7/10482011-2012 Field ProgramFri 7/15/11Wed 10/31/1249Study ReportsSat 9/1/12Sat 3/30/1350Issue Draft Study Reports Sat 9/1/12Tue 10/30/1251Issue Final Study ReportsSat 12/1/12Sat 3/30/1352Preliminary Engineering Design/Project ScopingTue 7/3/12Tue 10/30/1253Exhibit F DrawingsTue 7/3/12Tue 10/30/1254Engineering Cost EstimateWed 8/1/12Tue 10/30/1255License Application Wed 5/1/13Wed 10/30/1356Draft License Application (DLA)Wed 5/1/13Thu 5/30/1357Consultation Regarding DLA and Mitigation ProposalFri 5/31/13Fri 9/27/1358Final License ApplicationTue 10/1/13Wed 10/30/1310/7/089/1/1212/1/125/1/1310/1/Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q208200920102011201220132Kenai Hydro LLCGrant Lake/Falls Creek Hydroelectric ProjectTraditional Licensing Process SchedulePage 1 Renewable Energy Fund Grant Round IV Grant Budget Form 7-21-10 Milestone or Task Anticipated Completion Date RE- Fund Grant Funds Grantee Matching Funds Source of Matching Funds: Cash/In-kind/Federal Grants/Other State Grants/Other TOTALS (List milestones based on phase and type of project. See Attached Milestone list. ) $ $ $ #1 Field Studies / Environmental Assessment 3/2013 $1,108,000 $277,000 Cash $1,385,000 #2 Preliminary Engineering / Project Scoping 10/2012 $100,000 $25,000 Cash $125,000 #3 Engineering Cost Analysis 10/2012 $12,000 $3,000 Cash $15,000 #4 FERC License Application 10/2013 $280,000 $70,000 Cash $350,000 $ $ $ $ $ $ $ $ $ $ $ $ $ $ TOTALS $1,500,000 $375,000 $1,875,000 Budget Categories: Direct Labor & Benefits $ $ $ Travel & Per Diem $ $ $ Equipment $ $ $ Materials & Supplies $ $ $ Contractual Services $1,500,000 $375,000 $1,875,000 Construction Services $ $ $ Other $ $ $ TOTALS $1,500,000 $375,000 $1,875,000 Applications should include a separate worksheet for each project phase (Reconnaissance, Feasibility, Design and Permitting, and Construction)- Add additional pages as needed Renewable Energy Fund Grant Round IV Grant Budget Form 7-21-10 Project Milestones that should be addressed in Budget Proposal Reconnaissance Feasibility Design and Permitting Construction 1. Project scoping and contractor solicitation. 2. Resource identification and analysis 3. Land use, permitting, and environmental analysis 5. Preliminary design analysis and cost 4. Cost of energy and market analysis 5. Simple economic analysis 6. Final report and recommendations 1. Project scoping and contractor solicitation. 2. Detailed energy resource analysis 3. Identification of land and regulatory issues, 4. Permitting and environmental analysis 5. Detailed analysis of existing and future energy costs and markets 6. Assessment of alternatives 7. Conceptual design analysis and cost estimate 8. Detailed economic and financial analysis 9, Conceptual business and operations plans 10. Final report and recommendations 1. Project scoping and contractor solicitation for planning and design 2. Permit applications (as needed) 3. Final environmental assessment and mitigation plans (as needed) 4. Resolution of land use, right of way issues 5. Permit approvals 6. Final system design 7. Engineers cost estimate 8. Updated economic and financial analysis 9. Negotiated power sales agreements with approved rates 10. Final business and operational plan 1. Confirmation that all design and feasibility requirements are complete. 2. Completion of bid documents 3. Contractor/vendor selection and award 4. Construction Phases – Each project will have unique construction phases, limitations, and schedule constraints which should be identified by the grantee 5. Integration and testing 6. Decommissioning old systems 7. Final Acceptance, Commissioning and Start-up 8. Operations Reporting UNITED STATES OF AMERICA 125 FERC ¶ 62,018 FEDERAL ENERGY REGULATORY COMMISSION Kenai Hydro, LLC Project No. 13212-000 ORDER ISSUING PRELIMINARY PERMIT (Issued October 07, 2008) On April 28, 2008, Kenai Hydro, LLC filed an application, pursuant to section 4(f) of the Federal Power Act (FPA), 1 to study the feasibility of the Grant Lake Project. The project would be located on Grant Lake and Creek in Kenai Peninsula Borough, Alaska, and would occupy federal lands managed by the Chugach National Forest. The proposed project would consist of: (1) an earth filled, concrete faced gravity dam 10 feet high and 200 feet wide; (2) a reservoir with an approximate surface elevation of 800 feet MSL, an approximate surface area of 1,888 acres, and a storage capacity of 37,760 acre feet; (3) a 5 foot diameter, 1 mile long penstock constructed of high density polyethylene or steel; (4) a powerhouse containing one turbine generator unit with a total installed capacity of about 5 MW; (5) a 1-2 mile long, 115 kV transmission line and; (6) appurtenant facilities. The annual production would be 17.5 GWh, which would be sold to a local utility. Background The Commission issued public notice of the application on July 21, 2008. The U. S. Department of the Interior and the U.S. Department of Agriculture (USDA) filed motions to intervene to be parties in the proceeding. 2 The USDA also filed comments. USDA commented on resource issues that need to be evaluated by the permittee during the course of the preliminary permit. These issues include fish and wildlife, recreation, and visual resources. The USDA also states the permittee will need to obtain a Special Use Authorization in order to perform work related to the permit on National Forest lands. Discussion 1 16 U.S.C. § 797(f) (2000). 2 Timely, unopposed motions to intervene are granted by operation of Rule 214 of the Commission’s Regulations.Id.§ 385.214(a)(3) (2008). 20081007-3019 FERC PDF (Unofficial) 10/07/2008 Project No. 13212-000 2 The purpose of a preliminary permit is to maintain priority of application for a license during the term of the permit while the permittee conducts investigations and secures data necessary, after consultation with the appropriate resource agencies, to determine the feasibility of the proposed project and prepares an acceptable development application. The permit confers no authority on the permittee to undertake construction of the proposed project or any part thereof, 3 or to occupy or use lands or other property of the United States or of any other entity or individual. If, during the course of the permittee’s investigation into the feasibility of the proposal, the permittee decides to prepare a development application, it must first prepare a Notice of Intent (NOI) and Pre-Application Document (PAD) pursuant to Sections 5.5 and 5.6 of the Commission’s Regulations. Pursuant to Part 5 of the Commission’s regulations, 18 C.F.R. Part 5, the permittee must use the Integrated Licensing Process unless the Commission grants a request to use an alternative process (Alternative or Traditional Licensing Process). Pursuant to Section 5.3, such a request must accompany the NOI and PAD and set forth specific information justifying the request. 4 Should the permittee file a development application, notice of the application will be published, and interested persons and agencies will have an opportunity to intervene and to present their views concerning the project and the effects of its construction and operation. A preliminary permit is not transferable. The named permittee is the only party entitled to the priority of application for license afforded by this preliminary permit. In order to invoke permit-based priority in any subsequent licensing competition, the named permittee must file an application for license as the sole applicant, thereby evidencing its intent to be the sole licensee and to hold all proprietary rights necessary to construct, operate, and maintain the proposed project. Should any other parties intend to hold during the term of any license issued any of these proprietary rights necessary for project purposes, they must be included as joint applicants in any application for license filed. In such an instance, where parties other than the permittee are added as joint applicants for license, the joint application will not be eligible for any permit-based priority. See City of Fayetteville,16 FERC 61,209 (1981). The Director orders: 3 Issuance of this preliminary permit is thus not a major federal action significantly affecting the quality of the human environment. 4See Commission Order 2002, issued July 23, 2003. 20081007-3019 FERC PDF (Unofficial) 10/07/2008 Project No. 13212-000 3 (A) A preliminary permit is issued for the this project to Kenai Hydro, LLC, for a period effective the first day of the month in which this permit is issued, and ending either 36 months from the effective date or on the date that a development application submitted by the permittee has been accepted for filing, whichever occurs first. (B) This preliminary permit is subject to the terms and conditions of Part I of the Federal Power Act and related regulations. The permit is also subject to Articles 1 through 4, set forth in the attached standard form P-1. (C) This order is issued under authority delegated to the Director and constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days from the date of issuance of this order, pursuant to 18 C.F.R. 385.713. William Guey-Lee Chief, Engineering and Jurisdiction Branch Division of Hydropower Administration and Compliance 20081007-3019 FERC PDF (Unofficial) 10/07/2008 Form P-1 (Revised February 2007) FEDERAL ENERGY REGULATORY COMMISSION TERMS AND CONDITIONS OF PRELIMINARY PERMIT Article 1. The purpose of the permit is to maintain priority of application for a license during the term of the permit while the permittee conducts investigations and secures data necessary to determine the feasibility of the proposed project and, if said project is found to be feasible, prepares an acceptable application for license. In the course of whatever field studies the permittee undertakes, the permittee shall at all time exercise appropriate measures to prevent irreparable damage to the environment of the proposed project. All test sites shall be restored as closely as possible to their original condition and to the satisfaction of the Commission's authorized representative or, where federal lands are affected, to the satisfaction of the agency administering such lands. Article 2. The permit is not transferable and may, after notice and opportunity for hearing, be canceled by order of the Commission upon failure of the permittee to prosecute diligently the activities for which a permit is issued, or for any other good cause shown. Article 3. The priority granted under the permit shall be lost if the permit is canceled pursuant to Article 2 of this permit, or if the permittee fails, on or before the expiration date of the permit, to file with the Commission an application for license for the proposed project in conformity with the Commission's rules and regulations then in effect. Article 4. At the close of each six-month period from the effective date of this permit, the permittee shall file four copies of a progress report with the Secretary, Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426; and shall serve a copy on the interveners in this proceeding. The report shall describe, for that report period, the nature and timing of what the permittee has done under the pre-filing requirements of 18 CFR §§ 4.38 and 5 and other applicable regulations; and, where studies require access to and use of land not owned by the permittee, the status of the permittee's efforts to obtain permission therefor. 20081007-3019 FERC PDF (Unofficial) 10/07/2008 Renewable Energy Fund Round 4 Project Cost/Benefit Worksheet RFA AEA11-005 Application Cost Worksheet Page 1 7-21-10 Please note that some fields might not be applicable for all technologies or all project phases. The level of information detail varies according to phase requirements. 1. Renewable Energy Source The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. Annual average resource availability. The water resource is well documented in the form of USGS stream gaging data available on Grant Creek and Fall Creek, as well as in the referenced 1984 Ebasco study. Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel) 2. Existing Energy Generation and Usage a) Basic configuration (if system is part of the Railbelt 1 i. Number of generators/boilers/other grid, leave this section blank) ii. Rated capacity of generators/boilers/other iii. Generator/boilers/other type iv. Age of generators/boilers/other v. Efficiency of generators/boilers/other b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank) i. Annual O&M cost for labor ii. Annual O&M cost for non-labor c) Annual electricity production and fuel usage (fill in as applicable) (if system is part of the Railbelt grid, leave this section blank) i. Electricity [kWh] ii. Fuel usage Diesel [gal] Other iii. Peak Load iv. Average Load v. Minimum Load vi. Efficiency vii. Future trends d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] ii. Electricity [kWh] iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] 1 The Railbelt grid connects all customers of Chugach Electric Association, Homer Electric Association, Golden Valley Electric Association, the City of Seward Electric Department, Matanuska Electric Association and Anchorage Municipal Light and Power. Renewable Energy Fund Round 4 Project Cost/Benefit Worksheet RFA AEA11-005 Application Cost Worksheet Page 2 7-21-10 v. Wood [cords, green tons, dry tons] vi. Other 3. Proposed System Design Capacity and Fuel Usage (Include any projections for continued use of non-renewable fuels) a) Proposed renewable capacity (Wind, Hydro, Biomass, other) [kW or MMBtu/hr] Hydro b) Proposed annual electricity or heat production (fill in as applicable) i. Electricity [kWh] 5 MW nominal ii. Heat [MMBtu] c) Proposed annual fuel usage (fill in as applicable) i. Propane [gal or MMBtu] ii. Coal [tons or MMBtu] iii. Wood [cords, green tons, dry tons] iv. Other 4. Project Cost a) Total capital cost of new system $27,160,000 b) Development cost $4,500,000 c) Annual O&M cost of new system ~$100,000 d) Annual fuel cost $ 0 5. Project Benefits a) Amount of fuel displaced for i. Electricity 197,626 MCF per year ii. Heat iii. Transportation b) Current price of displaced fuel $6.83/ MCF of natural gas (2010) c) Other economic benefits 19,585 MCF per year of spin savings & 44 fewer unit starts. d) Alaska public benefits Stabilize rates, lower emissions per kWh, conserve gas 6. Power Purchase/Sales Price a) Price for power purchase/sale 7. Project Analysis Renewable Energy Fund Round 4 Project Cost/Benefit Worksheet RFA AEA11-005 Application Cost Worksheet Page 3 7-21-10 a) Basic Economic Analysis Project benefit/cost ratio 1.42 this ratio is sensitive to the price of natural gas. See attached Grant Lake Hydro Benefit – Cost Sept 2010 spreadsheet for details. Payback (years) To be determined AEA Grant RFA, Round 1 Application, October 8, 2008 GRANT LAKE/CREEK HYDRO BENEFIT-COST ANALYSIS ASSUMPTIONS 5.0000 MW, Power Capacity 4%/Year, Discount Rate 9.6 Mcf per MWh for LM2500 Gas-fired Plant 47%CAPACITY FACTOR 3%/Year, Cost Escalation for O&M & Gas beyond 203 197,626 Mcf, Gas Required for Equivalent Hydro Energy 2.4 aMW, Net Capacity 5%/Year, Power Price Escalation 7 $/MW of Generation Without Fuel Cost 8760 Hours Per Year 10%/Year, Cost of Capital 100%Availability Multiplier 5.00$ /MWh, Estimated O&M Cost 20586000 kWh, Estimated Annual Power Production 4,532.00$ /kW Estimated Construction Cost DATE YEAR # DESIGN & PERMITTING COST CONSTRUCTION COST Pay Period Cost of Capital (Interest on Loan)O&M COST Present Worth (PW) of Design & Permitting Costs PW of Construction Cost PW of Cost of Capital PW of O&M Cost PW of All Costs Projected Price of Gas ($/Mcf) Annual Avoided Fuel Cost Annual Fuel Savings for 3MW Spin Total Annual Fuel Savings Annual Revenue Fuel Savings + Annual Revenue Present Worth of Annual Avoided Cost Net Present Worth = PW Avoided Costs - PW All Costs Benefit:Cost Ratio PRESENT WORTH (2008) TOTALS ($4,006,640)($17,908,527)($25,898,683)($3,067,924)($50,881,775)$217,966,615 $21,612,834 $239,579,449 $38,502,179 $278,081,628 ($72,229,181)($21,347,406)1.42 2010 1 $900,000 $0 $0 ($865,385)6.83$ $133,762 $144,102 2011 2 $900,000 $0 $0 ($832,101)6.77$ $132,724 $151,307 2012 3 $900,000 $0 $0 ($800,097)7.16$ $140,256 $158,872 2013 4 $900,000 $0 $0 ($769,324)7.68$ $150,470 $166,816 2014 5 $900,000 $0 $0 ($739,734)8.05$ $157,661 $175,157 2015 6 $0 $22,660,000 1 $2,266,000 $0 ($17,908,527)($1,790,853)8.42$ $1,664,602 $165,056 $1,829,658 $183,915 $2,013,573 2016 7 $0 $0 2 $2,252,224 $102,930 ($1,711,505)($78,218)8.60$ $1,699,513 $168,518 $1,868,031 $193,110 $2,061,142 ($1,566,298) 2017 8 $0 $0 3 $2,237,071 $106,018 ($1,634,606)($77,466)8.73$ $1,725,128 $171,058 $1,896,186 $202,766 $2,098,952 ($1,533,684) 2018 9 $0 $0 4 $2,220,403 $109,198 ($1,560,026)($76,721)8.68$ $1,716,010 $170,154 $1,886,163 $212,904 $2,099,068 ($1,474,777) 2019 10 $0 $0 5 $2,202,068 $112,474 ($1,487,638)($75,984)8.94$ $1,767,043 $175,214 $1,942,257 $223,549 $2,165,806 ($1,463,141) 2020 11 $0 $0 6 $2,181,899 $115,849 ($1,417,320)($75,253)9.40$ $1,857,321 $184,166 $2,041,487 $234,727 $2,276,214 ($1,478,585) 2021 12 $0 $0 7 $2,159,713 $119,324 ($1,348,950)($74,529)9.94$ $1,965,023 $194,845 $2,159,868 $246,463 $2,406,332 ($1,502,988) 2022 13 $0 $0 8 $2,135,309 $122,904 ($1,282,411)($73,813)10.34$ $2,044,061 $202,682 $2,246,743 $258,786 $2,505,529 ($1,504,756) 2023 14 $0 $0 9 $2,108,464 $126,591 ($1,217,585)($73,103)10.79$ $2,131,547 $211,357 $2,342,904 $271,726 $2,614,630 ($1,509,884) 2024 15 $0 $0 10 $2,078,935 $130,389 ($1,154,359)($72,400)11.27$ $2,227,579 $220,879 $2,448,459 $285,312 $2,733,771 ($1,517,966) 2025 16 $0 $0 11 $2,046,453 $134,300 ($1,092,618)($71,704)11.52$ $2,276,074 $225,688 $2,501,762 $299,578 $2,801,339 ($1,495,658) 2026 17 $0 $0 12 $2,010,722 $138,329 ($1,032,251)($71,015)11.77$ $2,325,078 $230,547 $2,555,625 $314,557 $2,870,182 ($1,473,474) 2027 18 $0 $0 13 $1,971,419 $142,479 ($973,148)($70,332)12.24$ $2,419,778 $239,937 $2,659,715 $330,284 $2,990,000 ($1,475,948) 2028 19 $0 $0 14 $1,928,186 $146,754 ($915,199)($69,655)12.93$ $2,555,308 $253,376 $2,808,684 $346,799 $3,155,483 ($1,497,726) 2029 20 $0 $0 15 $1,880,628 $151,156 ($858,294)($68,986)13.56$ $2,679,154 $265,656 $2,944,810 $364,139 $3,308,949 ($1,510,161) 2030 21 $0 $0 16 $1,828,316 $155,691 ($802,326)($68,322)14.21$ $2,808,192 $278,451 $3,086,643 $382,346 $3,468,989 ($1,522,309) 2031 22 $0 $0 17 $1,770,772 $160,362 ($747,187)($67,665)14.97$ $2,957,665 $293,272 $3,250,937 $401,463 $3,652,399 ($1,541,150) 2032 23 $0 $0 18 $1,707,473 $165,172 ($692,767)($67,015)15.60$ $3,083,214 $305,721 $3,388,935 $421,536 $3,810,471 ($1,546,008) 2033 24 $0 $0 19 $1,637,845 $170,128 ($638,959)($66,370)16.36$ $3,233,149 $320,588 $3,553,737 $442,613 $3,996,350 ($1,559,062) 2034 25 $0 $0 20 $1,561,254 $175,231 ($585,653)($65,732)17.40$ $3,438,880 $340,988 $3,779,867 $464,743 $4,244,611 ($1,592,225) 2035 26 $0 $0 21 $1,477,004 $180,488 ($532,739)($65,100)18.23$ $3,602,539 $357,216 $3,959,755 $487,981 $4,447,735 ($1,604,250) 2036 27 $0 $0 22 $1,384,329 $185,903 ($480,108)($64,474)18.78$ $3,710,615 $367,932 $4,078,547 $512,380 $4,590,927 ($1,592,210) 2037 28 $0 $0 23 $1,282,386 $191,480 ($427,647)($63,854)19.34$ $3,821,934 $378,970 $4,200,904 $537,999 $4,738,902 ($1,580,317) 2038 29 $0 $0 24 $1,170,249 $197,225 ($375,242)($63,240)19.92$ $3,936,592 $390,339 $4,326,931 $564,898 $4,891,829 ($1,568,572) 2039 30 $0 $0 25 $1,046,898 $203,141 ($322,778)($62,632)20.52$ $4,054,689 $402,049 $4,456,739 $593,143 $5,049,882 ($1,556,973) 2040 31 $0 $0 26 $911,213 $209,235 ($270,138)($62,030)21.13$ $4,176,330 $414,111 $4,590,441 $622,801 $5,213,242 ($1,545,519) 2041 32 $0 $0 27 $761,958 $215,513 ($217,202)($61,434)21.77$ $4,301,620 $426,534 $4,728,154 $653,941 $5,382,095 ($1,534,209) 2042 33 $0 $0 28 $597,778 $221,978 ($163,848)($60,843)22.42$ $4,430,669 $439,330 $4,869,999 $686,638 $5,556,636 ($1,523,042) 2043 34 $0 $0 29 $417,181 $228,637 ($109,949)($60,258)23.09$ $4,563,589 $452,510 $5,016,099 $720,969 $5,737,068 ($1,512,016) 2044 35 $0 $0 30 $218,523 $235,496 ($55,377)($59,678)23.78$ $4,700,496 $466,085 $5,166,582 $757,018 $5,923,600 ($1,501,132) 2045 36 $0 $0 31 $242,561 ($59,105)24.50$ $4,841,511 $480,068 $5,321,579 $794,869 $6,116,448 ($1,490,387) 2046 37 $0 $0 32 $249,838 ($58,536)25.23$ $4,986,757 $494,470 $5,481,227 $834,612 $6,315,839 ($1,479,781) 2047 38 $0 $0 33 $257,333 ($57,973)25.99$ $5,136,359 $509,304 $5,645,663 $876,343 $6,522,006 ($1,469,313) 2048 39 $0 $0 34 $265,053 ($57,416)26.77$ $5,290,450 $524,583 $5,815,033 $920,160 $6,735,193 ($1,458,982) 2049 40 $0 $0 35 $273,005 ($56,864)27.57$ $5,449,164 $540,321 $5,989,484 $966,168 $6,955,652 ($1,448,786) 2050 41 $0 $0 36 $281,195 ($56,317)28.40$ $5,612,639 $556,530 $6,169,169 $1,014,476 $7,183,645 ($1,438,726) 2051 42 $0 $0 37 $289,631 ($55,776)29.25$ $5,781,018 $573,226 $6,354,244 $1,065,200 $7,419,444 ($1,428,799) 2052 43 $0 $0 38 $298,320 ($55,239)30.13$ $5,954,448 $590,423 $6,544,871 $1,118,460 $7,663,331 ($1,419,005) 2053 44 $0 $0 39 $307,269 ($54,708)31.03$ $6,133,082 $608,136 $6,741,217 $1,174,383 $7,915,601 ($1,409,344) 2054 45 $0 $0 40 $316,487 ($54,182)31.96$ $6,317,074 $626,380 $6,943,454 $1,233,102 $8,176,556 ($1,399,813) 2055 46 $0 $0 41 $325,982 ($53,661)32.92$ $6,506,586 $645,171 $7,151,757 $1,294,758 $8,446,515 ($1,390,413) 2056 47 $0 $0 42 $335,762 ($53,145)33.91$ $6,701,784 $664,526 $7,366,310 $1,359,495 $8,725,806 ($1,381,143) 2057 48 $0 $0 43 $345,834 ($52,634)34.93$ $6,902,837 $684,462 $7,587,300 $1,427,470 $9,014,770 ($1,372,001) 2058 49 $0 $0 44 $356,209 ($52,128)35.98$ $7,109,923 $704,996 $7,814,918 $1,498,844 $9,313,762 ($1,362,986) 2059 50 $0 $0 45 $366,896 ($51,627)37.06$ $7,323,220 $726,146 $8,049,366 $1,573,786 $9,623,152 ($1,354,099) 2060 51 $0 $0 46 $377,903 ($51,130)38.17$ $7,542,917 $747,930 $8,290,847 $1,652,475 $9,943,322 ($1,345,337) 2061 52 $0 $0 47 $389,240 ($50,639)39.31$ $7,769,204 $770,368 $8,539,572 $1,735,099 $10,274,671 ($1,336,701) 2062 53 $0 $0 48 $400,917 ($50,152)40.49$ $8,002,280 $793,479 $8,795,760 $1,821,854 $10,617,614 ($1,328,189) 2063 54 $0 $0 49 $412,944 ($49,670)41.71$ $8,242,349 $817,284 $9,059,632 $1,912,947 $10,972,579 ($1,319,801) 2064 55 $0 $0 50 $425,333 ($49,192)42.96$ $8,489,619 $841,802 $9,331,421 $2,008,594 $11,340,015 ($1,311,535) COSTS Power Production & Construction Financial Avoided Costs SAVINGS FEDERAL ENERGY REGULATORY COMMISSION WASHINGTON,D.C.20426 September 15,2009 OFFICE OF ENERGY PROJECTS Project No.13212-001 and 13211-001 –Alaska Grant Lake/Falls Creek Hydroelectric Project Kenai Hydro,L.L.C. Steve Gilbert,Manager Kenai Hydro,L.L.C. 6921 Howard Avenue Anchorage,AK 99504 Reference:Authorization to Use the Traditional Licensing Process Dear Mr.Gilbert: In a letter filed August 6,2009,you requested to use the Traditional Licensing Process (TLP)in preparing a license application for the proposed 4.5-megawatt Grant Lake/Falls Creek Hydroelectric Project,which would be located on Grant Lake,Grant Creek and Falls Creek on the Kenai Peninsula,near the community of Moose Pass, Alaska.On August 6,2009,you filed a notice of intent and pre-application document (PAD)for the proposed project. On August 7,2009,you filed documentation that you published notice of your request to use the TLP in editions of the Anchorage Daily News,Peninsula Clarion and Homer Tribune.Your notice contained the information required in 18 C.F.R.§5.3(d)(2) of the Commission’s regulations,including a statement requesting that comments on the request to use the TLP be filed with the Commission within 30 days of the date of the notice,which was by September 5,2009. The U.S.Forest Service (Forest Service)and Alaska Department of Fish and Game (Alaska DFG)filed comments September 4 and 8,2009,respectfully,supporting the use of the TLP,with the request that scoping be held early in the licensing process to advance timely study development and provide time for analysis of results.The Kenaitze Indian Tribe,filed comments September 4,2009,expressing no opposition to the use of the TLP. 20090915-3018 FERC PDF (Unofficial) 09/15/2009 P-13212-001 and P-13211-001 2 Comments from Michael Coone y and the Sierra Club Alaska Chapter,filed September 8,and 10,2009,respectfully,expressed concerns with the use of the TLP, particularly that the process does not afford adequate public involvement in which to voice environmental concerns.The Sierra Club also expressed concerns that the Integrated License Process (ILP),the Commission’s default license process,would need to be modified through lengthened timeframes,to ensure adequate study development and deployment. Also,comments from the Alaska Center for the Environment,filed September 8, 2009,while not advocating one process over the other,do express the different advantages of the ILP and TLP,noting that early scoping is one benefit of the ILP. Holding scoping early in the licensing process,as suggested by the Forest Service and the Alaska DFG,would provide early identification of issues by all interested parties, which would help to foster the development of any needed studies.Kenai Hydro,L.L.C., in a comment filed September 10,2009,expressed support of the TLP with early scoping and requested agencies and interested parties to consider this as an option when filing their comments.Early scoping also addresses some of the concerns of the Sierra Club Alaska Chapter and the Alaska Center for the Environment.In consideration of the above,I am granting your request to use the TLP with early scoping. If you have an y questions,please contact Joseph Adamson at (202)502-8085 or via email at joseph.adamson@ferc.gov. Sincerely, Ann F.Miles,Director Division of Hydropower Licensing cc:Mailing List Public Files Brad Zubeck,Project Engineer Kenai Hydro,L.L.C. 280 Airport Way Kenai,AK 99611 20090915-3018 FERC PDF (Unofficial) 09/15/2009 Document Content(s) P-13212-001Letter.DOC.................................................1-2 20090915-3018 FERC PDF (Unofficial) 09/15/2009 FEDERAL ENERGY REGULATORY COMMISSION Washington,D.C.20426 August 23,2010 OFFICE OF ENERGY PROJECTS Project Nos.13212-001-AK and 13211-001-AK Grant Lake/Falls Creek Hydroelectric Project Kenai Hydro,LLC Subject:Scoping Document 2 for the Grant Lake/Falls Creek Hydroelectric Project To the Party Addressed: On August 6,2009,Kenai Hydro,LLC (Kenai Hydro)filed with the Federal Energy Regulatory Commission (Commission)a Notice of Intent to file a license application,a request to use the Traditional Licensing Process,and a Pre-Application Document for the proposed 5-megawatt Grant Lake/Falls Creek Project. The Grant Lake/Falls Creek Hydroelectric Project (Grant Lake/Falls Creek Project or project;FERC Project Nos.13212-001 and 13211-001),located on Grant Creek near the outlet of Grant Lake just east of the Seward Highway (State Route 9)in the Kenai Peninsula Borough near the community of Moose Pass,Alaska.The Commission granted Kenai Hydro’s request to use the Traditional Licensing Process (TLP),with early scoping,on September 15,2009. Based on comments received and pursuant to the National Environmental Policy Act (NEPA),Commission staff intends to prepare an Environmental Assessment (EA), which will be used by the Commission to determine whether,and under what conditions, to issue a license for the project.To support and assist our environmental review,we are beginning the public scoping process to ensure that all pertinent issues are identified and analyzed,and that the EA is thorough and balanced. On May 11,2010,we issued Scoping Document 1,in which we disclosed our preliminary view of the scope of environmental issues associated with the proposed action.Based on the oral comments made at the June 2 and 3,2010 public scoping meetings in Moose Pass,Alaska,and written comments received during the scoping process,we have prepared the enclosed Scoping Document 2 (SD2).We appreciate the participation of governmental agencies,non-governmental organizations,and the general public in the scoping process.The enclosed SD2 for the proposed project is intended to serve as a guide to the issues and alternatives to be addressed in the EA. SD2 is issued for informational use by all interested entities;no response is required.Key changes fro SD1 to SD2 are identified in bold,italicized type. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 2 This scoping document is being distributed to both Kenai Hydro LLC’s distribution list and the Commission’s official mailing list (Section 9.0 of the attached SD2).If you wish to be added or removed from the Commission’s official mailing list, please mail your request to Kimberly D.Bose,Federal Energy Regulatory Commission, 888 First Street,N.E.,Room 1A,Washington,DC 20426.All written requests must specify your wish to be removed or added to the mailing list and must clearly identify the following on the first page:Grant Lake/Falls Creek Hydroelectric Project Nos.13212- 001 and 13211-001. For any questions about the SD2,the scoping process,or how the Commission staff will develop the EA for this project,please contact Mark Ivy at (202)502-6156 or mark.ivy@ferc.gov.Additional information about the Commission’s licensing process and the Grant Lake/Falls Creek Hydroelectric Project may be obtained from our website, http://www.ferc.gov. Enclosure:Scoping Document 2 cc:Mailing List Public Files 20100823-3012 FERC PDF (Unofficial) 08/23/2010 SCOPING DOCUMENT 2 GRANT LAKE/FALLS CREEK HYDROELECTRIC PROJECT ALASKA PROJECT NOS.13212-001 AND 13211-001 Federal Energy Regulatory Commission Office of Energy Projects Division of Hydropower Licensing Washington,D.C. August 2010 20100823-3012 FERC PDF (Unofficial) 08/23/2010 ii TABLE OF CONTENTS 1.0 INTRODUCTION .....................................................................................................1 2.0 SCOPING ...................................................................................................................3 2.1 PURPOSES OF SCOPING .............................................................................................3 2.2 SCOPING MEETINGS AND COMMENTS ........................................................................4 2.3 ISSUES RAISED DURING SCOPING ..............................................................................5 3.0 PROPOSED ACTION AND ALTERNATIVES ..................................................14 3.1 THE PROPOSED ACTION .......................................................................................14 3.1.1 Proposed Project Facilities.............................................................................14 3.1.2 Proposed Project Operations ..........................................................................14 3.2 ALTERNATIVES TO THE PROPOSED ACTION .......................................................15 3.3 NO ACTION............................................................................................................15 4.0 SCOPE OF CUMULATIVE EFFECTS AND RESOURCE ISSUES ................15 4.1 CUMULATIVE EFFECTS ........................................................................................15 4.1.1 Resources That Could Be Cumulatively Affected .........................................16 4.1.2 Geographic Scope ...........................................................................................16 4.1.3 Temporal Scope ..............................................................................................16 4.2 RESOURCE ISSUES.................................................................................................16 4.2.1 Geologic and Soils Resources ........................................................................17 4.2.2 Water Quantity and Quality*.........................................................................17 4.2.3 Aquatic Resources*........................................................................................17 4.2.4 Terrestrial Resources ......................................................................................18 4.2.5 Threatened and Endangered Species.............................................................19 4.2.6 Recreation Resources and Land Use*..........................................................19 4.2.7 Aesthetic Resources .......................................................................................20 4.2.8 Cultural Resources ........................................................................................20 4.2.9 Socioeconomics .............................................................................................20 4.2.10 Developmental Resources ............................................................................20 5.0 POTENTIAL STUDIES..........................................................................................20 6.0 EA PREPARATION SCHEDULE ........................................................................22 7.0 PROPOSED EA OUTLINE....................................................................................23 8.0 COMPREHENSIVE PLANS .................................................................................24 9.0 FERC OFFICIAL MAILING LIST ......................................................................26 20100823-3012 FERC PDF (Unofficial) 08/23/2010 iii LIST OF FIGURES FIGURE 1.PROJECT LOCATION AND FACILITIES FOR THE GRANT LAKE PROJECT (SOURCE: KENAI HYDRO LLC,SECTION 3 UPDATE,FILED AUGUST 13,2010)............................2 20100823-3012 FERC PDF (Unofficial) 08/23/2010 iv ACRONYMS AND ABBREVIATIONS ACE Alaska Center for the Environment Alaska DEC Alaska Department of Environmental Conservation Alaska DF&G Alaska Department of Fish and Game Alaska DNR Alaska Department of Natural Resources APE Area of Potential Effect cfs cubic feet per second COE United States Army Corps of Engineers Commission or FERC Federal Energy Regulatory Commission EA environmental assessment EIS environmental impact statement Forest Service U.S.Forest Service FPA Federal Power Act FWS U.S.Fish and Wildlife Service Grant Lake Project Grant Lake/Falls Creek Hydroelectric Project GWh gigawatt-hours INHT Iditarod National Historic Trail KAP Kenai Area Plan Kenai Hydro Kenai Hydro,L.L.C./applicant KMTA NHA Kenai Mountains –Turnagain Arm National Heritage Area KRS Kenai River Sportsfishing KRWF Kenai River Watershed Foundation kV kilovolt msl mean sea level MW megawatt MWh megawatt-hours NEPA National Environmental Policy Act NPS National Park Service NMFS National Marine Fisheries Service NGO non-governmental organizations PAD Pre-Application Document PDEA preliminary draft environmental assessment permits Preliminary Permits project Grant Lake/Falls Creek Hydroelectric Project RBCA Resurrection Bay Conservation Alliance SD1 Scoping Document 1 SD2 Scoping Document 2 TLP Traditional Licensing Process 20100823-3012 FERC PDF (Unofficial) 08/23/2010 1 1.0 INTRODUCTION The Federal Energy Regulatory Commission (Commission or FERC),under the authority of the Federal Power Act (FPA),1 may issue licenses for terms ranging from 30 to 50 years for the construction,operation,and maintenance of non-federal hydroelectric projects.On August 6,2009,Kenai Hydro (applicant)filed a Pre-Application Document (PAD)and Notice of Intent to seek an original license for the 5-megawatt (MW)Grant Lake/Falls Creek Hydroelectric Project (Grant Lake Project or project).2 The Grant Lake Project would be located on Grant Lake,Grant Creek and Falls Creek on the Kenai Peninsula,near the community of Moose Pass,Alaska (Figure 1). Portions of the project would occupy federal lands within the Chugach National Forest, administered by the U.S.Forest Service (Forest Service).The PAD filed on August 6, 2009,included a diversion from Falls Creek diverting flows into a 13,000-foot-long pipe to Grant Lake.On May 3,2010,the applicant filed a revised PAD and this diversion and pipe are no longer being considered as part of the proposed project.On August 13,2010, the applicant filed a revision to section 3.0 of the PAD which includes several modifications to the project works.The project will now either include a smaller diversion dam at the outlet of Grant Lake or no diversion dam at all,and will include an intake,a power tunnel and short penstock,a powerhouse,a tailrace detention pond, and a tailrace returning flows to Grant Creek.A more detailed description of the key project facilities is provided in section 3.0. The National Environmental Policy Act (NEPA)of 1969,3 the Commission’s regulations,and other applicable laws require the Commission to independently evaluate the environmental effects of issuing an original license for the Grant Lake Project as proposed,and to consider reasonable alternatives to the applicant’s proposal.Although Commission staff intends to prepare a draft and final environmental assessment (EA), there is a possibility that an Environmental Impact Statement (EIS)will be required.The EA will describe and evaluate the probable effects,including any site-specific and cumulative effects,of the proposed action and alternatives. 1 16 U.S.C.§791(a)-825(r). 2 On October 7,2008,the Commission issued two Preliminary Permits (permits)to Kenai Hydro to study the feasibility of developing hydroelectric projects on Grant Lake and Falls Creek.The permits provide the applicant protection under the FPA from competitive applications while conducting the studies and processes necessary to complete an application for license. 3 National Environmental Policy Act of 1969,as amended (Pub.L.91-190.42 U.S.C.4321-4347,January 1,1970,as amended by Pub.L.94-52,July 3,1975,Pub.L. 94-83,August 9,1975,and Pub.L.97-258,§4(b),September 13,1982). 20100823-3012 FERC PDF (Unofficial) 08/23/2010 20100823-3012 FERC PDF (Unofficial) 08/23/2010 2 Figure 1. Project location and facilities for the Grant Lake Project (Source: Kenai Hydro LLC, Section 3 update, filed August 13, 2010). 3 2.0 SCOPING This Scoping Document 2 (SD2)is intended to advise all participants as to the proposed scope of the EA and to seek additional information pertinent to this analysis. This document contains:(1)a description of the scoping process;(2)a description of the proposed action and alternatives;(3)a preliminary identification of environmental issues and proposed studies;(4)a request for comments and information;(5)a proposed EA outline;and (6)a preliminary list of comprehensive plans which would be applicable to the project. 2.1 Purposes of Scoping Scoping is the process used to identify issues,concerns,and opportunities for enhancement or mitigation associated with a proposed action.According to NEPA,the process should be conducted early in the planning stage of the project. The purposes of scoping include: •invite participation of federal,state and local resource agencies,Indian tribes, non-governmental organizations (NGOs),and the public to identify significant environmental and socioeconomic issues related to the proposed project; •determine the depth of analysis and significance of issues to be addressed in the EA; •identify how the project would or would not contribute to cumulative effects in the project area; •identify reasonable alternatives to the proposed action that should be evaluated in the EA; •solicit,from participants,available information on the resources at issue, including existing information and study needs;and •determine the resource areas and potential issues that do not require detailed analysis during project review. We issued Scoping Document 1 (SD1)for the project on May 11,2010,to enable appropriate resource agencies,Indian tribes,and other interested parties to more effectively participate in and contribute to the scoping process.In SD1,we requested clarification of preliminary issues concerning the Grant Lake/Falls Creek Project and 20100823-3012 FERC PDF (Unofficial) 08/23/2010 4 identification of any new issues that need to be addressed in the EA.We revised SD1 following the scoping meetings and after reviewing comments filed during the scoping comment period.Key changes to SD1 are identified in bold,italicized type. 2.2 Scoping Meetings and Comments The Commission’s staff held two scoping meetings in Moose Pass,Alaska,to discuss potential issues associated with the Grant Lake/Falls Creek Project.The scoping meetings were announced in local newspapers and in the Federal Register.An evening scoping meeting was held on June 2,2010,and a morning meeting was held on June 3,2010.A court reporter recorded oral comments made during the scoping meetings. In addition to the oral comments received at the scoping meetings,the following 17 agencies,individuals,and NGOs filed written comments on the SD1: Entity Date Filed Seward Iditarod Trail Blazers June 5,2010 John Polonowski June 15,2010 William Brennan June 23,2010 Kenai River Watershed Foundation (KRWF) June 25,2010;July 6,2010;July 19,2010 Becky Long June 25,2010 Michael Cooney July 6,2010 Alaska Center for the Environment (ACE)July 6,2010 Shawn Lynch July 6,2010 Resurrection Bay Conservation Alliance (RBCA) July 6,2010,July 7,20104 U.S.Department of Commerce,National Oceanic and Atmospheric Administration, National Marine Fisheries Service July 6,2010 Alaska Department of Natural Resources, Division of Mining,Land &Water (Alaska DNR) July 6,2010 U.S. Department of Interior,Fish and Wildlife Service July 6,2010 4 Public comments in response to a resolution regarding the development of the Grant Lake/Falls Creek Hydropower Project considered by the Kenai Peninsula Borough Assembly,during their June 21,2010 council meeting,were submitted as part of the public record for this proceeding. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 5 U.S.Department of Interior,National Park Service (NPS) July 6,2010 Alaska Department of Fish and Game, Division of Sport Fishing (Alaska DF&G) July 6,2010 Kenai Hydro,LLC July 7,2010 U.S. Department of Agriculture,Forest Service (Forest Service) July 9,2010 U.S.Department of the Army,Corps of Engineers (COE) August 3,2010 All comments received are part of the Commission’s official record for the project.Information in the official file is available for inspection and reproduction at the Commission's Public Reference Room,located at 888 First Street,N.E.,Room 2A, Washington,DC 20426,or by calling (202)502-8371.Information also may be accessed through the Commission’s eLibrary using the “Documents &Filing”link on the Commission’s web page at http://www.ferc.gov.Call (202)502-6652 for assistance. 2.3 Issues Raised During Scoping The general concerns raised by participants in the scoping process are summarized below by subject area.Oral comments received at the scoping meetings are similar to those written comments submitted to the Commission during the comment period.The summaries do not include every oral and written comment made during the scoping process.For instance,we do not address comments that are recom mendations for license conditions or schedule.Such comments will be addressed when we request final terms,conditions,recommendations,and comments when we issue our Ready for Environmental Analysis (REA)notice.This SD2 presents our current view of issues and alternatives to be considered in the EA. General Comments Comment:Moose Pass community representatives stated that the environmental document should be an EIS rather than an EA due to the controversial nature of the project. Response:The scoping process would satisfy NEPA requirem ents irrespective of whether an EA or EIS is issued by the Commission.While our intent at the time of scoping is to prepare an EA,a final decision on whether to prepare an EIS or an EA will be made after completion of any required studies and the filing of Kenai Hydro’s license application. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 6 Comment:Moose Pass community and NGO representatives encouraged the exploration of Lowell Creek near Seward as an alternative site that may be better suited to hydropower development. Response:The current scoping effort is focused on Kenai Hydro’s proposed project at Grant Lake which is filed with the Commission. Comment:Alaska DNR requested that the Kenai Area Plan (KAP,2001)be added to the list of comprehensive plans reviewed for this project. Response:We will consider the KAP in our analysis.Please note that this plan should be filed with the Commission in accordance with 18 CFR section 219,in order to be considered for addition to the Commission’s List of Comprehensive Plans. Comment:KRWF expressed concerns regarding the appropriateness of early scoping for this project. Response:Early scoping was requested by Forest Service and Alaska DF&G to provide time for study development and for the analysis of results. Resources That Could Be Cumulatively Affected Comment:Moose Pass community and RBCA representatives stated that all resources may be cumulatively impacted by this project.ACE indicated that the watershed may be cumulatively affected as a result of project development.NPS and Forest Service indicated that recreation may be cumulatively affected,and the Forest Service specified that cumulative impacts to the Iditarod National Historic Trail (INHT)should be thoroughly analyzed. Response:The geographic scope for cumulative impacts analysis is identified in section 4.1.2 as the Kenai River Basin;thus,the watershed will be analyzed regarding cumulative impacts for water quantity,water quality,and fishery resources (as identified in section 4.1.1).Conducting cumulative impact analysis for recreation resources was raised during scoping and we have revised section 4.1.1 accordingly. Geology and Soils Resources Comment:COE requested an analysis of wetland and terrestrial soils. Response:A bullet was added to assess the effects of the proposed project construction and operations on soils in section 4.2.1. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 7 Comment:Alaska DNR and RBCA state that a reduction in water flows in the bypassed reach may affect sediment transport and materials recruitment downstream. Response:A bullet was added to assess the effects of the proposed project construction and operations on sediment transport and materials recruitment downstream in section 4.2.1. Water Quantity and Quality Comment:Forest Service stated that project construction and operation could increase heavy metal leaking to water in the project area as a result of water level fluctuations of Grant Lake,an area of past mining and milling operations,and that this potential effect should be analyzed. Response:A bullet was added to assess the effects of project construction and operations on heavy metal leaking into project area water as a result of water level fluctuations of Grant Lake in section 4.2.2. Comment:ACE stated that road development and vegetation clearing may affect water quality. Response:As currently stated in section 4.2.2,assessing the effects of project construction and operation on water quality of Grant Lake,Grant Creek,Falls Creek, Lower Trail Lake,and the Narrows,is sufficiently broad to capture road development and clearing. Comment:Moose Pass community and RBCA representatives voiced concern regarding the potential impact of climate change on the amount of water available for power generation,noting that the glaciers which feed the rivers and lakes in the region have been receding. Response:Predictions of future flow scenarios on any given stream would be too speculative given the state of the science at this time.However,we do suggest that, when making flow recommendations and conditions,agencies consider whether different requirements for high and low water years are appropriate. Aquatic Resources Comment:Moose Pass community representatives requested that a model be developed to assess the potential impact on anadromous fish of reducing summer flows in order to enhance power generating flows during the winter months. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 8 Response:In the PAD,Kenai Hydro identified plans to conduct an instream flow study to assess impacts from project operations.The results of this analysis will be analyzed within the context of any license application that may be submitted by the applicant. Comment:Alaska DF&G states that the effects of modified flows below the powerhouse on aquatic resources should be evaluated. Response:As currently stated in Section 4.2.3,assessing the effects of project construction and operation on fish and aquatic resources of Grant Lake,Grant Creek, Falls Creek,Lower Trail Lake,and the Narrows,is sufficiently broad to capture the effects of modified flows on aquatic resources below the powerhouse. Comment:Forest Service indicates that the effects of project construction and operation on changes in distribution and abundance of aquatic insects should be analyzed. Response:As currently stated in Section 4.2.3,assessing the effects of project construction and operation on fish and aquatic resources of Grant Lake,Grant Creek, Falls Creek,Lower Trail Lake,and the Narrows,is sufficiently broad to capture changes in distribution and abundance of aquatic insects.. Comment:RBCA indicates that the effects of project construction and operation on changes in distribution and abundance of anadromous fish should be analyzed. Response:As currently stated in section 4.2.3,assessing the effects of project construction and operation on fish and aquatic resources of Grant Lake,Grant Creek, Falls Creek,Lower Trail Lake,and the Narrows,is sufficiently broad to capture changes in distribution and abundance of anadromous fish. Comment:COE suggests the inclusion of riffle pool complexes as special aquatic sites that should be evaluated regarding potential environmental impacts. Response:As currently stated in section 4.2.3,assessing the effects of project construction and operation on fish and aquatic resources of Grant Lake,Grant Creek, Falls Creek,Lower Trail Lake,and the Narrows,is sufficiently broad to capture riffle pool complexes. Comment:Moose Pass community representatives suggest that if the geographic scope of analysis is extended to include the mouth of the Kenai River,an assessment of the impacts on beluga whales would be necessary. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 9 Response:The geographic scope for cumulative effects analysis for water quantity and quality and aquatic resources has been set as the Kenai River basin,as stated in SD1. Project effects outside of the basin would be impossible to directly attribute to the proposed project therefore,extending the geographic scope to include open ocean habitat utilized by beluga whales is not appropriate.Should the geographic scope of analysis be extended to include the mouth of the Kenai River,a determination will be made as to appropriateness of incorporating an assessment of the impacts on beluga whales. Terrestrial Resources Comment:Alaska DNR suggested expanding the geographic scope to include areas potentially impacted by project related road developm ent. Response:A geographic scope is not defined within most of the bullets in section 4.2.4 so as to include all areas potentially impacted by project development,including road development. Comment:Forest Service states that the effects of project construction and operation on changes to animal movem ent in and through the project area as well as displacement and disruption of seasonal movement patterns should be analyzed. Response:The existing bullet in section 4.2.4,effects of project construction and operation on wildlife movement between Grant Lake and Trail Lake,has been modified to include movement through the project area as well as displacement and disruption of seasonal movement patterns. Comment:Forest Service suggests that the effects of increased access on harvestable wildlife should be analyzed. Response:A bullet was added to assess that the effects of increased access to harvestable wildlife in section 4.2.4. Comment:Forest Service commented that project effects may extend beyond the immediate project area. Response:We agree.An analysis of the project effects may extend beyond the immediate vicinity of the project. Comment:ACE indicated that the Kenai Brown Bear is a species of special concern that may be impacted by project development. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 10 Response:As currently stated in section 4.2.4,brown bear are identified as a Species of Special Concern by the State of Alaska and will be included in the analysis. Comment:Forest Service indicates that the effects of project construction and operation on changes in distribution and abundance of aquatic insects’predators should be analyzed (a specific interest in bats was expressed). Response:In section 4.2.4,bats were added to the list of Management Indicator Species under the bullet for effects of project construction and operation on wildlife critical life stages,distribution,and abundance. Comment:ACE requested further studies of avian use at Grant Lake. Response:The existing bullet in section 4.2.4,effects of project construction and operation on breeding and rearing habitat and nesting success of shorebirds and waterfowl in Grant Lake and Inlet Creek has been broadened to include other avian use in and around Grant Lake and Inlet Creek. Recreation Resources and Land Use Comment:Moose Pass community representatives and NPS identified the need to determine the spectrum of recreational activities that occur within the project area and assess the impacts of project development on each type of use. Response:In the PAD,Kenai Hydro indicated that a recreational use assessment would be conducted.The assessment should provide information to assess the effects of project construction and operation on existing recreation and land use in and around Grant Lake,Grant Creek,Falls Creek,Lower Trail Lake and the Narrows,as stated in the existing bullet in section 4.2.6. Comment:RBCA stated that displaced users from Grant Lake will likely increase visitation to nearby water bodies including Carter Lake,Vagt Lake,Upper Trail Lake, Trail River,Kenai Lake and Crescent Lake.The effects of increased use at alternative destinations should be examined. Response:A bullet has been added to section 4.2.6 to address this issue. Comment:NGOs and Forest Service raised the issue of project construction and operations on winter recreation use of Grant Lake due to unstable ice. Response:This issue is already listed and will be evaluated. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 11 Comment:Forest Service stated that the effects of the proposed project on the roadless character of the Kenai Mountains Roadless Area should be fully analyzed,including any vegetative clearing along the shoreline of Grant Lake.Similarly,Moose Pass community,NGO,and agency representatives voiced concern over the development of the proposed access road within one mile of a Forest Service designated roadless area (Kenai Mountains)and the potential for unauthorized motorized use. Response:A bullet has been added to section 4.2.6 to address this issue. Comment:The Forest Service,Alaska DNR,NGOs,and Moose Pass comm unity representatives raised the issue of the proposed project access road affecting the Vagt Lake Trail as well as the INHT right-of-way.The most recently proposed road corridor would likely substantially alter and compromise the desired INHT recreation experience,as well as fall within the Kenai River Special Management Area. Response:A bullet has been added to section 4.2.6 to address this issue. Comment:Moose Pass community representatives suggested that a 1000-foot lake frontage development prohibition may exist on Upper and Lower Trail Lakes. Response:After reviewing the Moose Pass Comprehensive Plan,the Kenai Peninsula Borough Plan and the Kenai River Comprehensive Management Plan,no reference to such a development restriction was found. Comment:Moose Pass community and RBCA representatives identified a need to conduct a detailed analysis of the impacts associated with development of the access road and transmission line on neighboring landowners. Response:As currently stated in section 4.2.6,assessing the effects of project construction and operation on local residential land use,is sufficiently broad to capture any impacts associated with development of the access road and transmission line on neighboring landowners. Comment:ACE suggests that project development may have an impact on the Black Mountain Research Natural Area. Response:As stated in section 4.2.6,effects of project construction and operation on existing recreation and land use in and around Grant Lake,Grant Creek,Falls Creek, Lower Trail Lake and the Narrows,is sufficiently broad to address potential impacts on the Kenai Lake-Black Mountain Research Natural Area. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 12 Aesthetic Resources Comment:NGOs and Moose Pass community representatives indicated that project facilities,including the access road,powerhouse,transmission lines and surge tank will negatively affect the aesthetics of the area as they will be visible from the Seward Highway,Alaska Railroad,and from the air.Forest Service recommended that the aesthetic impact assessment of project construction and operation consider aerial views.Similarly,RBCA states that security lighting would mar the nighttime sky and view. Response:As currently stated in section 4.2.7,effects of project construction,facilities, and operation on the aesthetic values of the project area,including noise and light pollution,is sufficiently broad to addresses the aesthetic concerns identified by Moose Pass Community and NGO representatives. Cultural Resources Comment:RBCA noted that known historic sites would be flooded thus jeopardizing any existing artifacts located at those sites. Response:As currently stated in section 4.2.8,effects of project construction and operation on historical and archaeological resources,and properties of traditional religious and cultural importance to Native Alaska tribes is sufficiently broad to address concerns of flooding existing artifacts. Comment:Moose Pass community representatives stated that the proposed project falls within the recently designated Kenai Mountains –Turnagain Arm National Heritage Area (KMTA NHA). Response:Commission staff will review the management plan developed for the KMTA NHA,should the plan be completed within the time frame of this license application,in order to assess potential effects of project development on the KMTA- NHA. Comment:Forest Service and Moose Pass community representatives stated that an assessment of impacts on subsistence use of resources should include both Native and non-Native rural residents. Response:comment noted and the bullet addressing this issue,in section 4.2.8,has been modified to include non-Natives. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 13 Socioeconomic Resources Comment:Several respondents indicated that energy infrastructure issues may influence the need for increased power generation on the Kenai Peninsula.Moose Pass community representatives state that an assessment should be conducted regarding how the proposed Alaska Bullet Gas Line might impact the need for energy and the cost/benefits of this project.Also,NPS stated that the regional electric grid may already be at capacity and that there is an excess of power being generated on the Kenai Peninsula. Response:The need for power will be assessed in our developmental analysis for the proposed project. Comment:Moose Pass community and NGO representatives requested a study of the potential impacts of project construction and operation on the recreation and tourism driven local economy.Additionally,Moose Pass community representatives stated that project development would negatively affect the comm unity without providing any direct benefits to the residents of the area. Response:As currently stated in section 4.2.9,the effects of project construction and operation on local,tribal,and regional economies will be assessed.The public benefits associated with project development will also be assessed. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 14 3.0 PROPOSED ACTION AND ALTERNATIVES In accordance with NEPA,the environmental analysis will consider the following alternatives,at a minimum:(1)the no-action alternative,(2)the applicant's proposed action,and (3)alternatives to the proposed action. 3.1 The Proposed Action 3.1.1 Proposed Project Facilities The project would consist of:a new 2-foot-high,120-foot-wide concrete gravity dam on Grant Lake (or no dam at all),with a 60-foot-wide spillway section at elevation 700 feet mean sea level (msl)if new dam is built);the 1,790-acre Grant Lake with active storage of 15,900 acre-feet between 687 and 698 feet msl;new outlet works including a 48-inch-diameter pipe and gatehouse;a new multi-level intake at Grant Lake;a new 3,200-foot-long,10-foot-high horseshoe power tunnel;a new 8-foot-diameter,110-foot- high surge tank (10 feet would extend above ground);a new 360-foot-long,72-inch- diameter steel penstock;a new powerhouse containing two Francis generating units with total installed capacity of 5 MW;a new 200-foot-long open channel tailrace;a new 5 acre tailrace detention pond;a 3.5-mile-long,overhead or underground transmission line at 24.9-kilovolt (kV);a new 4-mile-long access road;and appurtenant facilities. 3.1.2 Proposed Project Operations Kenai Hydro is proposing to operate the project block loading and level control (run-of-river)modes.The primary operational mode will be block loading at a specific output level.Level control,or balancing of outflow to inflow,will likely only occur during periods of low natural inflow to Grant Lake when the reservoir is at or near minimum pool elevation.Additionally,the project will be used to fulfill a portion of Homer Electric Company’s spinning reserve capacity requirement.With Grant Lake operating as a regulating reservoir,the typical mode of operation will be to capture high spring and summer runoff and to enter the late fall and winter season with the reservoir full at elevation 698 feet msl (without an impoundment structure)or 700 feet msl (with an impoundment structure).Water from Grant Lake would be diverted at the new multi-level intake into the power tunnel,surge tank,and powerhouse.Flows from the powerhouse would be discharged back into Grant Creek. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 15 3.1.3 Proposed Environmental Measures Kenai Hydro proposes to conduct studies (section 5.0)to analyze the project’s impact on environmental resources and develop appropriate protection,mitigation,and enhancement measures.At this time,Kenai Hydro has identified the following environmental measures to protect and enhance environmental resources of the project. Terrestrial Resources •Incorporate raptor protection guidelines into the transmission line design. •Install collision avoidance devices on the transmission line in appropriate locations to protect migratory birds. Aesthetic Resources •Incorporate setbacks into the transmission line route to minimize visual impacts as viewed from the Seward Highway. 3.2 Alternatives to the Proposed Action The EA will consider and analyze all recommendations for operation or facility modifications,as well as for protection,mitigation,and enhancement measures identified by Commission staff,resource agencies,Indian tribes,NGO’s,and the public. 3.3 No Action Under the no-action alternative,the Commission would deny a license for the proposed Grant Lake Project.The project would not be built and there would be no change to the existing environment.We use this alternative to establish baseline environmental conditions for comparison with other alternatives. 4.0 SCOPE OF CUMULATIVE EFFECTS AND RESOURCE ISSUES 4.1 Cumulative Effects According to the Council on Environmental Quality's regulations for implementing NEPA (50 C.F.R.1508.7),a cumulative effect is the effect on the environment that results from the incremental effect of the action when added to other past,present and reasonably foreseeable future actions,regardless of what agency (Federal or non-Federal) or person undertakes such other actions.Cumulative effects can result from individually 20100823-3012 FERC PDF (Unofficial) 08/23/2010 16 minor but collectively significant actions taking place over a period of time,including hydropower and other land and water development activities. 4.1.1 Resources That Could Be Cumulatively Affected Based on information in the PAD,preliminary staff analysis,and scoping input, we have identified water quantity,water quality,fishery resources,and recreation resources as resources that could be cumulatively affected by the proposed construction and operation of the project. 4.1.2 Geographic Scope Our geographic scope of analysis for cumulatively affected resources is defined by the physical limits or boundaries of the proposed action’s effect on the resources and contributing effects from other hydropower non-hydropower activities within the Kenai River Basin. At this time,we have tentatively identified the Kenai River Basin as our geographic scope of analysis for water quantity,water quality,fishery resources and recreation resources.As more information is provided during the licensing process the geographic scope may be adjusted as appropriate. 4.1.3 Temporal Scope The temporal scope of our cumulative effects analysis in the EA will include a discussion of past,present,and future actions and their effects on each resource.Based on the potential term of a new license,the temporal scope will look 30-50 years into the future,concentrating on the effect to the resources from reasonably foreseeable future actions.The historical discussion will,by necessity,be limited to the amount of available information for each resource.The quality and quantity of information,however, diminishes as we analyze resources further away in time from the present. 4.2 Resource Issues In this section,we present a preliminary list of environmental issues to be addressed in the EA.We have identified these issues,which are listed by resource area, by reviewing the PAD and the Commission’s record for this proceeding.This list is not intended to be exhaustive or final,but contains those issues raised to date that could have substantial effects.After the scoping process is complete,we will review the list and determine the appropriate level of analysis needed to address each issue in the EA. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 17 Issues identified by an asterisk (*)will be analyzed for both cumulative and site specific effects. 4.2.1 Geologic and Soils Resources •Effects of project construction and operation on erosion and sedimentation of Grant Lake and its shoreline. •Effects of project construction and operation on erosion or sedimentation of the existing Inlet Creek delta. •Effects of construction of the proposed outlet works,diversion structure, intake structure,tunnel,penstock,surge tower,powerhouse,tailrace detention basin,tailrace,access roads and transmission line on erosion and sedimentation of Grant Creek,the Narrows and Lower Trail Lake.. •Disposal/dispersion methods of spoil material resulting from construction of the proposed project facilities and impact on the surrounding areas. 4.2.2 Water Quantity and Quality* •Effects of project construction and operation on the water quality of Grant Lake,Grant Creek,Falls Creek,Lower Trail Lake,and the Narrows. •Effects of project construction and operation on the hydrology of Grant Lake, Grant Creek,Falls Creek,Lower Trail Lake and the Narrows. •Effects of project construction and operation on heavy metal leaking as a result of water level fluctuations of Grant Lake. 4.2.3 Aquatic Resources* •Effects of project construction and operation on the fish and aquatic resources in Grant Lake,Grant Creek,Falls Creek,Lower Trail Lake and the Narrows. •Effects of diverted flows on fish and aquatic resources in the proposed bypassed reach of Grant Creek. •Effects of Grant Lake reservoir fluctuations on fish and aquatic resources. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 18 •Effects of entrainment on fish populations in Grant Lake and Grant Creek. •Effects of the loss of habitat connectivity and bi-directional passage on resident fish populations in Grant Lake and Grant Creek. •Effects of project construction and operation on changes in distribution and abundance of aquatic insects. •Effects of the proposed project construction and operations on sediment transport and materials recruitment downstream. 4.2.4 Terrestrial Resources •Effects of project construction and operation on the distribution and abundance of plant species designated by the Forest Service as sensitive. •Effects of project construction and operation on the distribution and abundance of invasive plant species. •Effects of project construction and operation on forest/scrub,wetland,riparian, and littoral habitats used by wildlife on Grant Lake and Grant Creek. •Effects of project construction and operation on wildlife critical life stages, distribution,and abundance,including: o Wildlife species designated by the Forest Service as Management Indicator Species,such as:brown bear,moose,bats and mountain goat. o Wildlife species designated by the Forest Service as Species of Special Interest,such as:Canada lynx,wolverine,river otter,marbled murrelet, Townsend’s warbler,Northern goshawk,bald eagle,and osprey. o Wildlife species designated by the State of Alaska as Species of Special Concern,such as:olive-sided flycatcher,gray-cheeked warbler, blackpoll warbler,and brown bear. •Effects of project operation on availability of fish as food for wildlife. •Effects of project construction and operation on wildlife movement as well as displacement and disruption of seasonal movement patterns through the 20100823-3012 FERC PDF (Unofficial) 08/23/2010 19 project area. •Effects of project construction and operation on increased access to harvestable wildlife. •Effects of project operation on littoral wildlife habitat at the narrows between Upper and Lower Trail Lakes. •Effects of project construction and operation on breeding and rearing habitat and nesting success of shorebirds and waterfowl,and other avian use in and around Grant Lake and Inlet Creek. •Effect of project transmission lines on raptors and other birds,including electrocution and collision hazards. 4.2.5 Threatened and Endangered Species •No federally listed threatened and endangered species are known to occur in the project vicinity.No issues regarding threatened and endangered species have been identified at this time. 4.2.6 Recreation Resources and Land Use* •Effects of project construction and operation on existing recreation and land use in and around Grant Lake,Grant Creek,Falls Creek,Lower Trail Lake and the Narrows. •Effects of project construction and operation on current and future (over the term of a license)recreation demand and use,including barrier-free access and the need for and benefit of interpretive opportunities (such as interpretive signs)at the project. •Effects of project construction and operation on local residential land use. •Effects of project construction and operation on the roadless character of the Kenai Mountains Roadless Area. •Effects of the development of a project access road on the existing Vagt Lake Trail as well as the INHT right of way. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 20 •Effects of recreational use at Grant Lake on the potential to increase recreational use at nearby water bodies. 4.2.7 Aesthetic Resources •Effects of project construction,facilities,and operation on the aesthetic values of the project area,including noise and light pollution. •Effects of the transmission line on Scenic Byway viewpoints from the Seward “All American”Highway and views from existing recreation trails such as the Iditarod National Historic Trail. 4.2.8 Cultural Resources •Effects of project construction and operation on historical and archaeological resources,and properties of traditional religious and cultural importance to Native Alaska tribes. •Effects of Grant Lake reservoir fluctuations and reduced flows in Grant Creek on archaeological resources located along the reservoir shoreline. •Effects of project construction and operation on subsistence use (hunting, fishing,and gathering)involving Native Alaskan tribes and non-Native Alaskans. 4.2.9 Socioeconomics •Effects of project construction and operation on local,tribal,and regional economies. 4.2.10 Developmental Resources •Effects of recommended environmental measures on project generation and economics. •Effects of construction,operation,and maintenance on project economics. 5.0 POTENTIAL STUDIES Depending upon the findings of studies completed by Kenai Hydro,L.L.C.and the 20100823-3012 FERC PDF (Unofficial) 08/23/2010 21 recommendations of the consulted entities,the applicant will consider,and may propose certain measures to enhance environmental resources affected by the project as part of the proposed action.The following are the applicant’s initial study proposals to fill information gaps to address the above issues and determine appropriate environmental measures.Further studies may need to be added to this list based on comments provided to the Commission from interested participants,including Indian tribes.Kenai Hydro, L.L.C.proposes the following: Geology and Soils •Grant Lake Shoreline Erosional Processes Study Water Resources •Hydrology of Grant Lake/Grant Creek and Falls Creek Watersheds •Water Quality of Grant Lake/Grant Creek and Falls Creek Watersheds Fisheries and Aquatic Resources •Grant Lake Fish Resources Distribution and Abundance •Grant Creek Fish Resources Abundance and Distribution •Grant Creek Habitat Modeling/Instream Flow Analysis •Falls Creek Fish Resources Distribution and Abundance Terrestrial Resources •Wildlife and Bird Surveys and Habitat Use Mapping •Vegetation Surveys and Mapping •Wetlands Mapping Cultural Resources •Subsistence and Cultural Use Study •Historical and Archeological Resources Survey Recreation Resources and Land Use •Recreation Use Assessment •Land Use and Facilities Study (includes lands,roads,and construction practices) 20100823-3012 FERC PDF (Unofficial) 08/23/2010 22 Visual and Aesthetic Resources •Aesthetic/Visual Resources Study Socioeconomics •Socioeconomics assessment to assess project-related effects on the local and regional economy. 6.0 EA PREPARATION SCHEDULE At this time,we anticipate the need to prepare a draft and final EA.The draft EA will be sent to all persons and entities on the Commission’s service and mailing lists for the Grant Lake Project.The EA will include our recommendations for operating procedures,as well as environmental protection and enhancement measures that should be part of any license issued by the Commission.All recipients will then have 30 days to review the EA and file written comments with the Commission.All comments on the draft EA filed with the Commission will be considered in preparation of the final EA. The major milestones,including those for preparing the EA,are as follows:5 Major Milestone Target Date Scoping Meetings June 2-3,2010 License Application Filed October 2013 Ready for Environmental Analysis Notice Issued January 2014 Deadline for Filing Comments,Recommendations and Agency Terms and Conditions/Prescriptions March 2014 Draft EA Issued September 2014 Comments on Draft EA Due November 2014 Final EA Issued February 2015 If Commission staff determines that there is a need for additional information or additional studies,the issuance of the Ready for Environmental Analysis notice could be delayed.If this occurs,all subsequent milestones would be delayed by the time allowed for the applicant to respond to the Commission’s request. 5 This schedule assumes that a draft and final EA would be prepared.If a draft and final EIS is prepared the target dates for comments on the draft EIS and deadline for filing modified agency recommendations may need to be revised. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 23 7.0 PROPOSED EA OUTLINE The preliminary outline for the Grant Lake Project EA is as follows: TABLE OF CONTENTS LIST OF APPENDICES LIST OF FIGURES LIST OF TABLES ACRONYMS AND ABBREVIATIONS EXECUTIVE SUMMARY 1.0 INTRODUCTION 1.1 Application 1.2 Purpose of Action and Need for Power 1.3 Statutory and Regulatory Requirements 1.3.1 Federal Power Act 1.3.1.1 Section 18 Fishway Prescriptions 1.3.1.2 Section 4(e)Conditions 1.3.1.3 Section 10(j)Recommendations 1.3.2 Clean Water Act 1.3.3 Endangered Species Act 1.3.4 Coastal Zone Management Act 1.3.5 National Historic Preservation Act 1.3.6 Magnuson-Stevens Fishery Conservation and Management Act 1.4 Public Review and Comment 1.4.1 Scoping 1.4.2 Interventions 1.4.3 Comments on the Application 1.4.4 Comments on Draft EA 2.0 PROPOSED ACTION AND ALTERNATIVES 2.1 No-action Alternative 2.2 Proposed Action 2.2.1 Proposed Project Facilities 2.2.2 Project Safety 2.2.2 Proposed Project Operation 2.2.3 Proposed Environmental Measures 2.2.4 Modifications to Applicant’s Proposal—Mandatory Conditions 2.3 Staff Alternative 2.4 Staff Alternative with Mandatory Conditions 2.5 Alternatives Considered but Eliminated from Detailed Study 20100823-3012 FERC PDF (Unofficial) 08/23/2010 24 3.0 ENVIRONMENTAL ANALYSIS 3.1 General Description of the River Basin 3.2 Scope of Cumulative Effects Analysis 3.2.1 Geographic Scope 3.2.2 Temporal Scope 3.3 Proposed Action and Action Alternatives 3.3.1 Geologic and Soil Resources 3.3.2 Aquatic Resources 3.3.3 Terrestrial Resources 3.3.4 Threatened and Endangered Species 3.3.5 Recreation and Land Use 3.3.6 Cultural Resources 3.3.7 Aesthetic Resources 3.3.8 Socioeconomics 3.4 No-action Alternative 4.0 DEVELOPMENTAL ANALYSIS 4.1 Power and Economic Benefits of the Project 4.2 Cost of Environmental Measures 4.3 Comparison of Alternatives 5.0 CONCLUSIONS AND RECOMMENDATIONS 5.1 Comparison of Effects of Proposed Action and Alternatives 5.2 Comprehensive Development and Recommended Alternative 5.3 Unavoidable Adverse Effects 5.4 Recommendations of Fish and Wildlife Agencies 5.5 Consistency with Comprehensive Plans 6.0 FINDING OF NO SIGNIFICANT IMPACT (OR OF SIGNIFICANT IMPACT) 7.0 LITERATURE CITED 8.0 LIST OF PREPARERS APPENDICES 8.0 COMPREHENSIVE PLANS Section 10(a)(2)of the FPA,16 U.S.C.section 803(a)(2)(A),requires the Commission to consider the extent to which a project is consistent with federal and state comprehensive plans for improving,developing,or conserving a waterway or waterways affected by a project.We have a preliminarily identified and reviewed the plans listed below that may be relevant to the proposed Grant Lake Project.Agencies are requested to review this list and inform the Commission staff of any changes.If there are other comprehensive plans that should be considered for this list that are not on file with the Commission,or if there are more recent versions of the plans already listed,they can be filed for consideration with the Commission according to 18 C.F.R. 2.19 of the 20100823-3012 FERC PDF (Unofficial) 08/23/2010 25 Commission’s regulations.Please follow the instructions for filing a plan at http://www.ferc.gov/industries/hydropower/gen-info/licensing/complan.pdf. Alaska Alaska Department of Fish and Game.Anchor River/Fritz Creek Critical Habitat Area,June 1989;Anchorage Coastal Wildlife Refuge,February 1991;Kachemak Bay/Fox River Flats Critical Habitat Areas,December 1993;McNeil River State Game Refuge &State Game Sanctuary (draft),November 1995;Mendenhall Wetlands State Game Refuge,March 1990;Minto Flats State Game Refuge, March 1992;Palmer Hay Flats State Game Refuge,November 1986;Trading Bay State Game Refuge &Redoubt Bay Critical Habitat Area,July 1994;Susitna Flats State Game Refuge,March 1988;Tugidak Island Critical Habitat Area,June 1995; Yakataga State Game Refuge,June 1999.Juneau,Alaska. Alaska Department of Fish and Game.1998.Catalog of waters important for spawning,rearing or migration of anadromous fishes.November 1998.Juneau, Alaska. Alaska Department of Fish and Game.1998.Atlas to the catalog of waters important for spawning,rearing or migration of anadromous fishes.November 1998.Juneau,Alaska. Alaska Department of Fish and Game.2000.Kenai Peninsula brown bear conservation strategy.Juneau,Alaska.June 2000. Alaska Department of Fish and Game.1997.Kenai River comprehensive management plan.Juneau,Alaska.December 1997. Alaska Department of Natural Resources.1984.Fish Creek management plan. Anchorage,Alaska.August 1984. Alaska Department of Natural Resources.2004.Alaska's Outdoor Legacy: Statewide Comprehensive Outdoor Recreation Plan (SCORP)2004-2009.Juneau, Alaska.July 2004. Federal Bureau of Land Management.1981.South central Alaska water resources study: Anticipating water and related land resource needs.Anchorage,Alaska. October 1,1981. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 26 Forest Service.2002.Chugach National Forest revised land and resource management plan.Department of Agriculture,Anchorage,Alaska.May 31,2002. U.S.Fish and Wildlife Service.Undated.Fisheries USA:the recreational fisheries policy of the U.S.Fish and Wildlife Service.Washington,D.C. 9.0 FERC OFFICIAL MAILING LIST If you want to receive future mailings for this project and you did not receive notice of these meetings from the Commission,please send your request by mail to: Kimberly D.Bose,Secretary,Federal Energy Regulatory Commission,888 First Street, NE,Room 1A,Washington,DC 20426.All written requests to be added to the Commission’s mailing list must clearly identify the following on the first page:“Grant Lake/Falls Creek Hydroelectric Project Nos.13212-00 and 13211-0011.”You may use the same method to remove your name from the Commission’s mailing list for this project. Also,please notify the applicant if you would like to be placed on their Distribution List for this project. Register online at http://www.ferc.gov/esubscribenow.htm to be notified via email of new filings and issuances related to this or other pending projects.For assistance, please contact FERC Online Support at FERCOnlineSupport@ferc.gov or toll free (806) 208-3676,or for TTY,(202)502-8659. 20100823-3012 FERC PDF (Unofficial) 08/23/2010 Document Content(s) P-13212-001Letter.DOC.................................................1-32 20100823-3012 FERC PDF (Unofficial) 08/23/2010 ALASKA STATE LEGISLATURE SESSION ADDRESS INTERIM ADDRESSES: Alaska State Capitol 112 Mill Bay Road 345 W. Sterling Hwy.#102 Juneau, AK 99801-1182 Kodiak, AK 99615 Homer, AK 99603 (907) 465-4925 (907) 486-4925 (907) 235-0690 Fax (907) 465-3517 Fax (907) 486-5264 Fax (907) 235-4008 Senator Gary Stevens Senate President September 14, 2010 To whom it may concern: The provision of clean, affordable, renewable energy for Alaska in the 21st century is foremost among the many challenges confronting our state. Homer Electric Association’s (HEA) proposed Grant Lake Hydroelectric Facility would be a significant step in achieving this objective. The Grant Lake Hydro project, at the headwaters of the Kenai River watershed near Moose Pass, would supply 5 MW of low impact, low cost hydro energy to the residents of the Kenai Peninsula. The displacement of conventional generation would conserve dwindling Cook Inlet gas supplies; and secure long term price stability. Initial feasibility studies and the Federal Energy Regulatory Commission’s granting of a licensing path recommend that this project’s potential be thoroughly investigated. The enhanced flexibility in systems operation afforded by this project will also facilitate the development of other non-dispatchable renewables, such as wind. Clean, affordable energy and jobs for Alaskans: that’s an energy solution we can all agree upon. I endorse and applaud Homer Electric Association’s efforts to make this project a reality. Sincerely, Senator Gary Stevens Senate President Alaska State Legislature State Capitol, Room 102 345 W. Sterling Highway Juneau, AK 99802 Suite 102B Phone: 465-2689 Homer, AK 99603 Fax: 465-3472 Phone: 235-2921 Toll Free (800) 665-2689 Fax: 235-4008 Representative_Paul_Seaton@legis.state.ak.us REPRESENTATIVE Paul Seaton District 35 September 14, 2010 To whom it may concern: The provision of clean, affordable, renewable energy for Alaska in the 21st century is foremost among the many challenges confronting our state. Homer Electric Association’s (HEA) proposed Grant Lake Hydroelectric Facility would be a significant step in achieving this objective. The Grant Lake Hydro project, at the headwaters of the Kenai River watershed near Moose Pass, would supply 5 MW of low impact, low cost hydro energy to the residents of the Kenai Peninsula. The displacement of conventional generation would conserve dwindling Cook Inlet gas supplies; and secure long term price stability. Initial feasibility studies and the Federal Energy Regulatory Commission’s granting of a licensing path recommend that this project’s potential be thoroughly investigated. The enhanced flexibility in systems operation afforded by this projects will also facilitate the development of other non-dispatchable renewables, such as wind. Clean, affordable energy and jobs for Alaskans: that’s an energy solution we can all agree upon. I endorse and applaud Homer Electric Association’s efforts to make this project a reality if it proves to be economically and environmentally sound. Sincerely, Representative Paul Seaton