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HomeMy WebLinkAboutExhibit ETerror Lake Hydroelectric Project — FERC Project No. 2743 Third Unit Addition Pre -Feasibility Analysis ENGINEERING AND REGULATORY ASSESSMENT Project Licensee: KODIAK ELECTRIC ASSOCIATION Kodiak, Alaska OCTOBER 2009 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition Table of Contents Listof Tables................................................................................................................................... iii Table 2.3.1 License Articles Affected by Amendment Applications .......................................... iii Table 2.5.1 Required License Exhibits.................000......................©000©..............................©......... iii Table 2.7.6 Comparison of Options........................................................000............................... iii ExecutiveSummary............................................:.......000000Goo©.......................................................o©a.iv 1. Introduction .000.....................................00000000.............0000©............................00........................©000 1 1.1 Kodiak Electric System........................................................0........................................... 1 1.2 Terror Lake Project Description...................................................................................... 2 1.3 Provision for Third Unit in Existing Powerhouse ........................... o....................... o.......... 2 1.4 Need for and Pu rpose of I nstal I i ng Th i rd U n it............................................................. 0 0 0. 3 1.5 Scope of Studies ................................................ 000000000000000000000000000000000...... oa000000...... ___ 3 1.5.1 Regulatory Review .... o........... o000000.......... __....... 0......0000000000000000000000000000000000000000000000 ........ 0000000 3 1.5.2 Engineering Review: ..... .......00000000000.................. __....... ....... ....o000000000............................... 000000 4 1.5.3 Pre -Feasibility Report .00000......00000°000........... ....... _....... ....... ....... 00000............... ............ o... o 00004. 2. Regulatory Review... ....................................................... C'.... 0000000000........ 0..."0 0000000000000000000.... 0...'' 2.1 Purpose of Regulatory Review ............. 0......................................................................... 4 2.2 Strategic Planning.......................................................................................................00000 5 2.3 Review of License Requirements.................................................................................... 11 2.4 Risk Assessment...................................00000........................................ ... 000_...... __..... 12 2.5 FERC Process for Application for Capacity Amendment to License...o......0..................... 13 2.5.1 Required Exhibits for Capacity Related Amendment.........000............ 000............00.................... 13 2.6 Potential Study Requirements ........................... ........... o.......... .000000............................... 16 2.7 FERC Application for Amendment — Process Options ...... 00000..00000°° ............................... 16 2.7.1 Contents of a Capacity -related Amendment..........000........o000000000000000000000000000000o ...............0000000 16 2.7.2 Process Options ........ ............. _....................... ....... 00000000000000000000000000000a00000000ao......000000000000aaa 17 2.7.3 Integrated Licensing Process (ILP)000.....000000......000000000......... 000000000000000000000000000000000000000000000....... 17 2.7.4 Traditional Licensing Process (TLP)........... ..000............_................ 000......00000 0000000...........00000000 1 < 2.7.5 Alternative Licensing Procedure (ALP) ............... 000.............. ......... ........... 00000000................ 00... 19 2.7.6 Comparison of Options... ........................................... ......................................... ................. 20 2.8 Recommended Approach — FERC Alternative Licensing Procedure (ALP) ..................... 21 2.8.1 Process Selection — Schedule Comparison ..000..000...................00000000......000.............. ......._. 21 2.8.2 Recommendation to Use FERC ALP ....................000.........0000000000000000....................................... 21 2.8.3 Notice of Intent to File a Capacity Amendment Application............................00000000............ 22 2.8.4 Request to Use the ALP ............................... 000.......... oo.............. ___ .................... o............. 22 2.8.5 Communications Protocol ... ................ .......... .........000000........ ................ ......... 0_.......... __ 24 2.8.6 Preliminary Application Document (PAD)/Draft Annotated Application for License. ............ _ 25 2.9 Schedule to Prepare Capacity Amendment Application.............0............0000000000......o...... 25 3. Engineering Review................00000©00000®.....oc00000...00000...0000000000000000000000000.00000oo0©ooc000000000c00000c0000... 25 3.1 Purpose of Engineering Review ....... o...................................... o........... o................... ....... 25 3.2 Review of Existing Third Bay Provisions........00................. 25 3.2.1 Civil / Mechanical.... ........ ....... ___ ......................... 00......................................... 000J000000. 25 3.2.2 Electrical ............ °.00000....000............................................ 000000000000.....00000°00000000..................... 26 3.3 Tailrace Adequacy., .......................................... ................... ..........— 27 3.4 Existing Drawings...........................................................000000......................................... 27 3.4.1 As -Built Drawings ....... ...... ....... __.... _.......0000000000...... ...............00000000000000 00 ....................00000® 27 3.4.2 Exhibit F Drawings ..000__.................... 00000000000000......... .......... ....... _ 00000...........°oo _............. 28 3.4.3 Exhibit G Maps .............................. 000000 000 00000 ..00000 00 000000......o°000000_......000 _.........._....... 28 October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre -Feasibility Analysis 3.5 Constructabi I ity Review................................................................................................. 28 3.5.1 Adequacy of Third Bay Space................................................................................................. 28 3.5.2 Water Conveyance Connections............................................................................................ 28 3.6 Construction Schedule................................................................................................... 30 4. Conclusions and Recommendations....................................................................................... 30 4.1 Conclusions — Regulatory............................................................................................. 30 4.2 Conclusions — Engineering............................................................................................ 30 4.3 Recommendations Regulatory................................................................................... 30 4.4 Recommendations — Engineering........... ... 000-oo .... o .... o--o-00000-o .... o-o--o-0000..o.o.00.000.o ..... oo.o... 31 List of Tables Table 2.3.1 License Articles Affected by Amendment Applications Table 2.5.1 Required License Exhibits Table 2.7.6 Comparison of Options October 2009 Hatch Acres Corporation iii TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition Executive Summary Kodiak Electric Association (KEA), licensee for the 20 MW Terror Lake Hydroelectric Project — FERC No. 2743 (Terror Lake Project or project) has engaged the services of Hatch Acres Corporation (Hatch Acres or HAC) to investigate the feasibility of installing a third turbine/generator unit (third unit) in the existing open bay in the powerhouse, and by doing so expand the project i nstal led capacity from 20 to 30 MW. The Terror Lake Project was plan ned to be developed i n stages with the possibility of increasing the capability of the Project as the demand for electricity may increase in the future: KEA's Vision Statement is to Endeavor to produce 95% of energy sales with cost effective renewable power solutions by the year 2020. KEA constructed a 4.5 MW wind facility at Pillar Mountain as part of KEA's goal of reducing dependence on diesel generation by adding new renewable energy generation to its system. Wind energy is variable and does not provide the capacity to meet KEA's growing load demand. KEA identified installation of the third unit as the first step towards achieving the goal set in KEA's Vision Statement. This Pre -Feasibility Analysis presents our engineering and regulatory assessment of the feasibility to install a third turbine/generator unit (third unit) in the existing empty bay in the powerhouse at the Terror Lake Hydroelectric Project. The primary purpose of Task 1.a was to conduct a "fatal flaw analysis" to evaluate the viability of installing the third unit. This report presents the results of our regulatory and environmental review and analyses. The purpose of the Regulatory Review is to (1) perform a detailed review of requirements in the existing license, including the environmental terms and conditions; (2) identify and discuss any risks that might be anticipated with filing an Application for Capacity Amendment, including whether the filing might expose KEA to agency requests to modify terms and conditions of the license not associated with installation of the third unit; and (3) advise KEA regarding the recommended approach for the FERC license amendment process.. The purpose of the engineering review is to determine whether major modifications to the existing powerhouse and other project facilities will be required to install the third unit including (1) adequacy of the tailrace to accommodate water discharged from the powerhouse during the time that the three units would be operating with a capacity of 30 MW compared to the existing situation where installed capacity is 20 MW; and, (2) constructabi l ity review including adequacy of space within the powerhouse to accommodate the third unit and water conveyance connections; and electrical system considerations; We did not identify any "fatal flaws" associated with installation of the third unit. KEA requested that we rank, on a scale of 1 to 10 — with 10 being the most difficult, the potential difficulty of pursuing the FERC License Amendment to install the third unit. The application will fall under the category of "Capacity Amendment". We rank the third unit installation at "1 " on the above identified scale. We trust that this report will assist KEA in making its "Go / No" decision. The next step, Task 1.b, would build on work performed during Task 1.a. Regulatory Review activities would include (1) Discuss the FERC Amendment process with federal and state agencies; (2) receive further guidance from FERC Staff regarding use of the Alternative Licensing Procedure for the Application for Capacity Amendment; and (3) Prepare scope, schedule, and related cost estimate to prepare and file the Application for License Amendment. Engineering Review activities would include (1) Review constructabi l ity — e.g. third bay space and water conveyance connections; (2) Review potential construction schedule and any potential effect on current October 2009 Hatch Acres Corporation iv TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre -Feasibility Analysis operations; (3) Verify that the As -Built Drawings and modified Exhibit F Drawings are adequate to proceed with planning; and (4) Based on KEA decision to proceed, prepare a detailed scope and budget. October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition 1. Introduction 1.1 Kodiak Electric System Kodiak Electric Association, Inc. (KEA) serves approximately 5,800 meters on Kodiak Island. KEA's service area includes the area in and around the City of Kodiak, the US Coast Guard Base, Bells Flats, Chiniak, Pasagshak, and Port Lions. KEA operates an isolated electrical grid system. The 20 MW Terror Lake Project produces the majority of Kodiak Electric Association's (KEA) electricity and is the cornerstone to KEA's Vision Statement: "Endeavor to produce 95 % of energy sales with cost effective renewable power solutions by the year 2020, by providing base load capacity to backup other forms of renewable energy. " KEA's recently completed Pillar Mountain Wind Farm includes three 1.5-MW wind turbines, enhancing its renewable energy portfolio by 4.5 MW. The Terror Lake Project reservoir acts like a battery to store energy generated by the variable winds; when winds are plentiful water is conserved within the reservoir. When winds diminish, KEA can dispatch hydropower to serve load and maintain system stability. The current capacity at Terror Lake has been surpassed by the growing load demand. KEA needs to run diesel units to meet this demand. KEA proposes to install the third unit to add 10 MW of capacity at the Terror Lake Project. Installation of the third unit would increase KEA's total installed renewable energy capacity from the existing 24.5 MW (20 MW hydro + 4.5 MW wind) to 34.5 MW (30 MW hydro + 4.5 MW wind). KEA operates and maintains 33.95 MW of diesel generation in case the Terror Lake Project is not available: Kodiak Generating Station, Nyman Power Plant, Swampy Acres Plant, and Port Lions. There is a mixture of diesel reciprocating engines and a diesel -fired combined cycle generation unit. The table below lists KEA's electric generation facilities: CAPACITY PROJECT FUEL SOURCE (MW) Terror Lake Hydroelectric Project Water 20.00 Pillar Mountain Wind Farm Wind 4.50 Kodiak Generating Station Diesel 17.60 Nyman Power Plant Diesel 9.00 Swampy Acres Plant Diesel 6.60 Port Lions Diesel 0.75 KEA Generating Capacity Total 58.45 October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition 1.2 Terror Lake Project Description The 20 MW Terror Lake Hydroelectric Project, FERC No. 2743 (Terror Lake Project), is located in the north central part of Kodiak Island approximately 25 miles southwest of the City of Kodiak within the Kodiak National Wildlife Refuge. The Terror Lake Project is a remote site, accessible by floatplane helicopter or boat only. The project was licensed in 1981 and commenced commercial operation in 1985. The Terror Lake Dam is a fill structure approximately 193 feet in height and some 2,450 feet long. The dam crest is at El. 1.425 ft. The dam raised the level of the original lake by some 170 feet, forming a reservoir with a surface area of about 1,000 acres and providing 108,000 acre feet of storage at its normal maximum elevation of 1,420 ft (msl). The un-gated side channel spillway crest has a crest El. at 1,420 ft and a length of 650 feet. The Terror Lake Project is a trans -basin diversion project. A 23,300 foot -long, 11 foot diameter tunnel carries water from Terror Lake reservoir to an outlet portal located on the west slope of the Kizhuyak River Basin where flows pass through a 3,400 foot -long penstock to a powerhouse containing two 10 MW generating units. Outflow from the powerhouse is conveyed through a 2,275 foot -long tailrace to the lower Kizhuyak River. Additional water is diverted to the project tunnel from the 20 foot -high Falls Creek diversion dam and the 40 foot -high Shotgun Creek diversion dam. The 20 foot -high Rolling Rock Creek diversion dam is presently inoperable. These are all fill structures with minimum storage capabilities The powerhouse is located on the west bank of the Kizhuyak River, housing two 10-MW vertical axis impulse turbine generators with centerline elevation 103.5 feet, and containing an empty bay for a future third unit. A 2,200-foot-long tailrace channel conveys flows from the powerhouse to the main stem of the Kizhuyak River. The tailrace was recently upgraded and no additional modifications are anticipated. A 13.8/138-kV switchyard located adjacent to the powerhouse. Project electrical output is transmitted across a 17.4-mile-long, 138-kV transmission line from the switchyard to a substation within the USCG Reservation north of the Kodiak Airport. No modifications to the transmission line are anticipated. 1.3 Provision for Third Unit in Existing Powerhouse The 20 MW Terror Lake Project was planned to be developed in stages with the possibility of increasing the capacity by installing a 10 MW third unit in the empty bay as the demand for electricity increased in the future: • Powerhouse — The Terror Lake powerhouse was constructed in 1984 with two vertical axis impulse Pelton turbine/generator units and an empty bay for a future 10 MW unit. The power tunnel, penstock, and tailrace are large enough to accommodate a flow corresponding to 30 MW of capacity without modification. • Switchyard — Space has been allocated for addition of a future (Unit 3) 15MVA Generation Step Up transformer and disconnect switches to be located in the south corner of the switchyard, next to the service road and adjacent to the access gate. No additional bus has been provided. (Terror Lake Switchyard General Arrangement Plan, Dwg No. TL-57-021 (Rev 4: 12-6-85 As Built Revisions). (Source: FDP — Unit 3 Addition Estimate Assumptions.doc, page 1. 1/11/2007 October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition • Transmission — Two options exist: (1) feed the "Future 138 kV" line or (2) increase the output too the 138 kV Airport Substation line. ).(Source: FDP — Unit 3 Addition Estimate Assumptions.doc, page 1. 1/1112007) 1.4 Need for and Purpose of Installing Third Unit KEA's loads continue to grow and there are significant periods of time when KEA's load now surpasses the 20 MW capacity of the Terror Lake-Project's existing hydro turbine/generator units. The existing powerhouse contains an empty bay designed to accommodate a third 10 MW turbine/generator unit. Expanding the existing 20 MW installed capacity to 30 MW by installing the third 10 MW unit would: (1) cover peak loads, (2) provide outage backup for the existing two units; (3) improve KEA's system stability; and (4) provide backup capacity to support the existing 4.5 MW Pillar Mountain Wind Farm and enable KEA to pursue additional renewable energy projects. The two existing turbine/generator units are 1984 vintage. The amount of outage time required for annual and quarterly maintenance on these units can be up to four weeks. Losing 10 MW of power from offline hydro units during maintenance requires KEA to run diesel generators to meet system demand resulting in approximately 430,410 gallons of diesel fuel annually. Installing the third unit will enable KEA to cover peak loads and times when a hydro unit is down for maintenance with renewable power. Over the past decade, peak loads on the system have averaged 24 MW. Diesel generation is currently required for these periods of high demand and the need for diesel powered supplemental capacity will continue to grow into the future as peak loads increase. The current approach of burning diesel fuel to supplement KEA's capacity is not economical. Installation of the third unit would also provide the benefit of reducing emissions from KEA's diesel capacity during periods of high demand. 1.5 Scope of Studies The scope of work for Task Order 01, Terror Lake Project Engineering & Regulatory Assessment, includes the following activities: 1.5.1 Regulatory Review Phase 1 a activities include: • Review License Exhibits and Articles, and overall project record (FERC Docket and reports prepared by the FERC Regional Office) - identify and discuss potential modifications related to addition of the third unit • Identify and discuss any risks regarding opening the License as a result of filing an Application for Amendment — i.e. exposure to agencies requiring modifications to recently agreed to modifications to monitoring and reporting procedures for the license -mandated minimum flow release (License Article 43) • Identify potential environmental issues and discuss potential study requirements and related approvals and permits with resource agencies • Review FERC license amendment process options; discuss with FERC staff; and recommend proposed approach Phase 1.b activities following KEA decision to proceed with the FERC Amendment will include: October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Th i rd U n it Add ition Pre -Feasibility Analysis • Discuss the FERC Amendment process with federal and state agencies; • Receive further guidance from FERC staff regarding use of the Alternative Licensing Procedure for the Application for Capacity Amendment; and • Prepare scope, schedule, and related cost estimate to prepare and file the Application for License Amendment 1.5. 2 Engineering Re vie w Phase 1 a activities i ncl ude: • Review existing third bay provisions in existing design — determine whether there any additional considerations/modifications • Review adequacy of tailrace to accommodate modification in project operations with the third unit Phase 1.b activities following KEA decision to proceed with the FERC Amendment will include: • Review constructabi l ity — e.g. third bay space and water conveyance connections; Review potential construction schedule and any potential effect on current operations; • Verify that the As -Built Drawings and modified Exhibit F Drawings and Exhibit G Maps are adequate to proceed with planning 1.5.3 Pre -Feasibility Report Phase 1.a Pre -Feasibility Report: • Prepare a Report presenting the results of the above identified tasks • Provide support for KEA's "Go/No-Go Decision" Phase 1.b Pre -Feasibility Report • See above regarding Environmental and Engineering Sections • Based on decision, prepare a detailed scope and budget for following Phase lb and Phase II 2. Regulatory Review .1 Purpose of Regulatory Review The purpose of the Regulatory Review is to (1) perform a detailed review of requirements in the existing license, including the environmental terms and conditions; (2) identify and discuss any risks that might be anticipated with filing an Application for Capacity Amendment, including whether the filing might expose KEA to agency requests to modify terms and conditions of the license not associated with installation of the third unit; and (3) advise KEA regarding our recommended approach for the FERC license amendment process. October 2009 Hatch Acres Corporation 4 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre-Feasibi I ity Analysis 2.2 Strategic Planning Discussion with KEA Staff — July 27 & 28, 2009 A site visit and office meetings with KEA Staff were accomplished in July. During the office meetings Hatch Acres Corporation personnel met with Darron Scott, CEO, and Jennifer Richcreek, Environmental Coordinator to discuss the Terror Lake Project and the potential enhancements: • We discussed KEA's Vision Statement and goal to reach 95% renewable energy generation by the year 2020 • We discussed KEA's interest in reducing use of diesel -fuel -fired generation for multiple purposes: o Fuel contracts — volatile cost of fuel o Sulfur content of fuel and reducing environmental effects associated with use of diesel fuel and increased requirements associated with State permitting o Future uncertainties — e.g. "cap & trade" • Third Unit o Need for the third unit to operate "in sync" with the two existing units o KEA interest in relieving the current problem where one unit is down during maintenance and only one unit is available o KEA interest in providing capacity credits for purposes of considering additional renewable energy generation units o We noted that, based on our site visit and preliminary office studies we conducted prior to the site visit, we did not identify any impediments to a successful FE RC Amendment proceeding. Follow-up Discussion with ADF&G Staff — July 29, 2009 KEA's consultants, Nan Nalder and Dick Griffith (Hatch Acres Consultants) met with Jim Ferguson, outgoing Statewide Hydropower Coordinator, and Scott Maclean, incoming Statewide Hydropower Coordinator, in Anchorage on July 29, 2009. The purpose of the meeting was to discuss the proposed Third Unit addition at the Terror Lake Project as Nan & Dick had been in consultation with Jim Ferguson regarding this potential upcoming license amendment and wanted to share current information with Jim and Scott to ensure a smooth transition. Jim has a long history working on the Terror Lake Project and stated that he would remain available to participate in consultation. We briefly discussed the proposal and, based on our site visit during the previous 2 days, and conversations with John Magee regarding the design and capability of the tailrace to accommodate flow from the three units, whether ADF&G would need additional studies. We were advised that ADF&G would be interested in: (1) a hydrologic simulation of the additional flow with three units releasing flow to the tailrace and whether the tailrace, as reconfigured, would be adequate to accommodate the additional flow; and (2) whether there would be a modification to the current rule curve for operation of the Terror River reservoir with the three units operating. We also discussed the next steps for consultation with the agencies and the FERC process. ADF&G offered their assistance as appropriate in assisting KEA with the next steps in the consultation process. We note that ADF&G has offered use of their conference room for meetings with agencies on other projects and would provide space for agency meetings in the future. October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition We discussed use of the ALP as it would establish a protocol going forward with modifications to the project. Jim and Scott agreed that they could support the ALP as the appropriate pre -filing FERC process. Recommended Approach for the FERC Proceeding and Associated Permitting The recommended approach to the FERC Amendment is to request FERC approval to use the Alternative Licensing Procedure (ALP) to enable KEA to prepare the environmental assessment required by the FERC regulations and the National Environmental Policy Act (NEPA) concurrently. We also recommend that KEA prepare, concurrent with preparation of the application for amendment: (1) plans that will be required to install the third unit; (2) applications for permits; and (3) requests for other required approvals. We discuss the options available to KEA for the FERC process and our recommendation to use the ALP in more detail in Section 2.7 — FERC Application for Amendment — Process Options and 2.8 — Recommended Approach — FERC Alternative Licensing Procedure (ALP) of this report. One of the most comprehensive applications for approval required concurrent with preparation of the amendment application is the Coastal Project Questionnaire (CPQ). The primary purpose of the CPQ is to demonstrate consistency of KEA's proposed addition of the third unit with the Alaska Coastal Management Plan (RCMP). The Final CPQ will be submitted to the Alaska Department of Natural Resources, Division of Coastal and Oceanic Management (ADNR/DCOM). The CPQ and related Determination of Consistency are required prior to FERC issuance of the Order Approving Amendment to License. Pre -Filing Consultations with Agencies and other Participants We do not anticipate any major requests for studies from the resource agencies. In discussions with ADF&G, we are aware that the ADF&G will be interested in the proposed operation with the three units and any affect on the recently reconstructed tailrace. Following a "Go" decision by KEA of the proposed installation of the Third Unit as discussed within this report, we recommend that KEA and Hatch Acres staff identify primary contacts and enter into consultations with federal and state agencies and other entities (Participants) that will be interested in the Amendment. Hatch Acres, in coordination with KEA, will need to prepare documents to facilitate these consultations: (1) Preliminary Application Document (PAD); (2) Notice of Intent to File an Application for Capacity Amendment (NOI); (3) Request to Use the ALP & Communications Protocol; and (4) a detailed proposed plan of action. We recommend that this initial consultation with the agencies be held in Anchorage. We note that ADF&G has agreed to provide meeting space and assist with contacting the appropriate individuals in the federal and state agencies. The goal of these initial consultations is to reach agreement on: (1) any proposed studies; (2) required permits and other approvals; (3) use of the ALP and agreement regarding the Communications Protocol; and (4) the pre -filing schedule. Topics for discussion and objectives of these consultations include: • Present information regarding KEA's proposed action (installation of the Third Unit) — format for deliverable is the Preliminary Application Document (PAD); • Discuss how the Third Unit is an essential element in meeting KEA's overall goal to produce 95% of energy with renewable power by the year 2020; October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition • Discuss benefits of installing the Third Unit: e.g. KEA system benefits and reduced diesel emissions; • Discuss KEA's proposed use of the ALP and provide copies of draft Notice of Intent to File Capacity Amendment Application and Request to Use ALP; • Provide a draft Communications Protocol for review and approval, including signature by decision maker for each agency and other entity that wish to be participants in the ALP; • Receive information from agencies and other entities regarding any required studies; • Confirm requirements for permits and other approvals; • Discuss draft Scoping Document No. 1 and request comments regarding "target" resources; and, • Discuss KEA's proposed schedule for the FERC process, including permits and other approvals; agree to pre -filing schedule. Preliminary Schedule and Major Milestones For planning purposes, we developed a very preliminary schedule presenting the major steps and milestones in the pre -filing process. We also provide information regarding the steps that FERC Staff typically go through in processing an application for amendment. We cannot provide a schedule for the FERC Staff actions, nor for the issuance of an order. We do, however, provide some notes in this section regarding actions KEA could elect to take in advance of FE RC's issuance of the order to reduce delay in installing the third unit. During Phase 1.b, we will: (1) conduct a site visit to confirm requirements regarding installation of the turbine/generator unit and related mechanical & electrical equipment; (2) continue to work on the regulatory aspects of the project; and (3) prepare a detailed scope, schedule, and budget to prepare and file an Application for Non -Capacity Amendment with the FERC. These consultations will involve KEA Staff during the initial contacts and at major milestones where consultations are required to support the Capacity Amendment Application. A preliminary list of activities, participants & activity duration is provided in the following table: ACTIVITY DESCRIPTION / LEAD & DURATION # DELIVERABLES PARTICIPANTS 1 Convene a teleconference with FERC Lead: Nan Nalder, HAC; Preparation time — 2 Staff to discuss proposed amendment & Jennifer Richcreek, KEA; days pre -filing process. Receive guidance & Mo Fayyadd, FERC Teleconference — hold from FERC Staff as provided in FERC DHAC when KEA determines. regulation for amendments. Participants: Dick Griffith, HAC; and FERC Staff as determined by Mo. 2 Prepare draft documents to initiate the Lead: Nan Nalder, HAC From NTP from KEA — FERC proceeding: & Jennifer Richcreek, KEA 60 days • Preliminary Application Participants: Dick Griffith, Document Peter Rodrigue, Gene • Notice of Intent to File an Hawkridge, Dave Application Johnston, Langley Sears, • Request to Use the ALP HAC; John Magee & Jim • Communications Protocol Thrall (R&M) Continue with office studies 3. Initiate Consultation with agencies & Lead: Nan Nalder, HAC 60 days g Participants (See notes above at &Jennifer Richcreek, KEA October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition ACTIVITY DESCRIPTION / LEAD & DURATION # DELIVERABLES PARTICIPANTS Consultations with Agencies and other Participants: Dick Griffith, Participants & other HAC, as Develop PowerPoint to describe KEA s appropriate; Jim Thrall; proposal. and Agencies including: g ADF&G, ADNR (DCOM Convene meeting in Anchorage. & S H PO), FWS, U SACE & Provide documents listed above at item others TBD. 2 to facilitate consultation. (Note — should allow 30 days for agencies to review prior to initial consultation) 4. Respond to any agency requests: Lead: Nan Nalder, HAC 30 days & Jennifer Richcreek, , KEA • Develop proposed study plans Participants: Dick Griffith, • Provide response to questions &, as appropriate, PeterRodri ue, Gene g raised during initial Hawkridge, Dave consu Itation Johnston, Langley Sears, HAC; John Magee & J i m Thrall. 5. Commence any requested field studies. Lead: Nan Nalder, HAC 60 days — 180 days (continuous activity) & Jennifer Richcreek, KEA NOTE: Will depend on Continue with office studies. Participants: Dick Griffith extent of any requests Identify space in Anchorage & Kodiak & other HAC, as to hold Scoping Meetings appropriate; John Magee Prepare Final Package for formal NEPA & Jim Thrall. Scoping: Subconsultants if field • Notice of Scoping Meeting studies are requested. • Correspondence, as required • PAD • NOI • Request to Use ALP • Communications Protocol • Scoping Document No. 1 • PowerPoint 6 Issue Notice of Scoping Meetings in Lead: Nan Nalder, HAC 30 days notice period local newspapers. & Jennifer Richcreek, KEA for meetings Provide Final Package (as noted in Participants: Dick Griffith Activity 5) to agencies and Participants & other HAC, as for review and comment. appropriate Begin to prepare Draft Application for Capacity Amendment & Preliminary Draft Environmental Assessment (PDEA). (continuous activity) 7 Convene Scoping Meetings in Lead: Nan Nalder, HAC 5 days (includes travel Anchorage and Kodiak. & Jennifer Richcreek, KEA to Kodiak from Provide opportunity for site visit Participants: Dick Griffith, Anchorage) (powerhouse & tailrace and fly over of & other HAC, as Terror Lake reservoir) appropriate; John Magee Documents to be available include: & Jim Thrall; and • Notice of Scoping Meeting Agencies including: • Correspondence, as required ADF&G, ADNR (DCOM October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition ACTIVITY DESCRIPTION / LEAD & DURATION # DELIVERABLES PARTICIPANTS • PAD & S H PO), FWS, U SACE & • NOI others TBD. Other • Request to Use ALP Participants, including • Communications Protocol members of the public. • Scoping Document No. 1 8. Notice Period for Comments in 30 days post Scoping response to Scoping Meetings Meeti ngs 9. Review & respond to comments Lead: Nan Nalder, HAC 30 — 60 days received from agencies and others. & Jennifer Richcreek, KEA Participants: Dick Griffith, Continue work on Draft Application & Peter Rodrigue, Gene PDEA for Amendment & PDEA. Hawkridge, Dave Johnston, Langley Sears, HAC; John Magee & Jim Thrall (R&M) 10 Complete Draft Application & PDEA. Lead: Nan Nalder, HAC 60 days Conduct internal review for & Jennifer Richcreek, KEA consistency Participants: Dick Griffith, Peter Rodrigue, Gene Hawkridge, Dave Johnston, Langley Sears, HAC; John Magee & J i m Thrall (R&M) 11 Provide Draft Application for Lead: Nan Nalder, HAC 45 days Amendment & PDEA to KEA for pre- & Darron Scott & Jennifer issuance review and comment. Richcreek, KEA Respond to questions and comments Participants: Dick Griffith, and provide to KEA for approval Peter Rodrigue, Gene Hawkridge, Dave Johnston, Langley Sears, HAC; John Magee & Jim Thrall (R&M) 12 Provide Draft Application for Lead: Nan Nalder, HAC 60 day review period. Amendment & PDEA to agencies & & Jennifer Richcreek, KEA Note that agencies may Participants for review & comment. Participants: Langley Sears request extension of (Electronic service of the Draft time to comment. Application) Provide paper copies to library in Kodiak & KEA office for public review. Issue Notice in newspapers in Anchorage & Kodiak Note that Exhibit F is only provided to FERC per CEII requirements 13 Review comments received on Draft Lead: Nan Nalder, HAC 30 — 60 days Application & PDEA. & Jennifer Richcreek, KEA depending on extent of Contact commenting parties to receive Participants: Dick Griffith, comments receive. clarification, if necessary. Peter Rodrigue, Gene Modify Draft Application to address Hawkridge, Dave comments received. Johnston, Langley Sears, Prepare Final Application & PDEA HAC; John Magee & Jim Thrall (R&M) October 2009 Hatch Acres Corporation TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition ACTIVITY DESCRIPTION / LEAD & DURATION # DELIVERABLES PARTICIPANTS 14 File Final Application & PDEA with the FERC Office of the Secretary & Portland Regional Office (PRO) (electronic filing) File Exhibit F separately under CEII with FERC Office of Secretary & copy to PRO (electronic filing) Provide Final Application & PDEA for Amendment to agencies & Participants Lead: Nan Nalder, HAC 7 days & Jennifer Richcreek, KEA Participants: Langley Sears for review & comment. (Electronic service of the Draft Application) Provide paper copies to library in Kodiak & KEA office for public review. TOTAL — PRE -FILING 539 — 719 DAYS End of Pre -filing & Commencement of Post -Filing FERC Application Processing NOTE: FERC has no established deadlines post -filing. Duration noted below is based on experience with applications of similar complexity. 15 FERC Staff review for Adequacy FERC Staff Within 45 — 60 days of filing 16 FERC issues Notice of Application Lead: Nan Nalder, HAC 30 — 45 days & Jennifer Richcreek, KEA depending on content Respond to any FERC requests for Participants: Dick Griffith, of AIR additional information (AIR). Note that Peter Rodrigue, Gene FERC may request information they Hawkridge, Dave will need to take KEA's PDEA and turn Johnston, Langley Sears, it into the FERC NEPA EA. HAC; John Magee & Jim Thrall (R&M) 17 FERC Staff review for environmental FERC Staff No deadline set — purposes. given the extent of potential environmental issues associated with Third Unit could take 60 — 90 days 18 Federal & State Agencies provide Federal & State Agencies 60-day Notice recommendations, terms & conditions 19 FERC Staff prepare and issue EA NOTE: FERC Staff may elect to issue EA at same time of issuance of Order on Amendment. 19 Order Approving Amendment issued No deadline set — NOTE: If there are no interventions or given the extent of contested comments filed, this Order potential environmental may be issued by the Division Director, issues associated with Division of Hydro Administration & Third Unit could take Compliance (DHAC) 90 - 180 days Order is final post 30 October 2009 Hatch Acres Corporation 10 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition ACTIVITY DESCRIPTION / LEAD & DURATION # DELIVERABLES PARTICIPANTS days of issuance TOTAL — FERC PROCESSING 285 — 435 DAYS GRAND TOTAL 824 — 1.154 DAYS 2.3 Review of License Requirements We reviewed the December 1978 Application for License; FERC License and amendments to date to the Terror Lake Project; other documents posted to the FERC Docket for Project No. 2743 (Terror Lake Project); the FERC Part 12 Report prepared by Hatch Acres Corporation for the Four Dam Pool Power Agency (FDPPA) who held the license at the time the Part 12 report; and the Dam Safety Inspection Reports prepared by the FERC Division of Dam Safety and Inspections (D2S1), Portland Regional Office (PRO). We note that nothing in the proposed installation of the Third Unit is expected to affect the Offer of Settlement made part of the Order Issuing Major License and Approving Joint Offer of Settlement dated October 5, 1981 and effective on November 1, 1981. Note that the recommended process to prepare the Capacity Amendment Application, the Alternative Licensing Procedure (ALP) allows the Applicant to prepare and file with the Application for License Amendment a Preliminary Draft Environmental Assessment (PDEA). The PDEA addresses the FERC regulation for the Environmental Exhibit E and the requirements of the National Environmental Policy Act. FERC changed the regulations for Applications for License, including Amendments to the License, in the late 1970's. The 1978 Application for License for the Terror Lake Project was based on the regulations prior to the major modifications. Because of the major changes in the FERC regulations, we determined that the entire format of the Capacity Amendment Application will need to conform to the regulations at 18 CFR 4.51 and 4.41. Based on our review we identified the License Exhibits and Articles that will require investigations and preparation of modifications to the documents on file with the FERC. These investigations and modifications to documents on file with the FERC will be presented in the Capacity Amendment Application. Regarding license exhibits, the regulation in effect does not follow the format of the 1978 Application. KEA will not be required to note which exhibits from the 1978 Application are modified by the Capacity Amendment Application. KEA will be required to address License Articles. Table 2.3.1 identifies these Articles that will be affected by the addition of the third unit. Any modifications will be discussed in the Capacity Amendment Application. Note that FERC will probably issue new License Articles using their current numbering system. October 2009 Hatch Acres Corporation 11 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition TABLE 2.3.1 LICENSE ARTICLES AFFECTED BY AMENDMENT APPLICATION LICENSE ARTICLE DESCRIPTION MODIFICATION Annual Charges Original installed capacity is noted as 26,700 horsepower. Article 33 (a) administrative charge based KEA will need to file the modified installed capacity in horsepower and FERC will compute the additional on installed capacity administrative charge paid by KEA annually. Article 34 As -built drawings To be filed at completion of construction of the third unit. Contract drawings and Article 37 specifications to be filed with To be filed following issuance of the Amendment Order and FERC 60 days prior to prior to commencement of construction. construction. Effects of project operations on Article 41 the fishery resource in the Consultation with resource agencies to discuss any req u i red Kizhuyak River below the modifications to Article 41. powerhouse. Archaeological ly Sensitive Areas in vicinity of powerhouse Article 45 Monitor & protect — protect during construction. Discuss with SHPO whether archaeological site 49-KOD-190 any of the identified areas could be affected during construction. Article 47 Plans to minimize erosion, dust, sedimentation, water pollution Consultation with resource an agencies to discuss required g y q during construction plans. 2.4 Risk Assessment At the d i rection of KEA, we d id not consult with the resource agencies in performing the review presented in this report. In order to address KEA's interest in identifying any "fatal flaws" or major difficulties with the proposed FERC amendment, we did briefly discuss the potential for installation of the third unit with staff in the Alaska Department of Fish & Game (ADF&G) as ADF&G has recently been involved in the upgrade of the tailrace and we were interested in identifying any concerns ADF&G would have with addition of the third unit. ADF&G staff did not identify any major issues from their perspective. They will want to be involved in discussions with KEA should KEA elect to proceed with the FERC amendment. The Application for Capacity Amendment is not anticipated to result in requests by resource agencies for any new environmental field studies. We reviewed the existing License Articles and the 1981 Settlement Agreement and did not identify any potential for "opening up the license" to address other project facilities and/or project operations regarding facilities other than at the Terror Lake Powerhouse. We note that consultation with all agencies and interested participants in the FERC licensing process has not occurred and recommend that KEA consider engaging these entities in consultation at the outset of Phase 1.b of the feasibility study. We recommend that the Hatch Acres team participate in such consultations with KEA. We also reviewed the current tailrace operations and found it adequate to accommodate additional flow released from the third unit. Installation of the third turbine will not require additional lands or modifications to the project boundary. October 2009 Hatch Acres Corporation 12 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre -Feasibility Analysis On the scale of 1 to 10 with 10 being the most difficult, we assign a "1 " to installation of the third unit. 2.5 FERC Process for Application for Capacity Amendment to License 2.5.1 Required Exhibits for Capacity Related Amendment The FERC regulations require that "Any application to amend a license for a hydropower project that involves additional capacity not previously authorized, and that would increase the actual or proposed total installed capacity of the project, would result in an increase in the maximum hydraulic capacity of the project of 15 percent or more, and would result in an increase in the installed name -plate capacity of 2 megawatts or more, must contain the following exhibits, or revisions or additions to any exhibits on file, commensurate with the scope of the licensed project:' The Terror Lake Project is classified as a Major Project. The contents of the Amendment Application will include modifications to the license exhibits listed above in Table 2.3.1. Exhibits A, B, C, D, E, under 18 CFR 4.51 and Exhibits F, and G under 18 CFR 4.41 would be included in the Amendment Application. As KEA proposes to use the Alternative Licensing Procedure (ALP), a Preliminary Draft Environmental Assessment will replace the Exhibit E. Because no additional lands will be required and the Project Boundary will not be changed, KEA will advise FERC that a modified Exhibit G is not applicable. Citations to the FERC regulation are noted at each License Exhibit; all regulations are found in Title 18 of the Code of Federal Regulations. Table 2.5.1 presents the license exhibits that will be included in the Application for Capacity Amendment. Text in italic face is excerpted from the FERC regulations. October 2009 Hatch Acres Corporation 13 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition TABLE 2.5.1 REQUIRED LICENSE EXHIBITS LICENSE EXHIBIT Pre-Feasibi I ity Analysis This section of the Application identifies the licensee and provides supporting information regarding the state requirements. Of interest to the Amendment, the Initial Statement requires Initial a statement supporting why the proposed changes are necessary. Statement (4) The amendments of license proposed and the reason(s) why the proposed changes are necessary, are: [Give a statement or description] (Emphasis added) Note that the statement to 4.51(a) include here will be excerpted from the Preliminary Draft Environmental Assessment at the section discussing the purpose and need for the Amendment: e.g. The Terror Lake Project is the cornerstone to KEA's renewable energy vision. Project Description (3) The number, type, and rated capacity of any turbines or generators, whether existing or Exhibit A proposed, to be included as part of the project; 4.51(b) 5) The specifications of any additional mechanical, electrical, and transmission equipment appurtenant to the project; and 6) Statement that no additional lands will be required Project Operation (1) A statement whether operation of the powerplant will be manual or automatic, an estimate of the annual plant factor, and a statement of how the project will be operated during adverse, mean, and high water years; (2) An estimate of the dependable capacity and average annual energy production in kilowatt-hours (or a mechanical equivalent), supported by the following data: (i) The minimum, mean, and maximum recorded flows in cubic feet per second of the stream or other body of water at the powerplant intake or point of diversion, with a specification of any adjustments made for evaporation, leakage, minimum flow releases (including duration of releases), or other reductions in available flow; monthly flow duration curves indicating the period of record and the gauging stations used in deriving the curves; and a specification Exhibit B of the period of critical streamflow used to determine the dependable capacity; 4.51(c) (ii) An area -capacity curve showing the gross storage capacity and usable storage capacity of the impoundment, with a rule curve showing the proposed operation of the impoundment and how the usable storage capacity is to be utilized; (iii) The estimated hydraulic capacity of the powerplant (minimum and maximum flow through the powerplant) in cubic feet per second; (iv) A tailwater rating curve; and (v) A curve showing powerplant capability versus head and specifying maximum, normal, and minimum heads; Exhibit C 4.51(d) (3) A statement, with load curves and tabular data, if necessary, of the manner in which the power generated at the project is to be utilized, including the amount of power to be used on -site, if any, the amount of power to be sold, and the identity of any proposed purchasers; Proposed Construction Schedule (2) Proposed schedule describing the necessary work and specifying the intervals following issuance of a license amendment order when the work would be commenced and comaleted. October 2009 Hatch Acres Corporation 14 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition LICENSE EXHIBIT Statement of Costs and Financing (ii) The cost of the new development work, with a specification of.• (A) Total cost of each major item; (B) Indirect construction costs such as costs of construction equipment, camps, and commissaries; (C) Interest during construction; and (D) Overhead, construction, legal expenses, taxes, administrative and general expenses, and contingencies. (4) A statement of the estimated average annual cost of the total project as proposed specifying any projected changes in the costs (life -cycle costs) over the estimated financing or licensing period if the applicant takes such changes into account, including: (i) Cost of capital (equity and debt); (ii) Local, state, and Federal taxes; (iii) Depreciation and amortization; Exhibit D (iv) Operation and maintenance expenses, including interim replacements, insurance, 4.51(e) administrative and general expenses, and contingencies; and (v) The estimated capital cost and estimated annual operation and maintenance expense of each proposed environmental measure. (5) A statement of the estimated annual value of project power, based on a showing of the contract price for sale of power or the estimated average annual cost of obtaining an equivalent amount of power (capacity and energy) from the lowest cost alternative source, specifying any projected changes in the cost of power from that source over the estimated financing or licensing period if the applicant takes such changes into account. (6) A statement specifying the sources and extent of financing and annual revenues available to the applicant to meet the costs identified in paragraphs (e) (3) and (4) of this section. (7) An estimate of the cost to develop the license application; (8) The on peak and off-peak values of project power, and the basis for estimating the values, for projects which are proposed to operate in a mode other than run -of -river; and (9) The estimated average annual increase or decrease in project generation, and the estimated average annual increase or decrease of the value of project power, due to a change in project operations (i.e., minimum bypass flows; limits on reservoir fluctuations). The format for the PDEA follows the NEPA Environmental Assessment (EA) requirements. For those sections of the EA that are not applicable, we will state in an introductory section the PDEA extent of the potential project -related effects on natural resources and why information is not 4.34(i) appropriate. The content of the PDEA will depend on any environmental issues raised by the resource agencies during the Scoping Meeting and issues identified by FERC Staff. At this point, we do not anticipate a major effort associated with the PDEA. October 2009 Hatch Acres Corporation 15 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition LICENSE EXHIBIT General Design Drawings of the Principal Project Works & Supporting Information Used as the Basis of Design. NOTE: The Exhibit F drawings are protected under the FERC regulations governing Critical Energy Infrastructure Information (CEII) and are not to be provided in publicly available documents. Exhibiff drawings are only provided to the FERC and must be filed pursuant to CEII procedures contained in 18 CFR 388.112 and 388.113. Exhibit F The drawings must conform to the specifications of §4.39. (1) The drawings must show all major project structures in sufficient detail to provide a full 4.41(g) understanding of the project, including: (i) Plans (overhead view); (ii) Elevations (front view); (iii) Profiles (side view); and (iv) Sections. Exhibit L-11 / FERC Drawing No. 2743-19 — Powerhouse (PH) Site Plan Exhibit Exhibit L-12 / FERC Drawing No. 2743-20 — PH General Arrangement - Plans Drawings Exhibit L-13 / FERC Drawing No. 2743-21 — PH General Arrangement — Sections Map of the project that must conform to the specifications of §4.39. Exhibit G NOTE: Because there are no new major project features proposed and no modification to the 4.41(h) Project Boundary, we will include a statement that no modifications to the Exhibit G Maps on file with the FERC are required. 2.6 Potential Study Requirements Most of the studies to support the Capacity Amendment Application are related to engineering and economic aspects of the proposed installation of the Third Unit. The Application for Capacity Amendment is not anticipated to result in requests by resource agencies for any new environmental field studies. We do anticipate that the agencies will be interested in reviewing our analysis regarding the additional flow from the powerhouse during periods when all three units would be in operation; and analysis of the effect on the Terror Lake reservoir during such periods. 2.7 FERC Application for Amendment — Process Options 2.7.1 Contents of a Capacity -related Amendment For capacity -related amendments, a licensee is required to provide information required by Subpart L — Application for Amendment; 18 CFR 4.201(b): (b) Required exhibits for capacity related amendments. Any application to amend a license for a hydropower project that involves additional capacity not previously authorized, and that would increase the actual or proposed total installed capacity of the project, would result in an increase in the maximum hydraulic capacity of the project of 15 percent or more, and would result in an increase in the installed name plate capacity of 2 megawatts or more, must contain the following exhibits, or revisions or additions to any exhibits on file, commensurate with the scope of the licensed project: October 2009 Hatch Acres Corporation 16 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition (5) For amendment of a license for a water power project that, at the time the application is filed, has been constructed and is proposed to have a total installed generating capacity of more than 5 MW— Exhibits A, B, C, D, E, F, and G under §4.51 of this chapler. 2. Z2 Process Options The FERC regulations governing Applications for Amendment are silent as regards process design for Applications for Amendment. Effective July 23, 2005, the Integrated Licensing Process (I LP) is the default process for filing an application for an original, new, or subsequent license. We discussed this with FERC staff in the Division of Hydro Administration and Compliance (DHAC) and were advised that the most amendments follow the traditional licensing process (TLP) and the three -stage consultation process. We noted that KEA would be interested in consolidating, to the extent practicable, the environmental review and related requirement for a NEPA document to support a Commission action. The consolidated review provided by the ALP avoids the "second bite at the apple" that often occurs in a TLP: Applicant files Application for License with the Exhibit E; Agencies provide recommendations; FERC Staff then conducts NEPA Scopi ng and prepares an Environmental Assessment (EA). Often agencies that recommended terms and conditions in response to the Exhibit E increase their recommendations in response to the FERC NEPA Scopi ng and related EA. We were advised that while the regulation is silent as regards applications for amendment, an Applicant may elect to use the Alternative Licensing Procedure. Commission approval is needed to use either the Traditional or the Alternative Licensing Process. There are three options for the FERC prefi l i ng process: • Integrated Licensing Process (I LP) • Traditional Licensing Process (TLP) • Alternative Licensing Procedure (ALP) The following sections 2.7.1 through 2.7.3 provide a brief discussion of the three options with notes regarding the appropriateness of each option to KEA's proposed action. In reviewing the three options, we also considered the applicability of each option to the proposed addition of the third unit and the other potential project enhancements being investigated in Task Order 2. We see the benefit of establ ish i ng a protocol for the FE RC amend ment proceed i ng for the Th i rd U n it Addition that would serve KEA's interests in enhancing the Terror Lake Project with other potential applications for amendment. Section 2.7.6 provides a discussion of the schedules for each option. 2.7.3 Integrated Licensing Process OLP) FERC states that: "The Integrated Licensing Process is intended to streamline the Commission's licensing process by providing a predictable, efficient, and timely licensing process that continues to ensure adequate resource protections. The efficiencies expected to be achieved through the 1 LP are founded in three fundamental principles: • Early issue identification and resolution of studies needed to fill information gaps, avoiding studies post -filing; • Integration of other stakeholder permitting process needs; and October 2009 Hatch Acres Corporation 17 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition • Established time frames to complete process steps for all stakeholders, including the Commission." (Source: FERC Website at Industries — Hydropower) Pre -Feasibility Analysis The I LP is established as the "default" process and Applicants desiring to use either the TLP or ALP are required to file a request with the FERC. The request must include a discussion regarding why the I LP is not appropriate for the proposed FERC proceeding and include documentation of the Applicants consultation with agencies and other entities regarding their support for the request. The I LP imposes a detailed, sequential process schedule, including time frames for each step, including deadlines that must be met. I LP was primarily designed to address the problem FERC identified where delays in issuing licenses were caused by the state agencies failing to issue water quality certificates in a timely fashion; and issues experienced in proceedings involving large existing hydropower projects seeking a new license (rel icensi ng) During the ru lemaki ng, many commenting entities stated that strict adherence to the mandatory deadlines imposed by the FERC in setting the schedule emphasized speed at the expense of sound science and quality decision - making Based on our experience, the I LP would be "overkill" for the proceeding to apply for the Capacity Amendment. The I LP is highly regulated and the Applicant cedes a great degree of control over the process to the FERC Staff: FERC holds the Scopi ng Meetings; FERC Staff review and approve al study plans; the schedule is established by regulation and does not provide flexibility; the timeframe for the ILP is not designed for specific proceedings, rather the regulation imposes a "one size fits all" and does not take into consideration the scope of the proposed action, nor does the schedule take into consideration difficulty in accessing a project site or the seasonal constraints on conduct of field investigations. 2.7.4 Traditional Licensing Process (TLP) FERC states: "In developing a license application, applicants must complete and document a three -stage pre -filing consultation process. The steps include: First Stage • Applicant issues notice of intent, preliminary application document, request to use TLP, and newspaper notice; • Commission approves use of TLP; • Applicant conducts joint agency/public meeting and site visit; • Resource agencies and tribes provide written comments; and • Agencies, tribes, or applicant request dispute resolution on studies with the Commission. Second Stage • Applicant completes reasonable and necessary studies. • Applicant provides draft application and study results to resource agencies and tribes; Resource agencies and tribes comment on draft application; and • Applicant conducts meeting if substantive disagreements exist. October 2009 Hatch Acres Corporation 18 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition Third Stage • Applicant files final application with Commission and sends copies to agencies and tribes." (Source: FERC Website at Industries — Hydropower) The primary drawback to the TLP is that the environmental report is in the format of the Exhibit E. The Exhibit E format does not address requirements under NEPA for an Environmental Assessment (EA). What this means is that the Applicant prepares and files the Exhibit E as part of the Application. Following FERC acceptance of the Application, FERC Staff or a Third Party Contractor conducts NEPA Scopi ng and prepares the EA or EIS depending on the extent of environmental impacts. The post -filing process would add 1 — 2 years to the FERC post -filing process. In addition, agencies have a second opportunity to impose terms and conditions: the first opportunity is when the Applicant files the Application including the Exhibit E and the agencies file recommendations and preliminary terms and conditions; and the second opportunity is in response to FERC Scopi ng and issuance of the NEPA EA where the agencies may file additional recommendations and final terms and conditions. In our experience, agencies often take advantage of this "second bite of the apple" to impose significantly modified recommendations and, in some cases, mandatory terms and conditions. 2.7.5 Alternative Licensing Procedure (ALP) FERC States: "In contrast to the traditional licensing process described above, Applicants can utilize the Commission's alternative licensing process designed to improve communication among affected entities. As part of the alternative licensing process, an applicant can: • Tailor the pre -filing consultation process to the circumstances of each case; • Combine into a single process the pre -filing consultation process and environmental review processes under the National Environmental Policy Act and other statutes; and • Allow for preparation of a preliminary draft environmental assessment by an applicant or an environmental impact statement by a contractor chosen by the Commission and funded by the applicant. The requirements of the alternative licensing process are found in 18 CFR 4.34(i) and discussed in detail in Order 596." (Source: FERC Website at Industries — Hydropower) The significant advantages of the ALP are: • The pre -filing consultation process is collaborative and allows flexibility in developing the schedule and deadlines are established by the participants; • Study plans are developed by the applicant in consultant with participants and can be modified as need arises • The Applicant, in coordination with participants, tailor the pre -filing process to be commensurate with the scope of the proposed action; and • The Applicant conducts the Scoping process and prepares the Draft NEPA EA in the form of the Preliminary Draft Environmental Assessment (PDEA). October 2009 Hatch Acres Corporation 19 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition 2.7. 6 Comparison of Options The following matrix presents a comparison of the three processes: TABLE 2.7.6 COMPARISON OF OPTIONS Item Integrated Licensing Traditional Licensing Process Process (I LP) (T L P) Pre -Feasibility Analysis Alternative Licensing Procedure (ALP) Consultation with Integrated under regulation "Paper — driven" — primarily Collaborative Resource Agencies & document provision for Indian Tribes review & comment FERC Staff Begins at Pre -filing Notice of Post Application Filing Early involvement on requested Involvement Intent; Staff direction of basis. process & involvement is Post Application Filing sustained throughout Deadlines Strict, defined deadlines for Pre -filing — some deadlines Pre -filing — deadlines are all participants throughout for participants. defined by the collaborative process. group. Requests for extension must Post -filing — defined be detailed and demonstrate deadlines for participants. Post -filing — defined deadlines good cause. Granting for participants. extensions is rare. Study Plan Developed through study Development plan meetings. All plans must be approved by FERC. Study Dispute Informal dispute resolution Resolution available to all participants. Formal dispute resolution available to agencies with mandatory conditioning authority. 3-member panel technical recommendation on study dispute. Developed by Applicant based on early agency and tribal recommendations. No FERC involvement. FERC study dispute resolution available upon request. FERC OEP Director issues advisory opinion. Developed by collaborative group. Applicant may request FERC staff assistance; available as FERC staffing resources allow. FERC study dispute resolution available upon request. FERC OEP Director issues advisory opinion. FERC OEP Director opinion binding on Applicant. Application Preliminary licensing Draft and final application Draft and final application with proposal or draft application include Exhibit E. applicant prepared EA or third - and final application include party EIS meeting requirements Exhibit E that has form and Post filing FERC staff conduct of NEPA contents of an EA meeting scopi ng and prepare NEPA requirements of NEPA. document NEPA Process NEPA Scopi ng and Begins when FERC staff NEPA Scopi ng and preparation preparation of EA are accepts the application. FERC of EA are conducted during integrated with pre -filing staff conducts Scopi ng and collaborative pre -filing process. process. prepares the EA or EIS. October 2009 Hatch Acres Corporation 20 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre -Feasibility Analysis 2.8 Recommended Approach - FERC Alternative Licensing Procedure (ALP) 2.8.1 Process Selection - Schedule Comparison The I LP, as noted above, is a highly regulated pre -filing process. The schedule follows the process diagram included in the Final Rule. The NEPA process is integrated with the pre -filing activities. Modifications to the schedule are very difficult to achieve. Strict deadlines are imposed. The TLP follows the three -stage consultation process and review and comment periods are specified in the FERC regulation. Modifications to these periods require approval by all participants and the FERC. The NEPA process begins post -filing and FERC acceptance of the Application. The ALP pre -filing schedule and deadlines are defined by the collaborative group. The NEPA process is integrated with the pre -filing activities. 2.8.2 Recommendation to Use FERC ALP We reviewed the three available options that govern the pre -filing consultation and preparation of the Capacity Amendment Application discussed above in Section 2.7. We recommend that KEA request FERC approval to use the Alternative Licensing Procedure (ALP), as opposed to opting in for the I LP as the default process for the following reasons: • ALP allows KEA, in consultation with the agencies, to tailor the pre -filing consultation process to fit the scope of the potential project -related effects on the environment • ALP provides KEA flexibility in design of field studies in consultation with affected/i nte rested agencies; unlike the I LP where FERC must approve all study plans • ALP provides KEA and the pre -filing participants with flexibility in establishing the schedule for the pre -filing process; unlike the ILP where FERC establishes rigid deadlines. This flexibility is particularly important for a project located in a remote site where access is solely by helicopter, float plane, or boat. • ALP provides a process where consultations, environmental review, and NEPA scoping are combined; this greatly streamlines the pre -filing process. • ALP allows preparation of the NEPA document — the PDEA. FERC uses KEA's PDEA as the basis for its own NEPA document — another aspect of the streamlining benefits of the ALP. The regulation for the ALP at 18 CFR 4.34 (i)(2) describes the goals of the ALP (2) The goal of such alternative procedures shall be to: (i) Combine into a single process the pre -filing consultation process, the environmental review process under the National Environmental Policy Act and administrative processes associated with the Clean Water Act and other statutes; (ii) Facilitate greater participation by and improve communication among the potential applicant, resource agencies, Indian tribes, the public and Commission staff in a flexible pre -filing consultation process tailored to the circumstances of each case;(Emphasis Added) (iii) Allow for the preparation of a preliminary draft environmental assessment by an applicant or its contractor or consultant, or of a preliminary draft environmental impact statement by a contractor or consultant chosen by the Commission and funded by the applicant; October 2009 Hatch Acres Corporation 21 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre -Feasibility Analysis (iv) Promote cooperative efforts by the potential applicant and interested entities and encourage them to share information about resource impacts and mitigation and enhancement proposals and to narrow any areas of disagreement and reach agreement or settlement of the issues raised by the hydropower proposal; and (Emphasis Added) (v) Facilitate an orderly and expeditious review of an agreement or offer of settlement of an application for a hydropower license, exemption or amendment to a license. Following KEA selection of the pre -filing process, KEA will prepare and file with the FERC: • Notice of Intent to File an Application for License — discussed below at 2.8.2 • Request to Use the Alternative Licensing Process — discussed below at 2.8.3 2.8.3 Notice of Intent to File a Capacity Amendment Application When FERC modified its regulations in 2005, it added a requirement for applicants to file a Notice of Intent (NPI) to file. While the regulation does not address amendments, this requirement may apply. Noticing requirements are found at 18 CFR 5.5(b): (1) The potential applicant or existing licensee's name and address. (2) The project number, if any. (3) The license expiration date, if any. (4) An unequivocal statement of the potential applicant's intention to file an application for an original license, or, in the case of an existing licensee, to file or not to file an application for a new or subsequent license. (5) The type of principal project works licensed, if any, such as dam and reservoir, powerhouse, or transmission lines. (6) The location of the project by state, county, and stream, and, when appropriate, by city or nearby city. (7) The installed plant capacity, if any. (8) The names and mailing addresses of.• agencies, Tribes, and other participants The Notice is filed with the FERC along with the Request to Use the ALP and the Pre -Application Document. 2.8.4 Request to Use the ALP FERC modified its regulations in 2005. The primary purpose of the modified regulations was to include the Integrated Licensing Process (I LP) discussed above in section 2.8.1. FERC established the I LP as the "default process." FERC added a requirement in Section 5.3 (a)(2) of the regulations that requires applicants to file a request with the FERC if the applicant desires to use and alternative to the I LP: "(2) Any potential license applicant that files its notification of intent pursuant to § 5.5 and pre -application document pursuant to § 5.6 after July 23, 2005 must request authorization to use the licensing procedures of parts 4 and 16, as provided for in paragraphs (b)— (0 of this section." The following discussion identifies the steps in requesting FERC approval to use the ALP and includes the relevant regulation in italic face following the narrative. The regulation governing Alternative procedures is found in 18 CFR 4.34: October 2009 Hatch Acres Corporation 22 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre-Feasibi I ity Analysis (i) Alternative procedures. (1) An applicant may submit to the Commission a request to approve the use of alternative procedures for pre -filing consultation and the filing and processing of an application for an original, new or subsequent hydropower license or exemption that is subject to §4.38 or § 16.8 of this chapter, or for the amendment of a license that is subject to the provisions of §4.38. The first step is to contact all agencies and other potential participants to discuss KEA's desire to use the ALP, including a statement why the ALP will result in an efficient and effective pre -filing process. (2) A potential applicant requesting the use of §4.34(i) alternative procedures of this chapter must: (i) Demonstrate that a reasonable effort has been made to contact all agencies, Indian tribes, and others affected by the applicant's request, and that a consensus exists that the use of alternative procedures is appropriate under the circumstances; Following this initial consultation, KEA will prepare a Communications Protocol, provide to agencies and participants for review and comment and file with FERC at the outset of the pre -filing process. (ii) Submit a communications protocol, supported by interested entities, governing how the applicant and other participants in the pre -filing consultation process, including the Commission staff, may communicate with each other regarding the merits of the potential applicant's proposal and proposals and recommendations of interested entities; and KEA is required to provide a copy of its request to use the ALP for review and comment before filing with the FERC (iii) Provide a copy of the request to all affected resource agencies and Indian tribes and to all entities contacted by the applicant that have expressed an interest in the alternative pre -filing consultation process. (d)(1) The potential applicant must provide a copy of the request to use the traditional process or alternative procedures to all affected resource agencies, Indian tribes, and members of the public likely to be interested in the proceeding. The request must state that comments on the request to use the traditional process or alternative procedures, as applicable, must be filed with the Commission within 30 days of the filing date of the request and, if there is no project number, that responses must reference the potential applicant's name and address. KEA then files the Request to Use the Alternative Procedure, accompanied by the Communications Protocol with FERC, provides copies to consulted entities, and publishes notice of its request in local newspapers (in this case, the notice is also to be published in the Anchorage Daily News. (2) The potential applicant must also publish notice of the filing of its notification of intent, of the pre -application document, and of any request to use the traditional process or alternative procedures no later than the filing date of the notification of intent in a daily or weekly newspaper of general circulation in each county in which the project is located. The notice must: (i) Disclose the filing date of the request to use the traditional process or alternative procedures, and the notification of intent and pre -application document; (ii) Briefly summarize these documents and the basis for the request to use the traditional process or alternative procedures; October 2009 Hatch Acres Corporation 23 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre -Feasibility Analysis (iii) Include the potential applicant's name and address, and telephone number, the type of facility proposed to be applied for, its proposed location, the places where the pre -application document is available for inspection and reproduction; (iv) Include a statement that comments on the request to use the traditional process or alternative procedures are due to the Commission and the potential applicant no later than 30 days following the filing date of that document and, if there is no project number, that responses must reference the potential applicant's name and address; (v) State that comments on any request to use the traditional process should address, as appropriate to the circumstances of the request, the: (A) Likelihood of timely license issuance; (B) Complexity of the resource issues; (C) Level of anticipated controversy; (D) Relative cost of the traditional process compared to the integrated process; and (E) The amount of available information and potential for significant disputes over studies; and (F) Other factors believed by the commenter to be pertinent; and (vi) State that respondents must submit an electronic filing pursuant to §385.2003(c) or an original and eight copies of their comments to the Office of the Secretary, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. The FERC regulation provides that: "(e) Requests to use the traditional process or alternative procedures shall be granted for good cause shown." [Order 2002, 68 FR 51121, Aug. 25, 2003; 68 FR 61742, Oct. 30, 2003]" 2.8.5 Communications Protocol The purpose of this Communication Protocol (Protocol) is to facilitate communication and cooperation among KEA; federal and state agencies; Native Alaska Tribes and Native Corporations; other interested organizations; and members of the public (collectively, Participants) during the preparation of KEA's Capacity Amendment Application. The Communications Protocol is required by the FERC regulations at 18 CFR 4.34(i) (3) for the Alternative Licensing Procedure (ALP): (3) A potential hydropower applicant requesting the use of alternative procedures must: (i) Demonstrate that a reasonable effort has been made to contact all resource agencies, Indian tribes, citizens' groups, and others affected by the applicant's proposal, and that a consensus exists that the use of alternative procedures is appropriate under the circumstances; (ii) Submit a communications protocol, supported by interested entities, governing how the applicant and other participants in the pre -filing consultation process, including the Commission staff, may communicate with each other regarding the merits of the applicant's proposal and proposals and recommendations of interested entities; and (iii) Serve a copy of the request on all affected resource agencies and Indian tribes and on all entities contacted by the applicant that have expressed an interest in the alternative pre -filing consultation process. October 2009 Hatch Acres Corporation 24 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition 2.8.6 Preliminary Application Document (PA D)lDraft Annotated Application for License We consulted with FERC Staff regarding requirements for the PAD as required in the FERC regulations at 18 CFR 5.8. The purpose of a PAD is to provide FERC and Participants with existing information relevant to the project proposal. Potential Applicants for license are not required to conduct studies in order to generate information for inclusion in the PAD. Because this is an Application for Capacity Amendment to install a third unit in the existing Powerhouse and KEA's proposal does not involve: ground -disturbing actions on lands not already disturbed and no additional lands are required, KEA will use existing information and information developed in the pre -feasibility studies presented in this report, KEA will present information required by the FERC regulation for the PAD in the format of a Draft Application for License. 2.9 Schedule to Prepare Capacity Amendment Application One of the major benefits of using the ALP is the ability to establish the pre -filing schedule in consultation with the agencies and other participants. This flexibility allows KEA to schedule meetings and any on -site visits by participants to avoid poor weather conditions. A schedule would be developed during Phase 1.b of the Pre -Feasibility Study. Please see a preliminary schedule included at Section 2.2 Strategic Planning of this report. This schedule was developed absent any consultation with agencies and other participants and is provided solely for planning purposes. I Engineering Review 3.1 Purpose of Engineering Review The purpose of the Engineering Review is to determine whether there are any major modifications that may be required to install the third unit and review tailrace adequacy to accommodate modifications in project operation. The project constructability, potential construction schedule, and adequacy of existing As -Built Drawings and License Exhibits to proceed with planning and support the license amendment, are also evaluated. 3.2 Review of Existing Third Bay Provisions 3.2.1 Civil / Mechanical The third bay in the powerhouse, which is currently unused, is equal in size to the Unit 1 and 2 turbine bays. Therefore the powerhouse can accommodate a third unit that is at least equal in capacity to the existing units. Only the primary (first stage) concrete has been placed in the third bay, allowing for the second stage concreting once the embedded parts for the new turbine and generator are in place. The open area for secondary concrete is believed to be sufficiently large to accommodate slight variations in turbine dimensions with modern state-of-the-art Pelton turbines when compared early 1980's design of the Unit 1 and 2 turbines. Variations are generally quite small, and this will allow a turbine with the highest possible efficiency, considering head and flow conditions. It is uncertain as to what, if any anchors or other provisions have been made in the primary concrete for setting, adjusting, and holding the new turbine components during installation and concreting operations. However, even if nothing has been provided, drilled anchors and dowels can be installed for this purpose without major inconvenience. October 2009 Hatch Acres Corporation 25 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition The spherical turbine inlet valve for the third unit is in place and bolted to the branch pipe from the penstock manifold. It is reported that the valve is not complete and only the valve body is in place (no rotor, seals, bearings or valve operator). The downstream end of the valve is closed with a bolted pressure flange. Use of this valve body for the third unit will require some review, as supply of the remaining valve components by suppliers other than Fuji, the original equipment manufacturer, may be difficult. It may be more expeditious to purchase a complete new valve. It appears that the cooling water system and other mechanical systems have been designed to allow future expansion for a third unit. The powerhouse cranes runway currently extends over the third bay and would be used for installation of the new unit. Suitable care will be required that crane operations and construction activities will not affect operation of the other units (i.e. don't drop anything on the Unit 1 or 2 ge n e rato rs) . Other mechanical considerations for installing a third unit at Terror Lake include: • Impact of added waterway head losses on performance of the new and existing units • Hydraulic transients with the added flow of the third unit • Tailrace water levels with the higher flow and its affect on turbine operation • Potential for increased sediment in the water, and its adverse affect on the turbines At present the head loss from the Terror Lake reservoir to the turbines with both units discharging rated flow (135 cfs) is 26 ft, based on site test data. With a third 135 cfs unit the loss will increase to approximately 57 ft. As a result, the overall gross head water -to -wire efficiency of the plant when operating three units at rated flow will be about 2.5% lower than with two units. However, when the third unit is installed the overall efficiency when only one or two units are operating should increase a small amount as the new turbine should be slightly more efficient than the existing units, even with the recently installed new runners. The project design criteria indicates that hydraulic transients with third unit installed was considered in the original design analysis of the plant. Apparently, with three units there may be some limit to the needle operating time on one of the units. This is not be a major obstacle but should be reviewed further in the context of unit parallel operation. With three units operating, tai lwater levels will increase. Levels that are too high would interfere with the Pelton turbine operation. This has been reviewed in Section 3.3, and tai lwater levels are not considered to be a problem. Increased flows and velocities in the tunnels and penstock, in theory, imply added sediment transport to the units and increased wear on the turbine runners and needles. Sediment erosion has been a problem in the past, but has been mitigated by the present rock trap design. For the Terror Lake project, the majority of the sediment comes from the Falls Creek and Rolling Rock Creek diversions, and the flow through these diversions will not change with the addition of the third unit. Therefore the addition of a third unit will not have any effect on sediment erosion. 3.2.2 Electrical We noted space constraints and are concerned that the space available in the control room may be inadequate for the Unit 3 control panel. We also have questions regarding the adequacy of space in the existing switchyard and control building for addition of a Unit 3 step-up transformer, protection, October 2009 Hatch Acres Corporation 26 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition isolating disconnect switch, and bus extensions needs to be evaluated. Further investigation is needed. We have questions regarding the capability of the existing SCADA system to accommodate the new unit. It may not be possible to extend the existing DEC PDP-11/24 SCADA system for the new unit, although it may be possible to obtain components for expanding the equipment from Hewlett- Packard or an after market seller if there is adequate space. It may be necessary to complete a SCADA system upgrade to accommodate Unit 3 input/output. There are no provisions for auxiliary power for Unit 3 according to the information provided by KEA on 9/21/2009. Adequacy of existing equipment including ac and do distribution panels and motor controls needs further evaluation to determine if sufficient space exists to add the necessary branch circuit breakers and motor controllers. We have questions regarding the adequacy of the existing 125 V do system 168 Ah battery needs to be evaluated for the addition of Unit 3, including powering new controls, relays, and switchgear. This should be considered as the battery is being replaced this year. We have questions regarding the adequacy of raceways to accommodate control and power cabling between Unit 3 and other system elements; this needs to be evaluated. It appears that the existing 138 kV transmission line from Terror Lake to KEA's Airport Substation is adequate for the additional power that will be added by Unit 3, but further study is needed to make certain that no system problems will arise from the added capacity, such as a need to upgrade the fault ratings of equipment at all 138-kV system terminals. With the addition of Unit 3, we need to make certain that the plant will meet current N ESC and NEC code provisions for all newly added equipment, including an evaluation of arc flash protective margins and labeling requirements, and adequate space and egress provisions. 3.3 Tailrace Adequacy The tailrace capacity is adequate for three units operating. The tailrace confluence with Kizh uyak River was reconstructed recently and reduced the backwater effect into the tailrace channel during high river flows. The addition of a third unit should not have significant effect on the depth of flow, velocity of flow, or high tailwater elevation when all units are operating. We estimate that the depth of flow in the channel may increase 9 inches and the velocity of flow will increase about 0.5 fps, over current conditions with only two units. The increased flow velocity is not expected to affect the stability of the ri prap along the banks. The boulders were sized for velocities higher than those expected with three units operating. .4 Existing Drawings .3. 4E.1 As -Built Drawings New drawings will be required as part of engineering for the construction and installation of the third unit. These drawings would be issued to the FERC as as -built drawings once the work is complete. • Figure 3.1-1, Powerhouse Main Single Line Diagram, is not up-to-date. • Exhibit 4.4.1A System Switching Diagram: voltage level shown for the Port Lions line (7.2/12.47 W is not consistent with the Supporting Technical Information Document STI- October 2009 Hatch Acres Corporation 27 TERROR LAKE HYDROELECTRIC PROJECT: Third Unit Addition Pre -Feasibility Analysis 12-2008, FERC Project Number 2743, Amendment No.1 dated December 2008 prepared by HDR Alaska, Inc. • General Arrangement Drawings, e.g. Figures 1.13-1, -2, and -3 are not dimensioned as to equipment locations; location of motor control centers does not appear to be indicated. 3.4.2 Exhibit F Drawings Revisions to existing Exhibit F drawings that would be required to support an application for capacity amendment include: Exhibit FERC No. 2743- Showing L-12 2743-48 Powerhouse General Arrangement — Plans L-13 2743-49 Powerhouse General Arrangement — Sections L-14 2743-50 Powerhouse General Arrangement - Plans 3.4.3 Exhibit G Maps All activities related to installation of the third unit would occur within the existing Project Boundary and no new structures are proposed. Therefore, no revisions to existing Exhibit G drawings would be required to support an application for capacity amendment 3.5 Constructabi I ity Review This section contains a very preliminary review of constructabi l ity. A more detailed evaluation will be conducted during Phase 1.b. 3.5. T Adequacy of Third Bay Space While a more detailed review of the equipment requirements and space allocation in the third bay is required, significant problems or obstacles are not anticipated. The third bay is considered adequate for a unit that is the same size as Units 1 and 2. 3.5.2 Water Conveyance Connections Completion of the new turbine installation without significant disruption of Terror Lake operations will require careful study. Terror Lake is key to KEA's operations and it is necessary to keep plant outages to a minimum. During certain periods of the year plant outages would not be allowed. We understand that May through June is the optimum time to have the Terror Lake Project off l i ne to install the third unit. As a minimum, there needs to be one outage to add the turbine inlet valve internal parts or to install a new valve. Adding turbine inlet valve new parts would obviously require a longer outage. Another consideration is the possibility that the penstock branch line for Unit 3 has, over time, become filled with sediment (volcanic ash). This sediment will have to be removed prior to start of operation of the new turbine. It would appear that the best time to do this would be before the October 2009 Hatch Acres Corporation 28 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition new turbine casing is installed. If the existing valve or downstream flange were removed the sediment could be moved into the third bay area for disposal. Various outage scenarios can be postulated, including the following: (a) Install new internal parts in existing valve Activity Outage (days) Comment Unwater tunnel and penstock 2 Remove valve body 2 Install internal parts in valve 14 Risk of delay if valve body is not in good condition Remove sediment from penstock 0 Work done coincident with Item 3 Re-i nstal I and test valve 4 Re -water tunnel and penstock 2 Total outage (b) Procure new valve Activity 24 Outage (days) Comment Unwater tunnel and penstock 2 Remove valve body 2 Remove sediment from penstock 5 Instal I and test valve 5 Re -water tunnel and penstock 2 Total outage 16 Rather than dewatering the complete waterway and tunnel it may be possible to only dewater downstream of the guard valves, which are approximately 3100 ft upstream of the powerhouse. This would significantly reduce the dewateri ng and re -watering time, but safety issues must be considered. It may be necessary to overhaul the existing (Unit 1 and 2) turbine inlet valves. If this is required the overhaul work should be planned in conjunction with the work on the third unit. One possible scenario would be: • Purchase a new valve • Replace the Unit 1 valve with the new valve and then rebuild the Unit 1 valve. • Replace the Unit 2 valve with the rebuilt Unit 1 valve and than rebuild the Unit 2 valve. October 2009 Hatch Acres Corporation 29 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition • Install the rebuilt Unit 2 valve in the new Unit 3. Because of equipment lead times, this work needs to be planned well in advance of the replacement activities. Other than the valve work, and perhaps a short outage or outages for electrical interconnections it should be possible to complete the third unit work without interruption of existing plant generation activities. 3.6 Construction Schedule Fabrication of the new electrical and mechanical equipment will drive the construction schedule. Fabrication of the turbine/generator will occur off -site. Modifications to the powerhouse and switchyard required to accommodate the new turbine/generator are not expected to take over a 6- month period. Outage of the project to install the new electrical and mechanical equipment will probably be 1.5 weeks in duration. KEA advises the optimum time for a project outage is May through June. KEA has redundant diesel capability and would use diesel and wind during the outage at the Terror Lake Project. 4. Conclusions and Recommendations 4.1 Conclusions — Regulatory Installation of the third unit will primarily be accomplished within the existing powerhouse and switchyard. We did not identify any activities that would result in environmental impacts. No additional lands will be required as all activities will occur within the existing Project boundary. Addition of the third unit will increase the project installed capacity and average annual generation. We did not identify any major issues regarding the FE RC amendment process and related permitting/ approvals associated with installation of the third unit. 4.2 Conclusions — Engineering No serious engineering concerns or issues were identified in the engineering review. There is some concern about control room space and egress with additional controls, but that can likely be solved by add i ng an exit door to the outside th rough the back wal I. Head losses will increase with three units running, reducing the gross head about 2.5 percent when running three units compared to two. However, the new unit should be slight more efficient that the two existing units, so the overall plant efficiency should increase when running only one or two units. We have found no substantive reason that the Unit 3 addition will not be feasible with respect to electrical, protection, control, communications, and instrumentation; with the caveat that with a number of unanswered questions, we may yet discover other challenges that will need to be addressed. 4.3 Recommendations — Regulatory We recommend that KEA and Hatch Acres engage the agencies and other entities who will; be interested in the Amendment in consultation at the beginning of Phase 1.b. October 2009 Hatch Acres Corporation 30 TERROR LAKE HYDROELECTRIC PROJECT: Pre -Feasibility Analysis Third Unit Addition We recommend that KEA and Hatch Acres arrange for a teleconference consultation with staff in the FERC Division of Hydro Administration and Compliance (DHAC) at the beginning of Phase 1.b. Mo Fayyad, FERC DHAC, has offered to set up this consultation. We recommend that KEA use the Alternative Licensing Process in order to streamline the process, establish protocol that can be used in other amendments under consideration (Hidden Basin and Terror River), and avoid the "second bite at the apple" inherent in the Traditional Licensing Process. 4A Recommendations — Engineering Inside the Terror Lake Powerhouse Control Room, after a new switchboard panel is added for Unit 3, there will not be a safe, unobstructed path of egress from the backside of the Main Control Switchboard. At the left end, it appears that the path wi I I be obstructed by the AC/DC switchgear, and at the right end, by the swing -out manual synchronizing panel, to which someone has duct - taped padding to protect heads. We therefore recommend that an emergency exit door be added to the backside of the control room (---wet side of the Powerhouse). The work station currently at the left end of the Main Control Switchboard will need to be moved elsewhere. We recommend proceeding with replacing the obsolete SCADA equipment, and, in conjunction with this, upgrading protective relaying, to provide a fully up -dated protection and control system. (We are assuming that the protective relaying is original equipment). We recommend consideration of the addition of circuit switchers in the 138 kV switchyard on each generator step-up transformer in order to allow for rapid isolation of any transformer fault. October 2009 Hatch Acres Corporation 31