HomeMy WebLinkAboutCraig Biomass Fuel Complete Application
(907) 826-3275 ● Fax (907)826-3278 ● www.craigak.com ● PO Box 725, Craig, Alaska 99921 Sep
September 9, 2010
Alaska Energy Authority
AEA 11-005 Grant Application Round 4
813 West Northern Lights Blvd.
Anchorage, AK 99503
Dear Alaska Energy Authority Staff:
Attached you will find the City of Craig’s application for funding from the Renewable Energy
Grant Fund.
The city proposes to acquire equipment that will dry sawmill wood waste and chips to a moisture
content that makes the fuel ideal for combustion in commercial wood boilers. The project
supports the City of Craig’s wood boiler facility because it would eliminate the single greatest
operational difficulty we have with the wood boiler—managing fuel that is too wet to properly
burn in the boiler.
The project would be scaled to produce combustible wood fuel for other public applications in
Alaska, increasing renewable energy opportunities for other Alaska communities.
Drying wood waste to a condition that makes it ideally suited for large-scale combustion is a
natural extension of the Craig wood boiler project. Doing so improves efficiency of our local
wood boiler and assists Craig in increasing the number of facilities that can benefit from the low
cost, abundant, and renewable wood fuel resource we have in Southeast Alaska.
Thank you for considering our application.
Sincerely,
Jon Bolling
City Administrator
Renewable Energy Fund Round IV
Grant Application
AEA 11-005 Application Page 1 of 16 7/21/2010
SECTION 1 – APPLICANT INFORMATION
Name (Name of utility, IPP, or government entity submitting proposal)
City of Craig, Alaska
Type of Entity:
Municipality
Mailing Address
PO Box 725 Craig, AK 99921
Physical Address
500 Third Street Craig, AK 99921
Telephone
826-3275
Fax
826-3278
Email
jbolling@aptalaska.net
1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER
Name
Jon Bolling
Title
City Administrator
Mailing Address
PO Box 725 Craig, AK 99921
Telephone
826-3275
Fax
826-3278
Email
jbolling@aptalaska.net
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
An independent power producer in accordance with 3 AAC 107.695 (a) (1), or
X A local government, or
A governmental entity (which includes tribal councils and housing authorities);
√Yes
or
No
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
or
No
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
or
No
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
or
No
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 2 of 16 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)
Type in your answer here and follow same format for rest of the application.
Biomass Fuel Dryer Project
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.
Answer here.
The physical location of the project is the Craig Wood Fired Boiler Facility at 1300 Water Tower Road;
and Viking Lumber Company. Sawmill at Mile 7, Craig-Klawock Highway. The communities that will
benefit from the project are the City of Craig, and other communities where energy facilities will burn
waste wood dried by the project.
2.3 PROJECT TYPE
Put X in boxes as appropriate
2.3.1 Renewable Resource Type
Wind X Biomass or Biofuels
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 Design and Permitting
Feasibility X Construction and Commissioning
Conceptual Design
2.4 PROJECT DESCRIPTION
Provide a brief one paragraph description of your proposed project.
The project consists of acquiring and installing equipment that will dry approximately 13,000
tons of wood waste per year produced as a byproduct of the sawmilling process. Dried wood
would then be burned in publicly owned facilities to provide reduced-cost, district-style heat for
these facilities at reduced cost to the public entities that operate these facilities. The project
enables recipient facilities to burn renewable fuels to provide heat at lower costs over time than
the cost to burn fossil fuels to produce heat.
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 3 of 16 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.)
There are three public benefits from the project. First, the City of Craig will receive a higher
quality of wood fuel—i.e. dried to an ideal moisture content for combustion in wood boilers—for
its wood boiler, at a below market price. The higher quality wood fuel will reduce the City’s
costs to operate its wood boiler facility and also reduce the cost to heat the three buildings served
by the wood boiler. Second, public facilities in other Alaska communities will also benefit by
burning the same fuel, reducing heating costs and relying more on renewable, local fuel sources.
Third, the project improves the value of wood logged and milled from the Tongass National
Forest, increasing the benefit to the public from publicly owned stands of timber.
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.
Expected project costs total approximately $600,000. The proposed sources of funds are
1. Viking Lumber Company (labor & materials) $250,000
2. AEA Renewable Energy Fund $350,000
2.7 COST AND BENEFIT SUMARY
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. $350,000
2.7.2 Other Funds to be provided (Project match) $250,000
2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $600,000
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)
$600,000
2.7.5 Estimated Direct Financial Benefit (Savings) $127,880 first year, with
potential to $2 million.
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.)
$
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 4 of 16 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.
Craig City Administrator Jon Bolling will oversee the project. The City will hire a qualified
inspector to oversee installation of the wood drying equipment.
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.)
January 28, 2011: Meet with Viking Lumber to negotiate lease for wood drying equipment.
January 28-March 17: Initiate public notice and review process required for leasing city-owned
property, conduct public hearings as required before Craig city council, and finalize lease
terms for council consideration.
July 1: Solicit proposal(s) for project inspector.
July 1-July 15: Finalize design and specification details for acquisition of drying equipment.
July 1: Begin site work improvements for placement of wood drying equipment.
July 15- August 15: Solicit bids for acquisition of drying equipment.
July 31: Sign agreement with project inspection firm.
August 19: Award bid to successful bidder.
November 21: Receive equipment on site.
December 1: Begin assembly of drying equipment.
February 29, 2012: Complete installation and begin testing.
March 1: Certify equipment as operational
March 5: First load of dried wood fuel delivered to Craig wood boiler project.
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.)
Begin site work Jul 1, 2011
Completion of bid documents Jul 15, 2011
Vendor selection and award Aug 18, 2011
Receive drying equipment Nov 21, 2011
Begin assembly of drying equipment Dec 1, 2011
Integration and testing of equipment Feb 29, 2012
Final acceptance and start-up March 1, 2012
Operations reporting Per grant
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
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 5 of 16 7/21/2010
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.
Personnel: City personnel used to accomplish the project include the following persons.
1. Jon Bolling, City Administrator. Mr. Bolling will oversee all components of the project. He
will execute all official documents relevant to the project. See resume at Attachment A.
2. Joyce Mason, City Treasurer. Ms. Mason will complete required grant reports, oversee
issuance of purchase orders, be responsible for grant accounting, will assist with the
procurement processes, and be the point of contact between AEA auditors and the City of
3.
Craig. See resume at Attachment A.
Brian Templin, City Planner. Mr. Templin will assist with permitting and environmental
documentation needed by the project.
1.
Partners: Project partners will include the following.
Viking Lumber Company. Viking Lumber Company will partner with the City of Craig on
this project. The Company will apply to lease the wood drying equipment from the City o
Craig. If approved, the lease agreement will have Viking Lumber Company operate and
maintain the equipment for the benefit of the public at the City of Craig, other public sector
recipients of dried wood fuel, and third party recipients. Consistent with the requirements o
Section 16.02.030 of the Craig Municipal Code, the drying equipment shall be leased at
f
f
a
market rate of not less than eight percent per year of the equipment’s fair market value.
t
lers.
supply biomass to the drying equipment and subsequently store and deliver the dried product.
1.
Viking Lumber Company brings two important assets to the partnership. One, the Company
owns and manages the biomass resource necessary for the project. The resource is available
in substantial, existing stockpiles, and from future milling operations. Nearly all of the logs a
the mill originate on public national forest lands. Two, Viking Lumber Company personnel
have the operational experience and ability to install and operate equipment needed to dry the
biomass raw material to a condition that makes it ideal for combustion in wood-fired boi
The Company is in an excellent position to manage its wood waste stream to efficiently
Contractors: Contractors will include the following.
Project Inspector. The project inspector will review contractor submittals for compliance
with requirements listed in the bidding documents. The inspector will also make regular, on-
site visits to ensure proper installation of the drying equipment, and assist with project start
up and completion of punch-list items.
3.5 Project Communications
Discuss how you plan to monitor the project and keep the Authority informed of the status.
As it has done with past successful projects, regular (weekly or semi-weekly) progress meetings
will occur between City staff, Viking Lumber Company representatives, and project contractor
The meetings will detail recent accomplishments, anticipated goals for the coming one to two
week period, review the project budget, address unanticipated problems, and attend to other
project needs. AEA sta
s.
ff would hold a standing invitation to join in the meetings either in person
r via teleconference. o
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 6 of 16 7/21/2010
3.6 Project Risk
Discuss potential problems and how you would address them.
Virtually all capital projects include some degree of risk of potential problems. Many of these
can be prevented with proper planning. However even the best planned projects encounter
unanticipated problems. When such problems occur it is incumbent upon the project staff t
consider all options for alleviating them. The regular progress meetings proposed in Section 3.5
o
rs
r
weather on Prince of Wales
land typically allows for periodic times of production between inclement weather events, so
of this application are effective in building good relationships between the project parties,
relationships that allow problems to be addressed cooperatively when they do appear.
One potential problem is that given the likely award date of grants from this fourth round of
funding, and the long lead time between the time the dryer is ordered and the time it arrives on
Prince of Wales Island, erection of the drying equipment will take place during the winter
months. The inclement weather conditions and lack of daylight will limit productivity of worke
charged with installing the equipment. Some work items will no doubt have to be postponed fo
eather conditions favorable to outside work. However, winterw
Is
some installation can occur between December and February.
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.
• ou are requesting funding for If some work has already been completed on your project and y
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.
The potential amount of available biomass energy available through this project is significant.
The Viking Lumber Mill typically produces more than 13,000 tons of biomass fuel each year. At
35 percent moisture content, local biomass fuel contains about 11.25 million Btu per ton.
Therefore one ton of dried fuel can supply the full heating demand of an 11 million Btu system
for one hour. For perspective,
the City of Craig’s wood boiler system, rated at 4 million Btu per
from
ood fuels versus fossil fuels; elimination of a net increase in greenhouse gas
hour, is designed to supply the energy needs of 62,000 square feet of floor space and 113,000
gallons of heated pool water.
There are many well-known benefits of using wood heat in both domestic and public/commercial
applications. These include keeping in local communities the dollars spent on heating fuel;
creation of wood fuel supply jobs in local economies; elimination of sulfur range emissions
ombustion of wc
emissions from combustion of wood fuels versus fossil fuels; and use of renewable, locally
produced fuels.
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 7 of 16 7/21/2010
timber available from the National Forest for milling
perations. Because the biomass resource is frequently directly correlated to the volume of
ill National Forest wood, the availability of biomass byproduct
In the case of Southeast Alaska, one potential drawback to using biomass is the uncertainty
surrounding the timber program on the Tongass National Forest. There are groups that actively
oppose and litigate timber sales from public land, and others that oppose many of the sales
offered by the US Forest Service. The appeals and litigation that result from this opposition
increase the uncertainty of the volume of
o
production from sawmills that m
can vary substantially from year to year
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.
The project proposed here would install new equipment that would dry biomass fuel produced as
a byproduct of the local milling process. There is no equipment in place locally today that can dry
biomass fuel.
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.
Existing fossil fuel energy resources on Prince of Wales Island include conventional diesel and
gasoline bulk fuel storage, and bulk storage of propane. Existing vendors provide home delivery
via commercial tanker vehicle.
Electric energy resources for most of Prince of Wales Island are provided by an investor-owned
utility using hydro generation.
The project proposed here will not impact existing energy infrastructure and resources.
4.2.3 Existing Energy Market
Discuss existing energy use and its market. Discuss impacts your project may have on energy
customers.
The existing energy market for biomass fuels is just developing. The City of Craig’s wood boiler
project is the first of potentially many more biomass heating applications in Southeast Alaska. As
oil prices increase again ($73.30 per barrel for Alaska North Slope crude as of August 30, 2010—
more than twice as high as the 2009 low of $31.99 on January 15) the market for alternative fuels,
especially locally produced renewable fuels, will increase.
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
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 8 of 16 7/21/2010
• Anticipated barriers
• Basic integration concept
• Delivery methods
1. Specific description. The wood drying project proposed here would include placement of
wood drying equipment in close proximity to stockpiles/generation point of wood waste.
Green waste at estimated 50 percent moisture content would be conveyed to a receiving poi
that is the first step in the drying process. Conveyor a
nt
nd then drying systems would subject
the green wood to heated air within a rotary drum where between thirty to fifty percent of the
ould then convey to bulk storage and loading area for shipment to wood boilers.
Please see the sample line drawing at Attachment E.
2.
moisture content would exhaust. The dried fuel mixture, ranging from 25-35 percent moisture
content, w
Optimum installed capacity. The optimum installed capacity of is approximately 15,000 tons
per year.
. Anticipated capacity factor3. We understand the term “capacity factor” to mean the ratio of
ction operated at full capacity. In this case, we anticipate the wood drying unit to
operate at a capacity factor of 85 percent.
4.
energy produced in a given time period with the quantity of energy produced had the unit of
produ
Anticipated annual generation. Production of dried wood should equal a volume of 13,000
tons.
Anticipated barriers
5. . From a technical standpoint, the function of the equipment intended for
this project is simple—wet wood waste from the mill is dried to produce combustible fuel that
is ideal for use in commercial-sized heating systems. Some of the dry wood fuel produc
used to fire the unit to dry additional wood fuel. Barriers include some uncertainty in the
supply of timber from the Tongass National Forest. The timber program in the Tongass has
been the subject of much attention for the past twenty years. Timber sales released by the U
Forest Service are frequently appealed and litigated, making supplies of wood to mills
unpredictable. With an interest among mills in retooling toward young growth trees, and
with older logging areas on the Tonga
ed is
S
the
ss nearing a point where young growth could provide an
ongoing volume of timber, industry watchers hope that the conflicts over National Forest
us
6.
logging will diminish with the movement toward timber harvest of young growth areas vers
and with less reliance on old growth. It should be noted that this transition is commonly
believed to be still thirty years away.
Basic integration concept. The wood drying equipment will be sited to collect wood waste
from the milling process via automated conveyor belts from the milling blades to a receiving
area, where the green waste begins the drying process described in item 1 of this section. At
the end of the drying line the product is stored in bulk under cover or loaded in shipping
containers for transport to wood boiler customers, either in steel shipping containers or by
open truck to more local markets, including the Craig wood boiler facility. The wood drying
project better integrates wood from local forests by reducing an unmarketable byproduct from
local mills and, much like dried lumber, adds value to the wood to satisfy a market demanding
d
the dried product. In this way, the waste wood is integrated both into the milling process an
into the existing and growing energy market.
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 9 of 16 7/21/2010
During the Renewable Energy Fund Round III grant application process in 2009, the city
the
oiler project. That supplement is
included with this application as Attachment C.
received a request from AEA staff to supplement its application with information about
wood drying system installed with the Craig wood b
7. Delivery methods. Delivery methods will be via common barge carrier and via existing
highways to Prince of Wales Island area customers.
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.
Equipment and facilities will be owned by the City of Craig. Viking Lumber Company will apply
t
gents will be guaranteed in the lease agreement.
to lease and operate the wood drying equipment. Access to the project site, and to the equipmen
by the City of Craig and its a
4.3.3 Permits
Pro e permitting and how you intend to address vid the following information as it may relate to
outstanding permit issues.
• List of applicable permits
• Anticipated permitting timeline
• Identify and discussion of potential barriers
1. Coastal Project Consistency Review – The only item on the Coastal Project Questionnaire that
will need review is the DEC Air Quality section. That permit will be handled separately from
the ACMP process. A full consistency review will require 50 days from final project design.
ct will occur on land that is already developed and is unlikely to require a
mitting barriers.
2. Given that this proje
permit from the State of Alaska or federal government, it is unlikely that the project will face
potential per
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
1. Threatened or Endangered Species. Project will take place on previously developed upland.
There are no known threatened or endangered species within the project area.
2. Habitat Issues. Project will take place on previously developed upland. No habitat will be
impacted by the project.
3. Wetlands and other Protected Areas. Project will take place on previously developed upland
and will not require fill or disturbance of wetlands or protected areas.
4. Archaeological and Historical Resources. Although there are numerous historical and
archeological sites within the region, the project will take place on previously developed
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 10 of 16 7/21/2010
upland. The project site is not a catalogued archeological or historical site. If archaeological
or historical resources are discovered during the course of construction or equipment
installation the project manager will immediately notify the State Historical Preservation
Office.
5. Land Development Constraints. Project will take place on land held by Viking Lumber
Company, is sufficient for the project scope and will not impact other development in the
area.
6. Telecommunications Interference. The project will not receive or transmit signals that will
interfere with telecommunications. The project location is not adjacent to telecommunications
facilities.
7. Aviation Considerations. The project is located near the local seaplane base, but is not within
the flight approach for Klawock Harbor. The project is also located approximately 2.5 miles
from the Klawock Airport, but is not located within published approaches to the airport. The
height of completed project construction and equipment will be similar to surrounding
buildings and will not pose any danger or impediment to aviation.
8. Visual, Aesthetics Impacts. The project will be located in an area that has been developed as a
sawmill, chip storage area, log sort yard and other heavy industrial uses. The project is
consistent with the surrounding uses and will not have a negative visual or aesthetic impact.
9. Other Potential Barriers. No other potential barriers have been identified.
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
Total C
The tot drying system, shipment of the
system s Isla d, ins llation g equipment, and making the system
operati ,000. T e sou ue are estimated as follows.
stem
Erection of drying equipment $ 110,000
Contingency $ 35,000
ost
al cost of this project, including procurement of the wood
to Prince of Wale n ta of the dryin
ons is estimated at $600 h rces of reven
Procurement of wood drying sy $ 350,000
Freight $ 15,000
Site work $ 15,000
Concrete foundation $ 50,000
Electrical connection $ 25,000
$ 600,000 Total
Requested fund from the Renewable Energy Fund: $350,000
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 11 of 16 7/21/2010
Should e a l se be een th city a umber
Compa urce, s own in-
ind match, to assemble the drying equipment on site and under the supervision of the technician
t.
d capital cost of proposed renewable energy system $ 350,000
Matching funds.
the Craig city council eventually approv ea tw e nd Viking L
ny, the company commits to providing match from another so including it
k
provided by the vendor of the wood drying equipmen
Match from Viking Lumber Company $ 250,000
Projecte
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.)
The anticipated O&M costs would be borne by Viking Lumber Company, the operator of the
wood drying equipment, per the terms of a subsequent lease agreement between the operator and
the City of Craig. The lease will contain penalties for failure by the operator to operate and
maintain the equipment in good working order. The lease will provide for the operator to share
operating data with the city, including records, receipts, logs, correspondence, etc. of maintenance
fforts. While the operator of the wood drying equipment shall be responsible for O&M costs, the
sible party to AEA to ensure compliance with the terms of any
ning to O&M requirements
e
City of Craig will be the respon
grant agreements, including provisions of the grant agreement pertai
of the equipment.
4.4 P.3 ower Purchase/Sale
The power purchase/sale information should include the following:
• 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
According to Viking Lumber Company, potential customers of the wood drying equipment
etchikan,
nd Juneau, Sealaska’s Juneau Headquarters, Sitka Airport, Mt. Edgecombe High School,
between $150 and $200 per ton.
for the project will be at least eight percent of the equipment’s
include the City of Craig, as a priority customer, U.S. Coast Guard Stations in Sitka, K
a
SEARHC Hospital in Sitka, U of A campus in Sitka, the Haines Borough, and the City of Juneau.
Expected purchase price for dried wood fuel ranges
Rate of return to the City of Craig
fair market value, per section 16.02 of the Craig Municipal Code (to review the city’s lease rate,
see www.craigak.com/cmc/CMC0507Title16.pdf)
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
ources your numbers are based on here.
s
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 12 of 16 7/21/2010
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
1. Lifetime potential annual fuel displacement. At a twenty-year equipment life, assuming
annual sales of 13,000 dry tons of biomass, the potential annual fossil fuel displacement is
approximately 900,000 gallons. At an average diesel cost of $3.00 per gallon, the average
annual gross cost displacement is $2.7 million.
2.
Anticipated annual revenue. Annual revenue is estimated at $1,950,000 (9,000 tons at
$200/ton; 1,000 tons at $150/ton).
3.
Potential additional annual incentives. The US Department of Agriculture offers the
Collection, Harvest, Storage, and Transportation Matching Payment Program for users of
biomass of the type proposed for production in this application. The program can, for up to
two years, halve the cost of purchasing biomass.
4.
Potential additional annual revenue streams. The wood drier is sized to provide publi
biomass benefit to other users (see, for example, the recent Juneau Empire article at
http://juneauempire.com/stories/102809/loc_509936043.shtml; and Anchorage Daily New
c
s
editorial at http://www.adn.com/opinion/view/story/997301.html --copies also attached).
5.
Non-economic Benefits. Depending on how one chooses to measure non-economic benefits,
the following could apply to this proposed project.
A.
y agencies consider
emissions from combustion of wood as green house gas neutral.
B. orests are managed on a
sustainable basis, providing for a perpetual supply of wood fuel.
C.
at can interrupt fuel supply and cost,
compared with internationally shipped fuels.
D.
Reduction in fossil fuel emissions. Wood used to displace fossil fuel combustion
eliminates sulfur range emissions from combustion. Further, man
Renewable fuel source. Wood is a renewable resource. National F
Local control of commodity. The fact that the wood resource is locally/domestically
controlled eliminates some of the variables th
Beneficial use of state lands on Prince of Wales Island. On June 28, 2010, while visiting
Prince of Wales Island, Governor Parnell signed House Bill 162, creating the Southeast
State Forest. The bill designated more than 25,000 acres of State land as state forest, of
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 13 of 16 7/21/2010
t
a
s, can
be put to productive use as a source of renewable heating fuel for Alaska residents.
which more than 13,000 acres are within the Prince of Wales Island area. The state fores
designation means that the Alaska Division of Forestry will manage the new forest for a
long-term timber supply and invest in pre-commercial thinning, while still allowing for
multitude of other uses. Wood not well suited for dimensional lumber or other milled
uses, as well as wood waste resulting from milling of wood originating on State land
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
• ommitment to reporting the savings and benefits C
1. Business structure. As noted above, the City of Craig proposes to acquire wood drying
equipment and lease the equipment, at the market rate, to a local sawmill that has an ongoing
supply of wood waste that the mill can dry into a fuel intended for combustion in commercial-
sized boilers. The lease would govern:
A. Placement of equipment, including where the equipment would be installed, and
include provisions for City and granting agency personnel to access and inspect the
equipment;
B. Oversight of the assembly of the wood drying equipment, and assurances that the
equipment is installed in compliance with vendor specifications.
C. Operation and maintenance of the wood drying equipment. The lessee would assume
responsibility for property operation and maintenance of the drying equipment, and
keeping the equipment in good working order.
D. Public compensation for use of the equipment, at a market rate equal to at least eight
percent of the equipment’s fair market value.
E. ipmentOperational life of the equ , providing for operation of the equipment for the
duration of its useful life.
F. Terms of the contribution of the lessee, including in-kind and other contributions to the
acquisition, installation, operation, and maintenance of the equipment.
2. Financing of operation and maintenance. The City of Craig proposes that operation and
maintenance of the equipment fall upon the lessee as a condition of leasing the equipment.
3. Other operational issues. The City intends to work closely with the operator of the equipment
to jointly address any unexpected operational matters. As noted in Section 3.5, above, regular
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 14 of 16 7/21/2010
meetings between the City and the operator are needed to work on operational issues that
occur during the course of construction and operation of the facility.
4. Operational costs and project support. Operational costs of the wood drying equipment include
• Labor $375,000 (five FTE at $75,000 year (wages and benefits))
• Electricity $49,400 (300,000 KwH/year at $0.15/KwH; plus 12 percent fuel surcharge)
• Fuel $30,000
• Parts & Maintenance $50,000
• Loading equipment $100,000 ($100/hour at 1,000 hours)
• Freight $600,000 ($50/ton at 12,000 tons for common carrier or barge charter deliveries)
• Depreciation & Insurance $35,000
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.
Award preparation. Prior to making a decision on whether to apply for funding from the
Renewable Energy Fund, the City of Craig and representatives from Viking Lumber Company
discussed: the merits of acquiring the proposed equipment; how the equipment would operate
benefits to the City of Craig; and the City’s leasing protocols and requirements. In addition,
several City and Craig City School District staff discussed the idea and the likelihood of the
project aiding in the operation of the Craig wood boiler. The Craig
;
City Administrator also
riefed the City of Craig Mayor on the project and took feedback.
lature, the City is prepared to implement the project based on the schedule found in Section
.2.
b
Assuming that applicants are made aware of their ranking after AEA submits its prioritized list to
the Alaska Legislature on January 28, 2011, and if this project is recommended for funding to the
legis
3
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.
Attached is a letter of support from the Craig City School District. Also attached is a draft
resolution from the Craig City Council authorizing this grant application. The council wi
consider approval of the resolution at its next regularly scheduled meeting on Thursday,
ll
eptember 23, 2010. A copy of the city council supporting resolution from 2009 is also attached.
n
ty will be able to produce a greater amount of heat energy
r the same volume of wood burned.
S
The City of Craig is not aware of possible opposition to the project. There is general public
support of the wood boiler project, and the project proposed here supports the continued operatio
of the wood boiler. Indeed, having access to a drier wood fuel will assist the City in connecting
the Craig Community Association (CCA—the federally-recognized Tribe in Craig) tribal hall to
the wood boiler facility because the Ci
fo
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 15 of 16 7/21/2010
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
Provide a narrative summary regarding funding sources and your financial commitment to the
d assemble the drying
quipment, and the costs to test the equipment and put it into production.
ill also work to expand the reach of the Craig wood boiler to
enefit other facilities in Craig.
project.
This application requests $350,000 in grant funding from the AEA Renewable Energy Fund.
Proposed matching funds will come from Viking Lumber Company. Viking Lumber Company
shall provide all labor and materials to prepare the construction site an
e
The City of Craig commits to completing the public notice process to put the equipment under
lease, negotiating a market lease rate per the requirements of the Craig Municipal Code (and
additional requirements included in any subsequent grant agreement with AEA), and purchasing
dried biomass fuel. The City w
b
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 16 of 16 7/21/2010
SECTION 9 – ADDITIONAL DOCUMENTATION AND CERTIFICATION
SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION:
A. Contact information, resumes of Applicant’s Project Manager, key staff, partners,
consultants, and suppliers per application form Section 3.1 and 3.4.
B. Cost Worksheet per application form Section 4.4.4.
C. Grant Budget Form per application form Section 9.
D. Letters demonstrating local support per application form Section 8.
E. An electronic version of the entire application on CD per RFA Section 1.6.
F. Authorized Signers Form.
G. Governing Body Resolution or other formal action taken by the applicant’s
governing body or management per RFA Section 1.4 that:
- Commits the organization to provide the matching resources for project at the
match amounts indicated in the application.
- Authorizes the individual who signs the application has the authority to
commit the organization to the obligations under the grant.
- Provides as point of contact to represent the applicant for purposes of this
application.
- Certifies the applicant is in compliance with applicable federal, state, and local,
laws including existing credit and federal tax obligations.
H. CERTIFICATION
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, all federal and state laws including existing credit and federal tax obligations.
Print Name Jon Bolling
Signature
Title City Administrator
Date September 9, 2010
ATTACHMENT C
Page 1
Renewable Energy Fund Round 4
Grant Application
Application from the City of Craig
Supplemental Information
September 9, 2010
On December 7, 2009, during Round III of the AEA’s Renewable Energy Fund
application process, the City of Craig received a request for additional information from
staff at the AEA regarding the city’s application to AEA for project funding from the
Renewable Energy Fund. The request asked that the city “explain the issues with the
current walking floor dryer and why an additional dryer is needed.” This supplement was
provided to AEA staff in December 2009. The supplement is included here with the City
of Craig’s Round IV application for use by AEA staff.
Current Drying Capacity
The Craig wood boiler facility does have a system to dry wood fuel once that fuel is
delivered into the boiler building. The system consists of steel ducts cast into the
concrete floor of the wood storage bin. These ducts transmit air heated by the wood
boiler from a 20 horsepower electric fan into the chip pile within the storage bin. The
heated air, typically about fifty degrees higher than the ambient air temperature, is forced
through the chip pile through perforated plates that cover the top of the ducts. Moisture
evaporated from this process is removed from the storage area by an exhaust fan.
In short, this chip drying system works well up to a point. The system can dry wood that
enters the building at up to about 50 percent moisture content. Between the time that
wood is delivered and the time it ends up in the wood boiler, the in-floor duct system can
usually dry the wood fuel to between about 30 and 35 percent moisture content. For
green wood that has not been exposed to the precipitation—i.e. wood chips that are
brought to the wood boiler from fresh off the chipping line—the installed drying system
is functional. However, for wood that is more saturated, whether from whole logs that
are particularly wet when chipped or from chips that are exposed to precipitation before
they are delivered to the wood boiler, the installed system is unable to dry that wood to
moisture content levels within the operational range of the Craig boiler.
The issue of highly saturated wood chips was a chronic problem during the winter of
2008-2009. At those times when the mill supplying the chips had not chipped logs for an
extended period of time, the chips delivered to the Craig boiler were remarkably wet
from rain and snow, well in excess of 50 percent moisture content. While the wet chips
were enough to create combustion problems, the matter was made worse during the deep
winter months when layers of snow clumped together into large chunks of ice and
imbedded in the chip pile. These deliveries of particularly wet wood chips could not be
adequately dried by the in-floor system. The result was poor combustion efficiency in
the boiler, and the loss of heating capacity from the wood boiler, meaning that the
adjacent school buildings and the Craig Aquatic Center were forced to rely on diesel and
ATTACHMENT C
Page 2
Renewable Energy Fund Round 4
Grant Application
propane fossil fuels at a time when the wood boiler would have otherwise provided the
maximum benefit to the community.
Proposed Wood Drying Alternative
With the volume of wood chips at the mill that supplies the Craig wood boiler, it is not
practical for the mill to attempt to cover the large area to shelter green wood chips from
precipitation. Given that there appear to be markets for dried wood chips, hog fuel, and
sawdust for use as biomass fuel beyond what is demanded by the Craig wood boiler
project, it is likely more efficient to dry large volumes of biomass, some of which can be
used by the Craig project, and have sufficient quantities of properly dried wood fuel
available to encourage other biomass projects in Alaska. A related benefit from bulk
drying of biomass is a readily available supply of biomass that is already dried to a
moisture content of between 25-35 percent, the ideal range of moisture content for
commercial and industrial combustion. This would allow the City of Craig to avoid
having to dry chips after delivery to the boiler building, meaning that the energy that the
city now uses to dry out wood chips can instead be used to provide more heat to the Craig
school and Aquatic Center buildings, which in turns means even less reliance on fossil
fuels.
The biomass drying project proposed here by the City of Craig will have still another
tangible near-term benefit. Currently the city is working with the Craig Community
Association (CCA, the federally-recognized Tribe in Craig) to connect the CCA Tribal
Hall to the wood boiler facility. So long as the wet wood fuel issue is unresolved, the
ability of the wood boiler to provide reliable energy to other public buildings is uncertain.
However, the reliable supply of properly dried wood fuel would have such a beneficial
effect on boiler operations that adding a substantial additional load to the boiler, such as
one that would come with a connection between the boiler and the CCA Tribal Hall, can
be done with a high level of confidence that the boiler can meet the additional load
demand.
If all the wood burned at the Craig boiler project were delivered to the facility within the
25-35 moisture content range, the quality of that fuel would eliminate the single greatest
operational difficulty with the wood boiler—managing fuel that is too wet to burn
properly.
Renewable Energy Fund Round 4
Project Cost/Benefit Worksheet
ATTACHMENT D
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. 13,000 tons of sawmill wood waste.
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 grid, leave this section blank)
i. Number of generators/boilers/other One (Craig wood boiler)
ii. Rated capacity of generators/boilers/other 4 MMBtu
iii. Generator/boilers/other type None
iv. Age of generators/boilers/other 2.5 years
v. Efficiency of generators/boilers/other 85 percent
b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank)
i. Annual O&M cost for labor $10,500
ii. Annual O&M cost for non-labor $35,000
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] N/A
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]
v. Wood [cords, green tons, dry tons] 785 green tons (at Craig boiler facility)
vi. Other
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
ATTACHMENT D
RFA AEA11-005 Application Cost Worksheet Page 2 7-21-10
3. Proposed System Design Capacity and Fuel Usage
Please note: This page estimates cost/benefit for use by Craig wood boiler.
a) Proposed renewable capacity
(Wind, Hydro, Biomass, other)
[kW or MMBtu/hr]
785 tons dried wood fuel
b) Proposed annual electricity or heat production (fill in as applicable)
i. Electricity [kWh]
ii. Heat [MMBtu] 8,831 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] 785 dry tons (range 25-35 percent moisture content)
iv. Other
4. Project Cost
a) Total capital cost of new system $ 350,000
b) Development cost $ 250,000
c) Annual O&M cost of new system $1,239,400
d) Annual fuel cost $ 30,000 (diesel fuel for system start up)
5. Project Benefits
a) Amount of fuel displaced for
i. Electricity
ii. Heat 39,000 gallons of propane; 21,280 gallons diesel.
iii. Transportation
b) Current price of displaced fuel $2 per gallon propane; $ 3.00 per gallon diesel
c) Other economic benefits Reduction of sulfur range omissions; carbon neutral.
d) Alaska public benefits $70,200* (propane) + $57,456* (diesel) = $127,656
*Reduce propane and diesel benefit by 10% for incidental consumption each year.
6. Power Purchase/Sales Price
a) Price for power purchase/sale $30 per dry ton (discounted per equip. lease)= $23,550
7. Project Analysis
a) Basic Economic Analysis
Project benefit/cost ratio $127,656/$53,550* = 2.38 (*cost = annual, straight-line depreciation of
wood drier + $23,550; time value over 20 years not calculated.)
Payback (years) <one year.
Renewable Energy Fund Round 4
Project Cost/Benefit Worksheet
ATTACHMENT D
RFA AEA11-005 Application Cost Worksheet Page 3 7-21-10
3. Proposed System Design Capacity and Fuel Usage
Please note: This page estimates cost/benefit for capacity of wood drying equipment..
b) Proposed renewable capacity
(Wind, Hydro, Biomass, other)
[kW or MMBtu/hr]
13,000 tons dried wood fuel @ 11.2 mmbtu/ton
b) Proposed annual electricity or heat production (fill in as applicable)
i. Electricity [kWh]
ii. Heat [MMBtu] 145,600 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] 13,000 dry tons (range 25-35 percent moisture content)
iv. Other
4. Project Cost
a) Total capital cost of new system $ 350,000
b) Development cost $ 250,000
c) Annual O&M cost of new system $1,239,400
d) Annual fuel cost $ 30,000 (diesel fuel for system start up)
5. Project Benefits
a) Amount of fuel displaced for
i. Electricity
ii. Heat 1,078,000 gallons of fuel oil. (Line 3.b.ii/135,000 Btu per gallon of diesel)
iii. Transportation
b) Current price of displaced fuel Approx. $ 3.00 per gallon
c) Other economic benefits Reduction of sulfur range omissions; carbon neutral.
d) Alaska public benefits $3,234,000 (line 5.a.ii x line 5.b)
6. Power Purchase/Sales Price
a) Price for power purchase/sale $200 per dry ton = $2,000,000
7. Project Analysis
a) Basic Economic Analysis
Project benefit/cost ratio $3,234,000/$2,030,000* = 1.59 (*cost=annual, straight-line deprec. of
wood drier + $2 million; time value over 20 years not calculated)
Payback (years)
ATTACHMENT E
JUNEAU EMPIRE ARTICLE
AND
ANCHORAGE DAILY NEWS EDITORIAL
CITY OF CRAIG
RESOLUTION 10-15
SUPPORTING THE CITY OF CRAIG’S APPLICATION FOR FUNDING FROM
THE ALASKA ENERGY AUTHORITY RENEWABLE ENERGY FUND
WHEREAS, the City of Craig has prepared an application for submission to the Alaska
Energy Authority for funding from the Alaska Renewable Energy Fund; and,
WHEREAS, the application supports the Craig Wood Fired Boiler Project by improving
the quality of fuel available to the wood boiler project, and as a result increases the range
of public benefit that will result from operation of the boiler; and,
WHEREAS, the Craig City Administrator is authorized to sign the grant application, is
the point of contact for the State of Alaska for the purposes of the grant, and has the
authority to commit the City of Craig to the obligations of the grant; and,
WHEREAS, the City of Craig is in compliance with applicable federal, state, and local
laws, including existing credit and federal tax obligations; and,
WHEREAS, the City of Craig commits to providing, through partnerships or other
funding sources, the matching resources detailed in the city’s application for grant
funding from the Renewable Energy Fund.
NOW, THEREFORE, BE IT RESOLVED that the Craig City Council supports the
City of Craig’s application for funding from the Alaska Renewable Energy Fund.
Approved this 23rd day of September 2010.
_____________________________ _______________________________
Mayor Millie Schoonover Vicki Hamilton, City Clerk