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Kenai Winds Nikiski App
Renewable Energy Fund Grant Application AEA 09-004 Grant Application Kenai Winds Response to Request for Grant Applications AEA-09-004 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Table of Contents Evaluation Notes 1 Grant Application 5 Section 1 – Applicant Information 5 Section 2 – Project Summary 6 Section 3 – Project Management Plan for Phase 3 9 Section 4 – Project Description and Tasks for Phase 3 14 Section 3 – Project Management Plan for Phase 4 30 Section 4 – Project Description and Tasks for Phase 4 34 Section 5 – Project Benefit 39 Section 6 – Grant Budget 48 Application Cost Worksheet 50 Grant Budget Worksheet – Phase 3 52 Grant Budget Worksheet – Phase 4 53 Corporate Authorization Letter 54 Appendices – Section 7 A BQ Energy Resumes 56 B Tesoro Resumes 76 C Letter of Support From Tesoro 80 D Potential Contractor Statement of Qualifications 83 E Letter of Support From Kenai Peninsula Borough 101 F Project Schedule 103 G Homer Electric Transmission System 106 H Refinery One-Line Diagram 108 I Project Layout 110 J Coastal Zone Questionnaire 112 K Detailed Development Budget 134 L Detailed Operations Budget 136 M Wind Turbine Datasheets 138 N 6-Month Meteorological Study 152 O Tesoro Alaska Refinery Fact Sheet 160 P Production Tax Credit IRS Rulings 163 Q Letter of Support from Homer Electric 175 R Draft Interconnection Study Scope of Work 177 S Letter of Support from Alaska House Finance Committee 181 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Evaluation Notes Stage 1 Standards: Kenai Winds exceeds all Stage 1 Standards Kenai Winds LLC is an Independent Power Producer (IPP) as defined by Alaska HB152 and the RFA document. As a generator of electric power not owned by a certificated electric utility, Kenai Winds fits the standard definition of an IPP. Under the additional limits provided by the Alaska Energy Authority (“…energy to be used at least 50% by the public…”), Kenai Winds is an IPP. Through its interconnection to the electric utility grid, 100% of the electric energy generated by Kenai Winds is used by the public. It is the intent of Kenai Winds to sell the majority of the electricity generated to the Tesoro Alaska Company, considered member of the public under the Alaska Public Utilities Act. Other than its role as site host and potential off-taker, Tesoro is not a business affiliate of Kenai Winds. Kenai Winds will not self-generate as it has no load of its own to supply. All power generated by Kenai Winds will be used by the public. The project in question is a 15-18 MW wind based electric power generator which will start operations in 2010, and is connected to the electric utility grid. Kenai Winds LLC is a member managed Delaware based limited liability company that does not have a statutory Board of Directors. We included letters of commitment from authorized representatives of both Kenai Winds LLC and its member company BQ Energy LLC. The project is well described as having completed the reconnaissance and feasibility analysis/conceptual design phases. The project is entering the final design/permitting phase and seeks AEA participation in this phase as well as the coming construction phase. This application is complete, but we welcome the opportunity to respond to questions that the evaluation committee may have and have requested a chance to meet with the committee in order to ensure good communication. Finally, we include resumes and references of other wind farms that BQ Energy has developed. With the support of Homer Electric and Tesoro, we demonstrate outstanding capabilities to complete this wind farm project. Stage 2 Standards 1 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Kenai Winds exceeds all Stage 2 Standards 1. Project Management, Development and Operations- The schedule for Kenai Winds is clear, realistic and well described. As no offsite infrastructure is required to be built (eg roads, power lines), Kenai Winds can proceed efficiently with minimal impacts. Our schedule and planning are based on comparison to other actual operating wind farms with adjustments made for the Kenai region and site. Our experience with similar multi-stakeholder projects has taught us that active communication programs are essential to success. We describe our communication protocol herein. Our business plan includes the sale of power to Tesoro, who confirm their participation in the project. 2. BQ Energy, Homer Electric and Tesoro are all qualified energy companies who support this application. With BQ Energy as the project manager, their experience in siting wind farms at comparable industrial locations will be essential. This facility is important to all three organizations that will devote sufficient resources to fulfilling their designated roles in the project. The project team anticipates great success but 2 Renewable Energy Fund Grant Application AEA 09-004 Grant Application understands that all development work requires overcoming challenges. They have the skills required to overcome economic, technical and other project execution challenges which may arise. Finally, the local labor pool in the Nikiski area is highly skilled due to the refinery, LNG, and natural gas production facilities nearby. These laborers will be important assets for construction and maintenance operations. 3. The project will use proven reliable wind turbines from leading manufacturers. Our operations estimates are based on extensive study of area wind studies including several years from low level sensors and one year from a meteorological tower installed on site for this project. We have also examined the site and turbine locations and have conducted layout studies from several aspects. Our risk assessment is thorough and multi-disciplined and has concluded that all risks are reasonable. These factors show us that our production estimates are commercially attainable. 4. Based upon reasonable production estimates and a sale of this power to Tesoro at prices that are felt to be mutually attractive, the project has been proven to be economically feasible with the participation of the AEA as outlined herein. BQ Energy has demonstrated their ability to raise project specific capital from bank and tax equity sources, and can fund the required portions of the Kenai winds needs. Finally, the benefits to Alaska of this facility are tangible and demonstrated. These benefits are shown as both direct and indirect- short term and long term. Alaska realizes significant benefits by the construction of Kenai Winds. Stage 3 Standards Kenai Winds exceeds all Stage 3 Standards 1. The cost of energy in Nikiski is not as high as other remote regions of Alaska. However, Nikiski has shutdown large industry because of its inability to supply natural gas for all the area needs. Kenai Winds prevents this area from serious further degradation of its energy supply. 2. Kenai Winds proposes a strong 3:1 matching position, with the Alaska portion frozen at a fixed dollar amount so that any cost overruns will be absorbed by Kenai Winds. The matching portion from Kenai Winds will be in cash, not “in-kind” 3 Renewable Energy Fund Grant Application AEA 09-004 Grant Application contributions. The significant funds required will be raised from debt and tax equity sources know to BQ Energy. 3. Kenai Winds is the finest renewable energy option in the Kenai Peninsula Borough. 4. Our project feasibility is well demonstrated. There is no better conceived renewable energy project in Alaska. 5. The project readiness is strong. Work is ongoing and due to the minimal required supporting infrastructure, the important work is well underway and will continue with the strong AEA support. 6. The project has well executed its Phase 1 and Phase 2 work as evidenced by the overall status in place. 7. There are demonstrated benefits to the Alaska public , including strong benefits to the Tesoro refinery. 8. In the foreseeable future, Kenai Winds will be the most accessible wind farm in Alaska. As such it will allow other communities with pressing energy needs to come and learn from the operations there. 9. Through the use of wind energy, a resource that has been verified, the Kenai Winds facility will be completely sustainable. Locally available labor, who support heavy industry at the refinery and Cook Inlet gas sectors will ensure a pool of qualified maintenance workers. 10. The reception at the Kenai Peninsula Borough has been excellent as evidenced by the letter of support contained herein. 4 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Kenai Winds LLC Type of Entity: Delaware Limited Liability Company, Registered in Alaska as a Foreign Limited Liability Company Mailing Address C/O BQ Energy 20 Jon Barrett Rd. Suite 2 Patterson, NY 12563 Physical Address C/O BQ Energy 20 Jon Barrett Rd. Suite 2 Patterson, NY 12563 Telephone (845) 228-3485 Fax (845) 878-2139 Email Josh.berkow@bqenergy.com 1.1 APPLICANT POINT OF CONTACT Name Josh Berkow Title Project Manager Mailing Address BQ Energy 20 Jon Barrett Rd. Suite 2 Patterson, NY 12563 Telephone (845) 228-3485 Fax (845) 878-2139 Email Josh.berkow@bqenergy.com 1.2 APPLICANT MINIMUM REQUIREMENTS Please check as appropriate. If you do not to meet the minimum applicant requirements, your application will be rejected. 1.2.1 As an Applicant, we are: (put an X in the appropriate box) An electric utility holding a certificate of public convenience and necessity under AS 42.05, or X An independent power producer, or A local government, or A governmental entity (which includes tribal councils and housing authorities); Yes 1.2.2. Attached to this application is formal approval and endorsement for its project by its board of directors, executive management, or other governing authority. If a collaborative grouping, a formal approval from each participant’s governing authority is necessary. (Indicate Yes or No in the box ) Yes 1.2.3. As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement. Yes 1.2.4. If awarded the grant, we can comply with all terms and conditions of the attached grant form. (Any exceptions should be clearly noted and submitted with the application.) 5 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 2 – PROJECT SUMMARY Provide a brief 1-2 page overview of your project. 2.1 PROJECT TYPE Describe the type of project you are proposing, (Reconnaissance; Resource Assessment/ Feasibility Analysis/Conceptual Design; Final Design and Permitting; and/or Construction) as well as the kind of renewable energy you intend to use. Refer to Section 1.5 of RFA. Kenai Winds is applying for funds for the Phase 3 (Final Design and Permitting) and Phase 4 (Construction) of a wind energy generating facility. 2.2 PROJECT DESCRIPTION Provide a one paragraph description of your project. At a minimum include the project location, communities to be served, and who will be involved in the grant project. The Kenai Winds project is a 15-18MW wind energy generation facility located in the Nikiski Industrial Area, in Nikiski, on the Kenai peninsula. The project will consist of 10 wind turbines disbursed throughout the site, electrically interconnected to the Tesoro Alaska Refinery. A discussion of the refinery and its direct benefits to the community is included in Appendix O. At times when the Kenai Winds generation exceeds the needs of the refinery, power will be sold to others. Electric energy will be delivered and sold to the oil refinery, providing low-cost power, and helping ensure the economic viability of the refinery. 2.3 PROJECT BUDGET OVERVIEW Briefly discuss the amount of funds needed, the anticipated sources of funds, and the nature and source of other contributions to the project. Include a project cost summary that includes an estimated total cost through construction. Detailed project budgets are included in the required “Grant Budget Form” in Section 6, and separate development and operations budgets are included in the Appendix K and L respectively. The current budgetary estimate for development and construction of the project is $46.8 million. The bulk of the funds required will be sourced from loans and equity investments, with the balance provided by this grant. BQ Energy, the parent company of Kenai Winds, has excellent relations with a number of banks and wind energy investors, and will use these industry contacts and its experience to raise the necessary capital for development and construction. 2.4 PROJECT BENEFIT Briefly discuss the financial benefits that will result from this project, including an estimate of economic benefits(such as reduced fuel costs) and a description of other benefits to the Alaskan public. The main benefit to Alaska is in the sale of fixed-price electricity to the Tesoro Alaska Refinery, through an interconnection to the public electric utility grid. This will reduce the cost of operating the refinery and help ensure its economic viability. More details on the $71 million in energy savings are provided in Section 5. A discussion of the refinery and its direct benefits to the community is included in Appendix O. Benefits to this refinery can and should be construed as benefits to the state of Alaska and to the Alaskan public for a number of reasons. Firstly, Tesoro is considered by Alaska law to be a member of the public in its own right. The Tesoro Alaska Refinery also has a direct impact on the economic life of its host community. Since the closure of Agrium Corp.’s fertilizer plant, Tesoro’s 575 employees with a combined payroll of $32 million makes it one of the largest employers on the Kenai Peninsula. A 2002 study of Agrium’s impact (by the Juneau-based McDowell Group) can be extended to Tesoro for an estimate of its total economic impact. Based 6 Renewable Energy Fund Grant Application AEA 09-004 Grant Application on that study, it is estimated that payroll spending and employment by Tesoro creates 700 indirect jobs on the Kenai Peninsula. This supports 2700 people (including family members) and creates an additional $25million in payroll indirectly through local spending by employees of the plant. Beyond its payroll, the Tesoro Alaska Refinery provides other direct benefits to the Alaska public which are enhanced by the Kenai Winds project. The Tesoro Alaska supplies the majority of the refined petroleum products used by state residents and businesses. Efforts, such as Kenai Winds, to provide energy security to the refinery ensure energy security to south-central Alaska. Kenai Winds helps prevent a scenario where Alaska (like many oil-producing nations) would export crude oil at market rates and import refined petroleum at above-market rates. Kenai Winds also helps prevent a scenario where Kenai Peninsula residents would saddled with extra energy costs from system inefficiencies related to a closed refinery. In the near term, the current take-or-pay contracts under which Homer Electric buys electricity would yield higher rates to consumers if the refinery were to close. Kenai Winds through its provision of energy price security to the refinery helps prevent this. In the future when Homer Electric installs new generation, a smaller system would be required if the refinery were to close. The incremental capital costs of such a system would be higher and the efficiency would be lower. These would yield higher power costs to Kenai consumers. Kenai Winds through its provision of energy price security to the refinery helps prevent this. Also, in its roll as a good corporate citizen, Tesoro participates in the local community through its sponsorship of the Tesoro Iron Dog, Gallons for Grades program, and hundreds of community organizations like the Challenger Learning Center’s Starbase program. The integration of the Tesoro Alaska Refinery into Alaska’s and Kenai’s way of life makes a strong argument that benefits to the refinery are indeed benefits to Alaska as a whole. Beyond its direct benefits to the refinery which benefit Alaska as a whole, Kenai Winds has a direct and beneficial economic impact on the Alaska public. The McDowell group study on Agrium can be used to estimate the direct beneficial economic impact of the Kenai Winds project. During the construction period, the project would create approximately 100 jobs. Although these are temporary positions, the actual jobs created in Full-Time-Equivalents would be approximately 50 jobs, with a total payroll around $3million. Since construction would occur during the summer tourist months, any indirect job creation would be masked by seasonal workers. Additionally the construction workers would live and spend in the Kenai area, where the estimated indirect benefits would be approximately $2million. Following construction, the Kenai Winds project would have four full-time staff with a total yearly payroll of $450,000 (escalating with inflation at 3% per year). This would also create an additional $350,000 in annual pay indirectly through local spending. Over a 30-year project life, the jobs form Kenai Winds would have a economic impact of $29million. An additional benefit, which is difficult to quantify, is the educational benefits of a wind farm, in relation to training for construction workers on the project, training for operations personnel, and local schools. Due to the explosive growth in the wind industry, experienced construction personnel are in high demand. Work on this project will dramatically increase the value of construction personnel, and provide Alaska with a native workforce trained for renewable energy projects. Similarly the operations and maintenance of the wind farm, based in Kenai, will create a native workforce trained for the renewable energy projects this grant program supports. Kenai Winds is also committed to maximizing the educational providing tours and information to local schools and other interested educational groups. 7 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Another benefit, also difficult to quantify, is the benefit to Alaskans through increased efficiency of the electric power grid. In most of the lower-48 states, new power plants are constructed far away from load centers. For fossil fuel power plants, this is largely due to environmental concerns. For wind power plants, this is largely because wind resources are often not located near major cities. Both cases require long power lines and expensive system integration designs to accommodate new generation. Kenai Winds, through its location at a large electrical load, circumvents this problem. Utility engineers prefer to locate generation near load. Homer Electric, in its support letter in Appendix Q, agrees with this. Generation near load increases the efficiency and reliability of the system. By locating Kenai Winds next to an operating oil refinery with a large electrical load, the efficiency and reliability of the system are improved. In addition to education and electric power efficiency, Kenai Winds benefits Alaskans through the direct reduction of greenhouse gas emissions. The exact quantity of greenhouse gas emission reductions is impossible to state for certain for any power plant, prior to construction. System conditions and dispatch levels would need to be monitored for several years with the wind plant in operation to determine exactly the quantity of greenhouse gas emissions avoided. A preliminary estimate may be made based on the current generation mix of Chugach Electric (the provider of HEA’s power). Chugach’s primary resources are natural gas fired. Assuming all of the displaced electricity production is from natural gas, Kenai Winds would cause greenhouse gas emission reductions of the following quantities: Greenhouse Gas Emission Reductions CO2 53,153,185 lbs NOX 79,612 lbs SO2 4,683 lbs The dollar savings to Alaskans as a result of these reductions are not possible to estimate. Future carbon regulation is likely, though the form is unknown. The effects of climate change are also currently unknown. It is then not truly possible to estimate an economic impact of avoided greenhouse gas emissions, though it is highly likely to have a large impact. Finally, the Kenai Peninsula Borough (the host community) recognizes the benefits of this project. A letter, included in Appendix E, enthusiastically endorses the Kenai Winds project as a significant step towards meeting the policy goals of energy security for the Kenai Peninsula Borough. The Borough Mayor views Kenai Winds as a major stepping stone facilitating the further development of wind energy in the Borough, and welcomes the stabilizing effect it will have on the hard-hit Nikiski industrial zone. 2.5 PROJECT COST AND BENEFIT SUMARY Include a summary of your project’s total costs and benefits below. 2.5.1 Total Project Cost (Including estimates through construction.) $46,800,000 2.5.2 Grant Funds Requested in this application. $11,700,000 2.5.3 Other Funds to be provided (Project match) $35,100,000 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $46,800,000 2.5.5 Estimated Benefit (Savings) $71,194,805 2.5.6 Public Benefit (If you can calculate the benefit in terms of dollars please provide that number here and explain how you calculated that number in your application.) $29,000,000 8 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 3 – PROJECT MANAGEMENT PLAN FOR PHASE 3 Describe who will be responsible for managing the project and provide a plan for successfully completing the project within the scope, schedule and budget proposed in the application. 3.1 Project Manager Tell us who will be managing the project for the Grantee and include a resume and references for the manager(s). If the applicant does not have a project manager indicate how you intend to solicit project management Support. If the applicant expects project management assistance from AEA or another government entity, state that in this section. The current project manager for Kenai Winds is Josh Berkow, a manager at BQ Energy (the parent company of Kenai Winds) in Patterson, NY. Up to this point, due to the need to interface with wind energy experts in many regions of the country, a local project manager has not been needed. This is normal for Phase 1 and Phase 2 project development work. It is also typical that as a Project goes through Phase 3 and into Phase 4, a much greater state and local presence will be essential. Accordingly Kenai Winds is currently seeking qualified individuals near Kenai, AK to assume project management responsibilities, and has identified several candidates. During Phase 3 activities, a local person will be required to keep the project on track. Mr. Berkow’s resume is included in Appendix A with the resumes of other BQ Energy personnel involved in the project. 3.2 Project Schedule Include a schedule for the proposed work that will be funded by this grant. (You may include a chart or table attachment with a summary of dates below.) A detailed project schedule is included in Appendix F. The next Phase 3 major milestones will be the full Power Purchase Agreement with Tesoro (an MOU is completed), financing, and turbine selection and procurement. Due to the time required for turbine delivery, construction is planned in the Summer of 2010. 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. 1. Power Purchase Agreement (PPA) Executed- 12/20/2008 Kenai Winds has already begun negotiating the terms of a power purchase agreement with Tesoro, and has finalized an MOU which captures key terms. The final economics of the project and hence terms of the PPA will be impacted by the outcome of this grant application. The project will also be impacted by the land lease, tax agreement, and interconnection studies. 2. Turbine Selection- 2/10/2009 Kenai Winds has identified two potential turbine vendors for the Wind Project. These are GE Power and Vestas Wind Systems A/S. Turbine data sheets for each manufacturer are included in Appendix M. Initial analysis and discussions indicate that both turbines are suitable for this project and the Alaskan environment. Following the completion of a one- year meteorological study in October 2008, data will be provided to each vendors so that they can confirm turbine suitability. Final selection will be based on capital cost, scope of supply, reliability, field service, and power curve. 3. First Turbine Payment- 4/23/2009 Down-payments for the wind turbines are highly dependent on the terms from turbine vendors and on the PPA. As this will be a very significant outlay of capital, Kenai Winds will not take this action without an executed PPA in hand. 4. Site Lease Executed- 6/9/2009 9 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Kenai Winds has a memorandum of understanding related to a site lease, and is currently negotiating the detailed terms of this agreement with Tesoro. 5. Interconnection Agreement Executed- 6/23/2009 Kenai Winds has already entered into discussions with Homer Electric Association over interconnection of the wind farm. The project will interconnect directly to the Tesoro Alaska Refinery, so an interconnection agreement will need to be executed with Tesoro. Homer Electric Association (HEA), as the transmission grid owner, is conducting an interconnection study with EPS of Anchorage (and Seattle Wash) to determine the impacts of the project on the overall power grid. A draft scope of work for the interconnection study is included in Appendix R. The Tesoro refinery will also likely hire a contractor to perform an interconnection study to determine in greater detail the impacts of the project on its operations. A final interconnection agreement will include actions that Kenai Winds will take to mitigate any potential impacts. It is anticipated that some form of reactive power support will be required. 6. Construction Financing Secured- 10/16/2009 Kenai Winds will use a competitive process to bid for construction financing from one or more banks or institutional lenders. BQ Energy, the parent company, has excellent relationships with the leading lenders in the wind industry and is highly confident in its ability to secure construction financing. 7. Engineering Complete- 2/22/2010 Kenai Winds will use a competitive process to bid the Engineering, Procurement, and Construction (EPC) of the project. Two potential bidders (Signal Wind Energy and STG Inc.) Statements of Qualifications (SOQ) are included in Appendix D. Kenai Winds will use every effort to ensure that significant numbers of local construction personnel are employed, and a preference will be put on hiring Alaska-based subcontractors. As required by the grant, Kenai Winds will mandate that all contractors be qualified to work in Alaska. 8. Start of Construction- 5/3/2010 Simultaneous with the engineering of the project, the EPC contractor will begin construction mobilization. This will involve the pre-construction logistics that are required to move personnel and equipment to the site. Construction will begin as soon as weather permits, and will make use of the extended daylight hours in Alaska to expedite the project. 9. Turbine Components at Site- 5/7/2010 There is an existing deepwater port and oil terminal at the site. A second port, used for servicing offshore oil and gas platforms is located a few miles to the north of the site. It is anticipated that the blades, towers, and turbines will arrive via one of these two ports. Logistics will be coordinated with the turbine supplier, which is typically in the scope of supply. 10. Final Turbine Payment- 5/7/2010 As is typical, Kenai Winds with retain a portion of the final turbine payment to be contingent on final commissioning and punch-list items. 11. Civil Construction Complete- 7/14/2010 The civil infrastructure for this project will mainly include the turbine foundations. Since the project area has already been cleared and graded for industrial purposes, no road construction is anticipated. 12. Turbine Erection Begins- 7/22/2010 Kenai Winds anticipates possibly hiring extra crane operators to erect turbines around the clock and making use of the extended daylight hours available during Alaska summers. This does not occur serially with the electrical construction, but can be begun as soon as one turbine location is finished. 13. Electrical Infrastructure Complete- 7/28/2010 10 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Electrical infrastructure includes the pad-mounted transformers, underground collection system, overhead collection system, interconnection to the substation, installation of reactive compensation, and test of the entire system. This does not occur serially with the civil construction, but can be begun as soon as one turbine location is finished. 14. Guaranteed Infrastructure Completion- 8/27/2010 The construction contract will specify a date when all construction is complete. Following this, the turbine vendors will commission the wind turbines for commercial operations. 15. Commercial Operations- 10/27/2010 3.4 Project Resources Describe the personnel, contractors, equipment, and services you will use to accomplish the project. Include any partnerships or commitments with other entities you have or anticipate will be needed to complete your project. Describe any existing contracts and the selection process you may use for major equipment purchases or contracts. Include brief resumes and references for known, key personnel, contractors, and suppliers as an attachment to your application. Kenai Winds has three main project participants in addition to the various outside contractors hired to perform specific services. These are BQ Energy, Tesoro, and HEA. From BQ Energy, the main personnel involved are Paul Curran (managing director), Tim Ryan (director), Josh Berkow (project manager), and Lorry Wagner (project manager). BQ Energy receives administrative support from John Rygielski and engineering and technical support from Jim Falsetti and Rich Gross on a project by project basis. Resumes for all BQ Energy personnel are included in the Appendix A. Project management from Tesoro is provided by Leo Giron and Iype Chacko. Local political representation from Tesoro is provided by Kip Knudson. Local operations support from Tesoro is from Steve Hanson and Rolf Manscek. Project management from HEA is provided by Rick Eckert. HEA will be conducting the interconnection study for the transmission grid with Electric Power Services (EPS) of Anchorage, AK. A draft scope for the interconnection study is included in Appendix R. The interconnection study at the refinery will be conducted by the same contractor. Resumes for Tesoro are provided in Appendix B. A letter of support from Homer Electric is included in Appendix Q. A letter of support from Tesoro is included in Appendix C. A contractor for EPC of the project has not yet been selected. The Statement of Qualifications for Signal Wind Energy and STG Inc. (potential bidders) are included in the Appendix D. BQ Energy will use its industry contacts to identify other qualified firms. The contractor will be selected using a competitive bidding process and all firms will be required to be qualified to work in Alaska. As part of its Phase 3 activities, Kenai Winds will conduct a NEXRAD study to document collision risk by birds at the project site. NEXRAD studies make use of historical data from WSR-88D weather radar and track the flight paths of birds and insects over an area. This work will be performed by Geo-Marine Inc. BQ Energy has used Geo-Marine for similar work at its Steel Winds site in Lackawanna, NY. This process is recommended by the New York State Department of Environmental Conservation for quantitatively determining the use of a site by birds. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. The Alaska Energy Authority will enter the Kenai Winds LLC project as a key stakeholder when the Agreement is put in place for financial participation. As with all key stakeholders, the AEA 11 Renewable Energy Fund Grant Application AEA 09-004 Grant Application would be brought into the loop n all key communications and requested to assist the project on matters of key strategy. Such information and request for advice is for the benefit of Kenai Winds, but does not absolve the management of Kenai Winds of their responsibility for the success of all of their decisions. Specific information that would flow to AEA would be based on time and milestones. That is there will be periodic reports on all activities and there will be reports or meetings that will be based on when a specific event will occur. The Project Manager will be responsible for initiating all communication to the AEA. At the start of AEA involvement, all stakeholders will have a kickoff meeting either at site or in Anchorage to ensure that communication needs are understood and also so that face to face interaction facilitates future communication. There is a diversity of subjects that are simultaneously being addressed in Phase 3. Activities will range from financing to geotechnical assessments in terms of specialization. It will be the responsibility of the Project Manager to prepare a Monthly report to key stakeholders which synthesizes these diverse activities into a concise (typically 2 page) Monthly Report which will be issued to all key stakeholders. This report will typically be issued electronically. When the Project Manager deems that the wind farm is ready to enter Phase 4 (construction), he will convene a Phase Review Meeting with the AEA and other stakeholders. Prior to that meeting, he will issue a Phase 3 Project Report, which stakeholders can consider before the Review Meeting. Concurrence from the AEA will be sought at that Phase 3 Review Meeting. 3.6 Project Risk Discuss potential problems and how you would address them. As the Project Manger, BQ energy is responsible for ensuring that the risk profile of all stakeholders is appropriately managed. Most importantly, the risk that a stakeholder is undertaking must be communicated to that party so that they can understand how to manage that risk position. Throughout the remaining execution of the Kenai Winds Project, the primary risk for the AEA will be that the project fails to reach full operation and give the State a return of the public benefit expected. In all projects that risk of failure is greatest in the early stages of development. That is the reason that BQ Energy uses a Phased Gate development system very similar in nature to the one espoused by the AEA in this RFP. When a project reaches Phase 3, it should be in the mode of executing on project aspects that have been well defined. As with any development, cash follows progress. Kenai Winds will set up a milestone payment schedule for all stakeholder funds including the AEA. For the Kenai Winds, we see Phase 3 risks in the following areas: 1) Cost of delivered turbines exceeds the budget. 2) Unexpected increases in power delivery charges to the refinery from HEA due to the wind farm 3) Unavailability of wind turbine vendors for the Alaska market. 4) A permit difficulty 12 Renewable Energy Fund Grant Application AEA 09-004 Grant Application 5) Inability to finance the rest of the project. 6) An inability to execute key contracts consistent with the terms of completed MOUs. 7) A lack of wind resource. 8) Possible requirement to obtain a Certificate of Public Convenience and Necessity As is evidenced by the project description, all of these risks have been addressed in an appropriate level during Phase 2. The risks that remain are real and will require prudent management. Certainly, prior to signing a full turbine supply contract, which will require several million dollars of down-payment money, the management of Kenai Winds will conduct a thorough risk assessment of these and all other project aspects. 13 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 4 – PROJECT DESCRIPTION AND TASKS FOR PHASE 3 • Tell us what the project is and how you will meet the requirements outlined in Section 2 of the RFA. The level of information will vary according to phase of the project you propose to undertake with grant funds. • If you are applying for grant funding for more than one phase of a project provide a plan and grant budget for completion of each phase. • If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. 4.1 Proposed Energy Resource Describe the potential extent/amount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. The Kenai Winds project is a 15 – 18 MW (10 turbine) wind energy generation facility located in the Nikiski Industrial Area, in Nikiski, on the Kenai peninsula. The turbines will be disbursed throughout the site and electrically interconnected to the Tesoro Alaska Refinery at the point of coupling with the electric utility grid. Electric energy will be sold to the oil refinery, providing low cost power, and helping ensure the economic viability of the refinery. In the event of a refinery shutdown (maintenance or otherwise), all power will flow to Homer Electric. Under normal operation, the direction of power flow will be determined by physical laws. Through the interconnection to the public electric utility grid, 100% of the generated electricity will be used by the public. Beginning in November 2007, Kenai Winds undertook a 1 year meteorological study to assess the wind resource in Nikiski. Kenai Winds commissioned a 6-month assessment based on the first 6 months of data assuming a Vestas V90 turbine with a 105m tower. The study is attached in Appendix N. Since the 105m tower is no longer available, the capacity factor and energy output in that study are no longer valid. At the 95m tower height now available from Vestas, it is anticipated that the project will generate 46,831 MWh per year. The wind rose, shown in Appendix N and on the layout in Appendix I shows prevailing winds from both the south and the northeast. These winds are blowing off the Cook Inlet from each direction with an equal amount of energy, making this an ideal site for wind turbines. The main advantage of this wind resource (as opposed to others) is that it consumes no fuel. Since it consumes no fuel, it has no variable cost and generates no pollution. The cost of energy from this facility will be based entirely on the capital cost and fixed operating costs of the facility. Energy prices from wind will not be based on volatile fossil fuel markets or upcoming Federal greenhouse gas regulations. Thus, a wind energy facility can offer stable, fixed-price energy with a long-term PPA. This is something fossil-fuel generators cannot do. The purchase of power from wind energy also reduces the production of greenhouse gasses as a result of Tesoro operations. Specifically, Kenai Winds has the potential to avoid the emission of 53 million lbs of CO2, 79,000 lbs of NOx, and 4700 lbs of SO2. This will be an advantage when greenhouse gas regulation is enacted. This reduces greenhouse gas emissions from the refinery by as much as 5%, positioning the refinery well for future legislative actions. 14 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Another advantage of this resource is its location. There are indeed windier places in many parts of Alaska and parts of the State that have more acute energy needs. Like the rest of the United States, wind resources are not often found in the same place as electric load. Indeed long transmission lines are often needed to bring wind energy market. Not so at Kenai Winds. The location at an operating oil refinery helps strengthen the Homer Electric power grid. No long transmission lines are required. No expensive upgrades to infrastructure or power grid operations systems are required. In this location, the power grid is ready to accept wind energy, which lowers the integration costs compared to a project in other windy parts of Alaska which have no native electric load. An additional advantage of the location is the industrial nature of the site. The three primary environmental impacts of wind energy are birds, viewshed, and noise. Existing operations make viewshed and noise non-issues. The impact on birds at this location will be incremental at best, as the location is already non-ideal for nesting and migrating birds. Indeed, the impact from existing operations will greatly outweigh the impact from wind energy. The disadvantage of this resource is that it is intermittent. Energy is produced when the wind blows. The refinery will require a grid interconnection to provide power when the wind does not blow. Generation of this type requires a modern electric utility grid with the flexibility to accommodate intermittent generation. The Homer Electric Association grid already has this capability. The alternative to purchase of wind energy by Tesoro is purchase of energy from HEA. We show in Section 5, that the cost of this energy is expected to increase at a rate that rapidly outpaces the inflation-based cost increases of wind energy. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. A diagram showing the HEA transmission system with the Kenai Winds project is displayed in Appendix G. A simplified version is shown below. Currently, HEA operates a two-voltage transmission system at 69 and 115 kV. Electric energy is supplied by the Bradley Lake hydroelectric plant, Nikiski Cogen, and imported electricity from Chugach Electric. The Bernice Lake generating station is also in HEA territory, although this is rarely operated and then only in case of electric emergencies. HEA’s current load is 85 MW and is expected to grow to 120 MW in 2014 when the current power purchase contracts with Chugach and Bradley Lake expire. HEA intends to build its own natural gas generation to replace its current contract with Chugach. The existing natural gas generation is old and inefficient when compared to newer equipment. The Tesoro Alaska Refinery has an average electric load of 18 MW, and has two 5 MW cogeneration units. The average net load is 11 MW. The refinery is connected to the HEA 69 kV transmission system, and has an internal distribution system at 25 kV. A simplified one-line diagram of the refinery with the attached wind farm is shown in Appendix H. A simplified diagram showing the relationship with the power grid is shown below. HEA maintains a separate substation with a transformer and manual disconnects. This is connected via underground lines to the refinery switching station, which houses all the protective relaying and circuit breakers for the refinery. The refinery distribution system operates mainly at 25 kV and the cogeneration units operate at 4.16 kV. Load in the refinery is served at 4.16 kV, 2.4 kV, and 480 V. Data provided from Tesoro indicate that the existing 25 kV bus has adequate capacity for an 18 MW wind project. 15 Renewable Energy Fund Grant Application AEA 09-004 Grant Application It is anticipated that the refinery load will grow by 2–5 MW in the next 5 years. The chart below shows the energy balance for the refinery based on its actual usage pattern for 2007 adjusted for expected growth as compared with the wind. The refinery load was measured on an hourly basis during the year. The wind data was correlated to a nearby meteorological reference station to create a year of wind data for 2007. This was used to create the wind turbine output indicated in the chart below. It clearly shows that the refinery will purchase the bulk of the electricity generated by Kenai Winds. Specifically, the wind farm will sell approximately 95% of its output to the refinery. The physical use of the power will be determined by physical laws. While the wind farm will indeed offset a significant portion of the refinery energy requirements, an interconnection to the power grid must still be maintained at all times. Through this interconnection to the power grid, 100% of the output of Kenai Winds will be used by the public. 0 2 4 6 8 10 12 14 16 18 20 Jan-07 Feb-07 Apr-07 May-07 Jul-07 Sep-07 Oct-07 Dec-07 DateMW Tesoro Purchased Power Wind Farm Output 4.2.2 Existing Energy Resources Used Briefly discuss your understanding of the existing energy resources. Include a brief discussion of 16 Renewable Energy Fund Grant Application AEA 09-004 Grant Application any impact the project may have on existing energy infrastructure and resources. The existing energy resources in the Kenai Peninsula are natural gas and hydroelectric. The Kenai Winds project will displace natural gas generation so that less natural gas will be purchased and consumed. The Wind Project is in connected parallel with the electric grid in HEA territory and it will improve the reliability of the HEA grid. In addition, since, the location of generation is near the load, it helps regulate the frequency of the entire grid, and keeps the frequency stable in the event of other generator outages. It is anticipated that the Wind Project will include some form of reactive power compensation. This reactive power compensation will further improve the reliability of the HEA grid and the refinery. Reactive power compensation acts like a shock absorber to disruptions in the power grid. It softens the spikes, and prevents voltage oscillations from damaging electrical equipment. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. Throughout the Railbelt grid, there is no deregulated real time energy market as is common in the lower-48 states. Consumers (industrial, commercial, and residential) do not have retail choice for electricity. The utilities purchase electricity (or natural gas for generation) through long-term contracts. In HEA territory, electricity prices are based primarily on natural gas. Through a complicated contract formula, natural gas prices are based on the historical aggregate United States natural gas, fuel oil, and crude oil prices. These contracts expire in 2014. It is anticipated that future prices will be based more closely on current Henry Hub prices. Following completion of the Alaska Natural Gas Pipeline, and the proposed spur line to the Railbelt, it is anticipated that natural gas prices will be set at a higher market rate. In all of these scenarios, wind energy from the Kenai Winds project will reduce the cost of energy to the Tesoro Alaska Refinery. 4.3 Proposed System Include information necessary to describe the system you are intending to develop and address potential system design, land ownership, permits, and environmental issues. 4.3.1 System Design Provide the following information for the proposed renewable energy system: • A description of renewable energy technology specific to project location • Optimum installed capacity • Anticipated capacity factor • Anticipated annual generation • Anticipated barriers • Basic integration concept • Delivery methods The Kenai Winds project is a 15 – 18 MW, 10 turbine wind energy generation facility for the Nikiski Industrial Area in the Kenai Peninsula Borough. Specifically, the wind turbines will be located on land owned by Tesoro, and electrically interconnected to the Tesoro Alaska Refinery. Kenai Winds has had productive discussions with both General Electric Power and Vestas Wind Systems A/S about the supply of wind turbines for this project. It is anticipated that either GE 1.5sle1.5 MW turbines or Vestas V90-1.8 MW turbines could be supplied for this project. As discussed in Section 4.1, Kenai Winds anticipates annual generation of 46,831 MWh. This represents a capacity factor of 29.7% based on an 18 MW project. 17 Renewable Energy Fund Grant Application AEA 09-004 Grant Application The draft layout, shown in Appendix I, shows the approximate locations of the wind turbines and the electrical collection system. The red dots in the diagram are scale representations of the rotor- swept area for a Vestas V90 wind turbine with a 90m rotor. Turbine locations have been selected to meet the design criteria of a Vestas V90 with a minimum turbine spacing of 270m in the direction of the wind, and 630m perpendicular to the direction of the wind. Since the GE 1.5sle turbines have 77m rotors, the indicated turbine spacing will be more than adequate for those machines. The layout also identifies other area landowners. As part of the Phase 3 activities, Tesoro will contact the other landowners on behalf of Kenai Winds to gauge the potential for locating wind turbines on those sites as well. As part of its Phase 3 activities Kenai Winds will work with DNV Global Energy Concepts, AWS Truewind, or another qualified contractor to determine the optimal locations for the wind turbines within manufacturer specifications. Wind data will be provided to the contractors and the turbine vendor as part of the final turbine selection process. The data and layout will be analyzed for other potential conflicts prior signing turbine purchase agreements. The project will be electrically interconnected to the Tesoro Alaska Refinery at its point of common coupling with the Homer Electric power grid. A simplified one-line diagram of the refinery with the attached wind farm is shown in Appendix H. A simplified diagram showing the connection to the public power grid is shown below. While connected in parallel with the refinery, Kenai Winds will be integrated into the public power grid and 100% of the generated electricity will be used by the public. HEA maintains a separate substation with a transformer and manual disconnects. This is connected via underground lines to the refinery switching station, which houses all the protective relaying and circuit breakers for the refinery. The refinery distribution system operates mainly at 25 kV and the cogeneration units operate at 4.16 kV. Load in the refinery is served at 4.16 kV, 2.4 kV, and 480 V. Data provided from Tesoro indicates that the existing 25 kV bus has adequate current carrying capacity to interconnect the wind farm. The Kenai Winds project will expand Tesoro’s switching station by extending the 25 kV bus and adding three new circuit breaker positions. Two of the new breaker positions will be for the wind farm collection system. Each wind turbine will be supplied with a pad-mounted transformer at the base, which steps up the generator voltage of 600 V to the collection system voltage of 25 kV. The turbines will be connected in parallel to the collection system, with 5 per collection feeder. In the 18 Renewable Energy Fund Grant Application AEA 09-004 Grant Application immediate area of the wind turbines, the collection system will be underground. Every effort will be made to have the collection system follow existing electrical, pipeline, and road right-of-ways. Where appropriate, the collection system will be above ground, to minimize costs. As part of its Phase 3 activities, Kenai Winds will contract out preliminary engineering of the facility. Engineering, Procurement, and Construction costs will be estimated for updating the project economics and securing long lead-time items. Preliminary engineering will also include geotechnical and wetlands surveys. The third added breaker position at the refinery will be for reactive power compensation. There are a number of reasons for including reactive power compensation in the system, and it can take a number of forms. The primary forms are Dynamic VAR (DVAR), Static VAR , Thyristor- Switched VAR, and Mechanically Switched VAR. The final determination on which is the most appropriate device will be made during the interconnection studies with Tesoro and HEA. There are three main reasons for installing reactive power compensation; all are related to voltage stability. First, the voltage at the refinery may not remain constant if the existing cogeneration, a large refinery load, or the wind farm trips offline. If any of these scenarios occur, the voltage and frequency at the substation will drop below nominal while the transmission system catches up. This typically occurs on the time-scale of seconds, which is a long time for electrical equipment. Immediately after a trip, voltage oscillations occur with extreme dips and spikes. These typically occur on the order of milliseconds (16.66 ms/cycle), which is an extremely short time for electrical equipment. Reactive power compensation acts as a shock absorber for both of these phenomena, holding the voltage constant after a trip. Even without the wind farm installed, the refinery would want to consider installing this equipment for better reliability. Both wind turbine generator models proposed for this project make use of induction generators and are designed to operate at a unity power factor (they neither make nor consume reactive power). These induction generators are dependent on the transmission system stability and cannot control the voltage at their connection to the grid. In order to maximize reliability for the refinery and the transmission system, the generator output voltage should remain constant during an incident. Reactive power compensation provides the control that makes this possible. The final reason for installing reactive power compensation is to increase the stability of the entire HEA grid. As discussed previously, and shown in the transmission diagram in Appendix G, there is very little generation in HEA territory. Chugach, near Anchorage, provides most of the generation. HEA currently maintains its own Static VAR Compensator to regulate the voltage in its territory. The addition of more reactive compensation at the refinery will take some of the strain off the existing equipment and increase the reliability of the entire system. HEA plans to upgrade the transmission line feeding Tesoro to 115 kV will further increase the benefit of reactive compensation. As mentioned previously, interconnection studies will need to be performed for both HEA and Tesoro. The first study will focus on impacts on the system wide transmission system. HEA and its preferred contractor will perform this study. A draft interconnection study scope is included in Appendix Q. HEA and Kenai Winds have held preliminary discussions on this scope, and wmore work is required to refine it. It is anticipated that this will be integrated in HEA’s larger study on expanding generation in its service territory. Similar studies (System Reliability Impact Study- SRIS) are conducted by the ISOs (Independent transmission System Operator) in the lower-48 states 19 Renewable Energy Fund Grant Application AEA 09-004 Grant Application An SRIS in the lower-48 states incorporates a number of separate studies, including: • Evaluation of the impact of the project on the reliability of the grid based on thermal, voltage, and stability criteria • Evaluation of the impact of the project on transfer limits • Evaluation of the consequence of a failure or misoperation of protection equipment. • Evaluation of the impact of the project for Extreme Contingencies • Evaluation of the impact of the project on fault interrupting requirements of existing circuit breakers (Short-Circuit Analysis) • Evaluation of the impact of the project on fault clearing times • Evaluation of the impact of the project on auto-reclosing systems • Evaluation of the reactive power requirements of the project Some of these studies may be required by HEA, and are expected as the normal course of any Phase 3 development. Similar studies, though smaller in scope, may be done at the refinery. For the refinery study, the scope will focus more on preventing voltage and frequency excursions, preventing essential equipment from tripping offline, and improving the electric reliability. Both studies will be conducted as part of the Phase 3 activities. A draft interconnection study scope for HEA is included in Appendix Q. Further negotiation is needed to refine the scope. 4.3.2 Land Ownership Identify potential land ownership issues, including whether site owners have agreed to the project or how you intend to approach land ownership and access issues. The primary landowner is Tesoro and its subsidiary Kenai Pipeline Company. The layout included in Appendix I shows the locations of the wind turbines on Tesoro land, and also identifies the other area landowners. The layout is currently in draft form. At present, a commercially viable wind farm can be constructed using land leased from Tesoro, with only a few required easements for power line road crossings. As part of the Phase 3 activities, Tesoro will contact the other landowners on behalf of Kenai Winds to gauge the potential for locating wind turbines on those sites. While the installed capacity of the project will not increase, access to the other lands allows flexibility in the final siting determination. This allows Kenai Winds to site the turbines most effectively to maximize power output. The other area landowners are: Agrium, Conoco-Phillips, Chevron, ASRC, and the Kenai Peninsula Borough (KPB). The Agrium property is the site of its moth-balled fertilizer plant. The fertilizer plant does not occupy the entire plot. The empty land was slated for a coal gasification facility, now cancelled due to the plant closure. The Conoco-Phillips property hosts a liquefied natural gas terminal and it does not occupy the entire plot. The Chevron property is the site of a former oil refinery which has long since closed and been removed, leaving a large area of shovel- ready land. ASRC is an oil and gas services company and the land available is currently a parking lot, which may not be sufficient to host a wind turbine. The KPB land is cleared and shovel-ready. It was originally slated for another oil-and-gas industrial company, but has not been developed. 4.3.3 Permits Provide the following information is it may relate to permitting and how you intend to address outstanding permit issues. • List of applicable permits • Anticipated permitting timeline • Identify and discussion of potential barriers Kenai Winds has identified only one applicable permitting agency for this project. The location in Nikiski places the project in an unincorporated part of the Kenai Peninsula Borough. No 20 Renewable Energy Fund Grant Application AEA 09-004 Grant Application municipal approvals will be required in the form of zoning variances, ordinances, or building permits. Both Tesoro and the Kenai Peninsula Borough Mayor’s office confirmed this in Fall 2007. A letter of support from the Kenai Peninsula Borough Mayor’s office is included as Appendix E. The Alaska Coastal Zone Management Program (CZMP) governs permitting in this area. Kenai Winds has completed a coastal zone questionnaire. It is included in Appendix J.The purpose of this questionnaire is to determine whether a project is consistent with the goals of the CZMP and to identify any permits required. The completed questionnaire identifies no permits required for this project on a State or Federal level. Furthermore, the Kenai Peninsula Borough Coastal Management Plan of June 2008 specifically identifies wind energy generation as consistent with its goals and objectives. Appendix A Section G-4.7 (Enforceable and Guidance Policies), states that “Projects using energy sources such as wind, solar, and geothermal will be permitted provided the project conforms to the policies contained in this program and all other applicable laws. Projects using energy sources such as wind, solar, and geothermal will be permitted provided the project conforms to the policies contained in this program and all other applicable laws.” Kenai Winds has made a preliminary filing with the Kenai Peninsula Borough Coastal District Coordinator. While the review is preliminary, the Coastal District Coordinator believes the project to be consistent with Kenai Peninsula Borough policy and the Alaska Coastal Management Program. This is not deemed to be a critical path item for project development. As part of its Phase 3 activities, Kenai Winds will file for coastal zone consistency review. In addition to the Coastal Management consistency review, Kenai Winds may be subject to regulatory approval from the Regulatory Commission of Alaska (RCA). Certain provisions of Alaska law may require the wind farm to acquire a Certificate of Public Convenience and Necessity from the RCA. As part of its Phase 3 activities, Kenai Winds will further explore the possibility, and determine whether a “public interest” exemption from regulation is appropriate. Finally, the project will be required to file a lighting plan with the Obstruction Evaluation/Airport Airspace Analysis (OEAAA) group at the Federal Aviation Administration (FAA). All developers building structures taller than 200ft. are required to file a lighting plan for approval with the FAA. Since this project is not located within 2 miles of an FAA airport, the nature of the review will be cursory. The timeline for handling the request will be determined by the shear number of wind farm requests handled by the FAA, rather than any need for a detailed analysis of the project. FAA approval is by far the most straightforward approval process in the country. Locations of the wind turbines are filed using an internet form and there is no filing fee. Developers suggest a lighting plan for approval and if the FAA does not concur, it will provide its own lighting plan. This is not considered to be a critical path item. As part of its Phase 3 activities, Kenai Winds will file for FAA approval. 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will be addressed: • Threatened or Endangered species • Habitat issues • Wetlands and other protected areas • Archaeological and historical resources • Land development constraints • Telecommunications interference • Aviation considerations 21 Renewable Energy Fund Grant Application AEA 09-004 Grant Application • Visual, aesthetics impacts • Identify and discuss other potential barriers A number of environmental impacts are commonly associated with wind energy. These are: birds, noise, view-shed, aviation, construction, and property values. In all cases, except aviation, the impact from existing operations will far outweigh the impact a wind energy facility at the site. 1. Avian Impacts Birds are an important part of the beauty of the Cook Inlet and several studies have shown that a wide variety of species are present during various points of the year. It has been widely documented that birds coexist well with wind turbines throughout the world. However, as with all tall structures, highways, and industrial complexes, some impact may As part of its Phase 3 activities, Kenai Winds intends to analyze the potential avian impact through a method recommended by the New York State Department of Environmental Conservation. NEXRAD (Next-Generation Radar WSR-88D) weather radar stations can be used to assess exactly how many birds have flown at a given height at a specific location. NEXRAD stations log data for many years and it is possible to literally count the number of birds that would have been flying over a site at the height of wind turbines on each day for several years. Because NEXRAD systems also monitor weather data, the technique, produces a very clear picture of the potential impact of wind turbines. By correlating the weather data, the bird count (and flight height), and the local wind speed (from the long-term reference tower at Tesoro’s port), a quantitative estimate of avian impacts can be developed. The NEXRAD chart below (from BQ Energy’s Steel Winds project) clearly shows the local weather patterns and airborne birds in the project area. At other coastal locations, this type of analysis has shown that birds tend to fly above the height of the turbines. The weather conditions that cause birds to fly lower are correlated with low wind speeds, or at times when the turbines are not operating. Kenai Winds expects similar results at this site. Typically, NEXRAD is not present at places in the US near a proposed wind energy site. It is present at Nikiski to serve the Anchorage airport which puts Kenai in a unique position to 22 Renewable Energy Fund Grant Application AEA 09-004 Grant Application achieve a level of analysis with NEXRAD that is not available at most locations.. This fortuitous location should allow for an exceptional analysis. While NEXRAD analysis is not required for permitting or Coastal Zone Consistency review, Kenai Winds intends to conduct the study for a more accurate picture of local environmental impacts, and to further validate this as a methodology for other wind sites. Obviously, the fact that birds have flown near where a wind turbine will be built does not mean that they will fly there in the future when a turbine is actually built. Birds generally see wind turbines and avoid them which is indicated by a national average of 2 – 7 avian collisions per wind turbine per year. For the Kenai Winds project, this would mean a maximum of 70 avian fatalities per year. This is the same number of fatalities that could be expected from a mile of highway or seven cats. 2. Noise Wind turbines are generally not noisy and the sound profile is well documented for each manufacturers’ turbines. The noise map shown below was created for BQ Energy’s Steel Winds project in Lackawanna NY. Noise sensors were placed at varying distances from the proposed wind turbine locations to measure ambient background noise. The expected noise output of the wind turbines is plotted on the map. At these locations, the background noise was greater than the noise of the turbines. Given the industrial nature of the Kenai Winds area and its inherent existing background noise, similar results are expected. In any case, a full noise report will be produced at part of the Phase 3 activities. 3. Visual Impact Wind turbines are tall and visible from a distance. Given the shoreline location, Kenai Winds will 23 Renewable Energy Fund Grant Application AEA 09-004 Grant Application be visible from ships and planes travelling around the Cook Inlet. Due to the wooded nature of the surrounding areas, the wind turbines are not expected to be visible from residences. Whether the turbines are viewed as an eyesore or an icon is clearly “in the eye of the beholder” and is debated at many wind projects. Kenai Winds is in an area of Alaska that already hosts a refinery, chemical plant, an LNG terminal, and a gas-to-liquids facility. BQ Energy is developing wind projects at a number of similar sites around the United States, and there is a general consensus among residents at other project sites that the visual impact of a windproject on the area is a great improvement. We will not opine on either view but will produce a series of photo montages as part of the Phase 3 activities. During its Phase 2 activities, Kenai Winds has produced the following two photo-montages. Wind turbines were inserted into existing photographs at approximately the scale they would appear to the human eye. 24 Renewable Energy Fund Grant Application AEA 09-004 Grant Application 4. Aviation Impact Wind turbines do not pose a threat to area aviation. Turbines are typically less than 450 feet to the top of rotation and planes fly far higher than that. However, the FAA has clear regulations as to notification that we will adhere to. All developers building structures in excess of 200 feet are required to notify the FAA. The turbines of the Kenai Wind project will appear on all aviation maps for the area. The FAA was notified of the meteorological tower erected on the site in 2007. FAA approved lighting will be installed on top of the turbines to advise pilots of their presence. 5. Construction Disruption During construction there will be several trucks delivering major turbine components to the Nikiski area. Such deliveries will obviously be for a short period of time, but we will work with the state police and Department of Transportation and Public Facilities to ensure that all required permits are obtained for wide loads and extended length road vehicles. In addition there will be a greater labor presence in the area during construction, which is, generally a good thing. We will coordinate with other industries in the area to avoid simultaneous peaks in labor demand as well as use of port facilities. 6. Local Property Values The impact of wind energy on property values is a poorly understood and poorly documented phenomenon. Several major studies have been conducted in the continental United States yielding results that are difficult to gauge and are often contradictory. These studies tend to focus solely on the impact of wind turbines without analyzing any other factors. The recent boom in wind energy development has coincided with both a bubble and a collapse in the US housing market. While equal numbers of studies show positive, negative, and no impact from wind turbines; the results of these studies are suspect due to the other factors affecting the housing market. The clearest action a developer can undertake in this respect is related to public perceptions of wind turbines. Negative attitudes toward wind energy may lower property values. These negative attitudes are often linked to a perceived lack of local control over a project, and a sense of being subjected to some form of injustice. BQ Energy has consistently had good relations with local residents at all of its project sites. Good communication with residents and local stakeholders help inform everyone about the project and give a sense of local ownership. As part of its Phase 3 activities, Kenai Winds will hold local stakeholders meetings to inform residents about the project, answer questions, and respond to concerns. As the project site is an industrial site, Kenai Winds expects to receive a favorable response, and absolutely no negative effect on property values. 4.4 Proposed New System Costs (Total Estimated Costs and proposed Revenues) The level of cost information provided will vary according to the phase of funding requested and any previous work the applicant may have done on the project. Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer’s estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of the project. Cost information should include the following: • Total anticipated project cost, and cost for this phase • Requested grant funding • Applicant matching funds – loans, capital contributions, in-kind • Identification of other funding sources 25 Renewable Energy Fund Grant Application AEA 09-004 Grant Application • Projected capital cost of proposed renewable energy system • Projected development cost of proposed renewable energy system As part of its Phase 2 activities, Kenai Winds has created a draft budget and pro-forma for the development and construction of the project. Detailed budgets are included in the Grant Budget Worksheet in Section 6, and in Appendix K. Total Anticipated Project Cost: $46.8 million Total Phase 2 Cost: $65,000 (already spent) Total Phase 3 Cost: $10.335 million Total Phase 4 Cost: $36.4 million (separate Section 4 and Grant Budget are provided) Requested Phase 3 Grant Funding: $2.6 million Requested Phase 4 Grant Funding: $9.1 million (separate Section 4 and Grant Budget are provided) Total Requested Grant Funding: $11.7 million Applicant Phase 3 Matching Funds: $7.735 million Applicant Phase 4 Matching Funds: $27.3 million Total Development Cost: $400,000 Total Capital Cost: $46.4 million (includes construction, turbines and down payments, balance of plant, interest during construction) Kenai Winds, in requesting $11.7 million is requesting a fixed amount. The requested amount remains fixed regardless of any changes in the project capital cost. If the project cost goes up or down, the requested grant amount remains the same. 4.4.2 Project Operating and Maintenance Costs Include anticipated O&M costs for new facilities constructed and how these would be funded by the applicant. • Total anticipated project cost for this phase • Requested grant funding At the current stage of planning, a definitive operations and maintenance plan has not yet been established. The Kenai Winds Project has an advantage over traditional wind farms due to its location. The Kenai Peninsula maintains a highly skilled work force that is uniquely qualified in the operations and maintenance of these types of facilities. The close proximity of oil and gas facilities ensures the continuing availability of skilled labor. BQ Energy has entered into a preliminary discussion with Tesoro regarding the use of their facilities as a staging area for operations and maintenance. This would preclude the need for new office and storage facilities required by the project. In addition, electrical maintenance can be coordinated with refinery personnel. While the exact sum has not been estimated, these benefits typically provide a considerable cost savings to the operations and maintenance of a wind project. Wind turbines are purchased under warranty, and usually with an O&M contract from the turbine vendor. Typically the O&M contract term is for the first 5 years, after which the vendor will continue to provide O&M support under a new contract. In some cases, a third party contractor provides the O&M. This is typically for older model turbines that have been in service for many years. As the turbines age and the domestic wind industry develops Kenai Winds will explore this option. 26 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Currently, Kenai Winds estimates the annual O&M costs to be $891,825, escalating with inflation at 3% per year. The estimate includes the warranty, O&M, on-site project manager, and insurance. This will be paid out of project revenues. A detailed O&M budget is provided in Appendix L. 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following: • Identification of potential power buyer(s)/customer(s) • Potential power purchase/sales price - at a minimum indicate a price range • Proposed rate of return from grant-funded project It is anticipated that the refinery load will grow by 2–5 MW in the next 5 years. The chart below shows the energy balance for the refinery and the wind farm for calendar year 2007. This chart assumes that the refinery load (as measured in 2007) has increased with planned capital projects. The refinery load was measured on an hourly basis during the year 2007 for the chart below. The wind data was correlated to a nearby meteorological reference station to create a year of wind data for 2007. This was used to create the wind turbine output indicated in the chart below It clearly shows that the refinery will purchase the bulk of the electricity generated by Kenai Winds. Specifically, the wind farm will sell approximately 95% of its output to the refinery. The physical use of the power will be determined by physical laws. While the wind farm will indeed offset a significant portion of the refinery energy requirements, an interconnection to the power grid must still be maintained at all times. Through this interconnection to the power grid, 100% of the output of Kenai Winds will be used by the public. In the event of spillover, an agreement will be made with HEA to determine the purchase of the remaining power. Kenai Winds has not begun this discussion with HEA as of yet. Two spillover options are available. In the first option, any excess power will be sold to HEA on a real time basis at HEA’s avoided cost rate. This is not anticipated to have any negative impact on the project rate of return, as HEA’s avoided cost rate may well be greater than Kenai Wind’s contract rate with Tesoro over the long term. Details on the avoided cost assumptions are included in Section 5. Project Benefit. Kenai Winds intends to sell energy to Tesoro at $60-$65 per MWh initially, with the price escalating (with inflation) at 3% per year. 0 2 4 6 8 10 12 14 16 18 20 Jan-07 Feb-07 Apr-07 May-07 Jul-07 Sep-07 Oct-07 Dec-07 DateMW Tesoro Purchased Power Wind Farm Output 27 Renewable Energy Fund Grant Application AEA 09-004 Grant Application In the second option, any excess power will be sold to HEA on a monthly basis at HEA’s avoided cost rate. If the total generation for the month were in excess of the total refinery load for the month, the spillover would be sold to HEA. In either case, HEA would still supply energy to Tesoro on a real time basis to make up any real-time discrepancy between energy generated by the wind farm and energy consumed by the refinery. In both cases, the refinery would remain connected to the grid and receive any additional energy from HEA. Note that the refinery currently and in the future remains a member of the public as it will remain connected to the public grid at all times. Kenai Winds contemplates a 9.5% rate of return from this project assuming full funding at the requested amount from the Alaska Energy Authority. 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. For a full accounting of the cost and benefit information, see Section 5 Project Benefit. Project output is estimated from an Energy Production Estimate provided by Global Energy Concepts Concepts a world scale expert in wind energy meteorology out of Portland Oregon. Capital costs were developed from industry sources based on work for other BQ Energy projects. Development costs were developed from Kenai Winds’ internal data from past projects. O&M costs were developed from internal data and industry sources. Fuel displacement was developed from Regulatory Commission of Alaska documents describing the heat rate of Railbelt power plants. Alaska public benefits were developed from industry sources and a 2002 study on Agrium by the Juneau-based McDowell Group. Payback was developed by summing the annual savings to Tesoro based on probably gas prices outlined in Section 5. Benefit/cost ratio is the ratio of project benefits to grant funds. 4.4.5 Business Plan Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum proposed business structure(s) and concepts that may be considered. Kenai Winds will operate as a commercial facility. Exact operations plans will depend on the selected turbine, the investment structure of the project, and any operations agreements between Kenai Winds and Tesoro. In many commercial wind farms maintenance is conducted under contract with the turbine vendor, both during the warranty period and afterwards. Turbine vendors typically operate central maintenance hubs to service turbines operating in various regions of the country and the world. In Europe, wind farm owners are increasingly switching to 3rd-party maintenance contractors after a decade of operation. As most domestic wind farms have not passed the decade mark, this trend has not been seen in the United States. At this time 3rd-party maintenance contractors are not a viable option, and the turbine vendor will coordinate the maintenance under contract. Operations of many wind farms are also conducted from central locations. This is largely because wind farms are typically located in remote regions where local operations and maintenance crews would be difficult to maintain. Kenai Winds holds a significant advantage in this respect. The location in an industrial area allows on-site operations and maintenance personnel at all time, and locally sourced staff. As part of its Phase 3 activities, Kenai Winds will 28 Renewable Energy Fund Grant Application AEA 09-004 Grant Application develop a definite operations plan, which may include personnel from Tesoro and other local new-hires. The business structure of many commercial wind farms has a mix of tax-equity investors and developers. The developers are largely responsible for the operations and maintenance of the wind farm, and become full owners of the project following the expiration of the tax benefits after 10 years of operation. As part of its Phase 3 activities, and securing financing, Kenai Winds will further refine the business structure. Note that Tim Ryan, a partner in BQ Energy, arranged project financing for over 19.000 MW of power projects prior to his entering the wind energy industry. He arranged financing for the 135 MW Judith Gap wind project in 2005. In 2006, BQ Energy arranged for construction and permanent financing of the 20 MW Steel Winds project. We have the experience and ability to finance the Kenai Winds project. 4.4.6 Analysis and Recommendations Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. 29 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 3 – PROJECT MANAGEMENT PLAN FOR PHASE 4 Describe who will be responsible for managing the project and provide a plan for successfully completing the project within the scope, schedule and budget proposed in the application. 3.1 Project Manager Tell us who will be managing the project for the Grantee and include a resume and references for the manager(s). If the applicant does not have a project manager indicate how you intend to solicit project management Support. If the applicant expects project management assistance from AEA or another government entity, state that in this section. The current project manager for Kenai Winds is Josh Berkow, a manager at BQ Energy (the parent company of Kenai Winds) in Patterson, NY. Up to this point, a local project manager has not been needed, however, Kenai Winds is currently seeking qualified individuals near Kenai, AK to assume project management responsibilities, and has identified several candidates. At the outset of Phase 3 activities, a local person will be required to keep the project on track. This person will play an integral and provide direct supervision of the EPC contractors during Phase 4. Mr. Berkow’s resume is included in Appendix A with the resumes of other BQ Energy personnel involved in the project. 3.2 Project Schedule Include a schedule for the proposed work that will be funded by this grant. (You may include a chart or table attachment with a summary of dates below.) A detailed project schedule is included in Appendix F. 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. Current project planning has Phase 4 beginning in October, 2009 with the start of the EPC process. 1. Bid EPC 10/19/2009 Kenai Winds will use a competitive process to bid the Engineering, Procurement, and Construction (EPC) of the project. Two potential bidders (Signal Wind Energy and STG Inc.) Statements of Qualifications (SOQ) are included in Appendix D. Kenai Winds will use every effort to ensure that significant numbers of local construction personnel are employed, and a preference will be put on hiring Alaska-based subcontractors. As required by the grant, Kenai Winds will mandate that all contractors be qualified to work in Alaska. 2. Engineering Complete- 2/22/2010 Detailed engineering will be performed and/or subcontracted by the EPC contractor, with supervision by the Kenai Winds project manager and BQ Energy management. A preference will be put on hiring Alaska-based subcontractors where appropriate. As the site is “shovel- ready” industrial land, much of the civil engineering required for a typical wind project is not required. For instance, road construction at this type of site is not required. Clearing trees and underbrush is not required. 3. Start of Construction- 5/3/2010 Simultaneous with the engineering of the project, the EPC contractor will begin construction mobilization. This will involve the pre-construction logistics that are required to move personnel and equipment to the site. Construction will begin as soon as weather permits, and will make use of the extended daylight hours in Alaska to expedite the project. 4. Turbine Components at Site- 5/7/2010 There is an existing deepwater port and oil terminal at the site. A second port, used for servicing offshore oil and gas platforms is located a few miles to the north of the site. It is 30 Renewable Energy Fund Grant Application AEA 09-004 Grant Application anticipated that the blades, towers, and turbines will arrive via one of these two ports. Logistics will be coordinated with the turbine supplier, which is typically in the scope of supply. 5. Final Turbine Payment- 5/7/2010 As is typical, Kenai Winds with retain a portion of the final turbine payment to be contingent on final commissioning and punch-list items. 6. Civil Construction Complete- 7/14/2010 The civil infrastructure for this project will mainly include the turbine foundations. Since the project area has already been cleared and graded for industrial purposes, no road construction is anticipated. 7. Turbine Erection Begins- 7/22/2010 Kenai Winds anticipates hiring extra crane operators to erect turbines around the clock and making use of the extended daylight hours available during Alaska summers. This does not occur serially with the electrical construction, but can be begun as soon as one turbine location is finished. 8. Electrical Infrastructure Complete- 7/28/2010 Electrical infrastructure includes the pad-mounted transformers, underground collection system, overhead collection system, interconnection to the substation, installation of reactive compensation, and test of the entire system. This does not occur serially with the civil construction, but can be begun as soon as one turbine location is finished. 9. Guaranteed Infrastructure Completion- 8/27/2010 The construction contract will specify a date when all construction is complete. Following this, the turbine vendors will commission the wind turbines for commercial operations. 10. Commercial Operations- 10/27/2010 3.4 Project Resources Describe the personnel, contractors, equipment, and services you will use to accomplish the project. Include any partnerships or commitments with other entities you have or anticipate will be needed to complete your project. Describe any existing contracts and the selection process you may use for major equipment purchases or contracts. Include brief resumes and references for known, key personnel, contractors, and suppliers as an attachment to your application. Kenai Winds has three main project participants in addition to the various outside contractors hired to perform specific services. These are BQ Energy, Tesoro, and HEA. From BQ Energy, the main personnel involved are Paul Curran (managing director), Tim Ryan (director), Josh Berkow (project manager), and Lorry Wagner (project manager). BQ Energy receives administrative support from John Rygielski and engineering and technical support from Jim Falsetti and Rich Gross on a project by project basis. Resumes for all BQ Energy personnel are included in the Appendix A. Project management from Tesoro is provided by Leo Giron and Iype Chacko. Local political representation from Tesoro is provided by Kip Knudson. Local operations support from Tesoro is from Steve Hanson and Rolf Manscek. Project management from HEA is provided by Rick Eckert. HEA will be conducting the interconnection study for the transmission grid with a contractor of their choice. A draft scope for the interconnection study is included in Appendix R. The interconnection study at the refinery will be conducted by the same contractor. Resumes for Tesoro are provided in Appendix B. A letter of support from Homer Electric is included in Appendix Q. A letter of support from Tesoro is included in Appendix C. A contractor for EPC of the project has not yet been selected. The SOQ for Signal Wind Energy 31 Renewable Energy Fund Grant Application AEA 09-004 Grant Application and STG Inc. (potential bidders) are included in the Appendix D. BQ Energy will use its industry contacts to identify other qualified firms. The contractor will be selected using a competitive bidding process and all firms will be required to be qualified to work in Alaska. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. The Alaska Energy Authority will enter the Kenai Winds LLC project as a key stakeholder when the Agreement is put in place for financial participation. As with all key stakeholders, the AEA would be brought into the loop n all key communications and requested to assist the project on matters of key strategy. Such information and request for advice is for the benefit of Kenai Winds, but does not absolve the management of Kenai Winds of their responsibility for the success of all of their decisions. Specific information that would flow to AEA would be based on time and milestones. That is there will be periodic reports on all activities and there will be reports or meetings that will be based on when a specific event will occur. The Project Manager will be responsible for initiating all communication to the AEA. At the start of AEA involvement, all stakeholders will have a kickoff meeting either at site or in Anchorage to ensure that communication needs are understood and also so that face to face interaction facilitates future communication. The main focus of Phase 4 is construction. Although there is seemingly more activity in this Phase as compared with Phase 3, the amount and type of reports do not change, and typically reports can get shorter during some months in Phase 4. At the start of Phase 4, a new Phase kickoff meeting will be held (this is often at the same session as the Phase 3 wrapup). At this session a new schedule of milestones will be issued. Phase 4 reports largely focus on the plans for all construction activity and how the Project Manager will ensure that the onsite work is to be executed in a safe and timely fashion. At the start of actual field construction activity, the Project Manager will be responsible for organizing a Groundbreaking Meeting and ceremony. The AEA would be invited to participate and receive appropriate recognition at that ceremony. At the conclusion of construction the Project Manager would be responsible for organizing a Start of Operations Meeting and ceremony. 3.6 Project Risk Discuss potential problems and how you would address them. As the Project Manger, BQ energy is responsible for ensuring that the risk profile of all stakeholders is appropriately managed. Most importantly, the risk that a stakeholder is undertaking must be communicated to that party so that they can understand how to manage that risk position. Throughout the remaining execution of the Kenai Winds Project, the primary risk for the AEA will be that the project fails to reach full operation and give the State a return of the public benefit expected. In all projects that risk of failure is greatest in the early stages of development. That is the reason that BQ Energy uses a Phased Gate development system very similar in nature to the one espoused by the AEA in this RFP. When a project reaches Phase 3, it should be in the mode of executing on project aspects that have been well defined. As with any development, cash follows progress. Kenai Winds will set up a milestone payment 32 Renewable Energy Fund Grant Application AEA 09-004 Grant Application schedule for all stakeholder funds including the AEA. In Phase 4, the main activity will be construction related. There the most pressing risk deals with construction safety. Tesoro has an active safety program and it will be our intention to ensure that the wind construction contractors will follow Tesoro safety standards. Note that the wind turbines are not to be located in the refinery process units, but we feel it prudent to use the refinery standards nonetheless. The second risk in construction is financial dealing with cost overruns. This risk is a real danger to stakeholders except for AEA. We have structured this participation agreement to be a fixed dollar amount from AEA. If there is a cost overrun, the AEA financial exposure does not increase. Other Phase 4 risks will also be scrutinized at the start of that phase. At the moment, it is our intention to focus on suppliers such as Vestas and GE. These leading vendors will significantly reduce project execution and commissioning risks. 33 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 4 – PROJECT DESCRIPTION AND TASKS FOR PHASE 4 • Tell us what the project is and how you will meet the requirements outlined in Section 2 of the RFA. The level of information will vary according to phase of the project you propose to undertake with grant funds. • If you are applying for grant funding for more than one phase of a project provide a plan and grant budget for completion of each phase. • If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. 4.1 Proposed Energy Resource Describe the potential extent/amount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. The Kenai Winds project is a 15 – 18 MW (10 turbine) wind energy generation facility located in the Nikiski Industrial Area, in Nikiski, on the Kenai peninsula. The turbines will be disbursed throughout the site and electrically interconnected to the Tesoro Alaska Refinery. Electric energy will be delivered and sold to the oil refinery, providing low cost power, and helping ensure the economic viability of the refinery. Beginning in November 2007, Kenai Winds undertook a 1 year meteorological study to assess the wind resource in Nikiski. Kenai Winds commissioned a 6-month assessment based on the first 6 months of data assuming a Vestas V90 turbine with a 105m tower. The study is attached in Appendix N. Since the 105m tower is no longer available, the capacity factor and energy output in that study are no longer valid. At the 95m tower height now available from Vestas, it is anticipated that the project will generate 46,831 MWh per year. The wind rose, shown in Appendix N and on the layout in Appendix I shows prevailing winds from both the south and the northeast. These winds are blowing off the Cook Inlet from each direction with an equal amount of energy, making this an ideal site for wind turbines. Prior to purchasing wind turbines, Kenai Winds will generate a detailed energy production estimate based on a meteorologist’s site visit, a year of meteorological data, and consultation with the appropriate wind turbine vendors. This and the full year of data will be provided to the turbine vendor to determine the ultimate viability of a given wind turbine at this site. This will occur as part of Phase 3 activities, and is a prerequisite for Phase 4. Details on the pros and cons of wind energy at this location are included in the Project Description and Tasks for Phase 3. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. At the beginning of Phase 4, an approved plan for interconnection will be executed with Tesoro and Homer Electric. This will be based on the outcomes of the interconnection studies, and 34 Renewable Energy Fund Grant Application AEA 09-004 Grant Application provide detailed drawings and specifications for all facilities required to interconnect to Tesoro and HEA. As part of its operations, Kenai Winds will provide day-ahead and real-time energy production estimates to HEA to aid in dispatching other generation. This service is typically provided by a contractor such as AWS Truewind or Global Energy Concepts. A detailed scope of work has not been created for this service yet, but will be specified prior to operations. 4.2.2 Existing Energy Resources Used Briefly discuss your understanding of the existing energy resources. Include a brief discussion of any impact the project may have on existing energy infrastructure and resources. Discussed as part of Phase 3 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. Discussed as part of Phase 3 4.3 Proposed System Include information necessary to describe the system you are intending to develop and address potential system design, land ownership, permits, and environmental issues. 4.3.1 System Design Provide the following information for the proposed renewable energy system: • A description of renewable energy technology specific to project location • Optimum installed capacity • Anticipated capacity factor • Anticipated annual generation • Anticipated barriers • Basic integration concept • Delivery methods Discussed as part of Phase 3. Changes to system design will be made as part of the interconnection studies performed in Phase 3, and the detailed engineering design performed at the outset of Phase 4. 4.3.2 Land Ownership Identify potential land ownership issues, including whether site owners have agreed to the project or how you intend to approach land ownership and access issues. All land ownership issues will be resolved as part of Phase 3, as Phase 4 cannot begin without land access. Kenai Winds will execute a land lease agreement with Tesoro. Any required easements will be obtained from the pertinent land owners. If Kenai Winds determines certain turbines are best sited off Tesoro property, a land lease agreement will be executed with the appropriate land owner. 4.3.3 Permits Provide the following informationas it may relate to permitting and how you intend to address outstanding permit issues. • List of applicable permits • Anticipated permitting timeline • Identify and discussion of potential barriers 35 Renewable Energy Fund Grant Application AEA 09-004 Grant Application All permits identified in the Project Description and Tasks for Phase 3 will be acquired prior to Phase 4. 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will be addressed: • Threatened or Endangered species • Habitat issues • Wetlands and other protected areas • Archaeological and historical resources • Land development constraints • Telecommunications interference • Aviation considerations • Visual, aesthetics impacts • Identify and discuss other potential barriers The outcomes of the studies undertaken as part of Phase 3 activities will be used to determine any operations changes required to mitigate environmental impacts. At present, no operations changes are anticipated. 4.4 Proposed New System Costs (Total Estimated Costs and proposed Revenues) The level of cost information provided will vary according to the phase of funding requested and any previous work the applicant may have done on the project. Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer’s estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of the project. Cost information should include the following: • Total anticipated project cost, and cost for this phase • Requested grant funding • Applicant matching funds – loans, capital contributions, in-kind • Identification of other funding sources • Projected capital cost of proposed renewable energy system • Projected development cost of proposed renewable energy system As part of its Phase 2 activities, Kenai Winds has created a draft budget and pro-forma for the development and construction of the project. Detailed budgets are included in the Grant Budget Worksheet in Section 6, and in Appendix K. Total Anticipated Project Cost: $46.8 million Total Phase 2 Cost: $65,000 (already spent) Total Phase 3 Cost: $10.335 million Total Phase 4 Cost: $36.4 million (separate Section 4 and Grant Budget are provided) Requested Phase 3 Grant Funding: $2.6 million Requested Phase 4 Grant Funding: $9.1 million (separate Section 4 and Grant Budget are provided) Total Requested Grant Funding: $11.7 million Applicant Phase 3 Matching Funds: $7.735 million Applicant Phase 4 Matching Funds: $27.3 million 36 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Total Development Cost: $400,000 (includes spent Phase 2) Total Capital Cost: $46.4 million (includes construction, turbines and downpayment, balance of plant) Project costs may change after the detailed engineering design of the project. Kenai Winds, in requesting $11.7 million is requesting a fixed amount. The requested amount remains fixed regardless of any changes in the project capital cost. If the project cost goes up or down, the requested grant amount remains the same. 4.4.2 Project Operating and Maintenance Costs Include anticipated O&M costs for new facilities constructed and how these would be funded by the applicant. • Total anticipated project cost for this phase • Requested grant funding At the current stage of planning, a definitive operations and maintenance plan has not yet been established. The Kenai Winds Project has an advantage over traditional wind farms due to its location. The Kenai Peninsula maintains a highly skilled work force that is uniquely qualified in the operations and maintenance of these types of facilities. The close proximity of oil and gas facilities ensures the continuing availability of skilled labor. BQ Energy has entered into a preliminary discussion with Tesoro regarding the use of their facilities as a staging area for operations and maintenance. This would preclude the need for new office and storage facilities required by the project. In addition, electrical maintenance can be coordinated with refinery personnel. While the exact sum has not been estimated, these benefits typically provide a considerable cost savings to the operations and maintenance of a wind project. Wind turbines are purchased under warranty, and usually with an O&M contract from the turbine vendor. Typically the O&M contract term is for the first 5 years, after which the vendor will continue to provide O&M support under a new contract. In some cases, a third party contractor provides the O&M. This is typically for older model turbines that have been in service for many years. As the turbines age and the domestic wind industry develops Kenai Winds will explore this option. Currently, Kenai Winds estimates the annual O&M costs to be $891,825, escalating with inflation at 3% per year. The estimate includes the warranty, O&M, on-site project manager, and insurance. This will be paid out of project revenues. A detailed O&M budget is provided in Appendix L. 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following: • Identification of potential power buyer(s)/customer(s) • Potential power purchase/sales price - at a minimum indicate a price range • Proposed rate of return from grant-funded project Discussed as part of Phase 3 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. 37 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Provided with Phase 3 4.4.5 Business Plan Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum proposed business structure(s) and concepts that may be considered. Kenai Winds will operate as a commercial facility. Exact operations plans will depend on the selected turbine, the investment structure of the project, and any operations agreements between Kenai Winds and Tesoro. In many commercial wind farms maintenance is conducted under contract with the turbine vendor, both during the warranty period and afterwards. Turbine vendors typically operate central maintenance hubs to service turbines operating in various regions of the country and the world. In Europe, wind farm owners are increasingly switching to 3rd-party maintenance contractors after a decade of operation. As most domestic wind farms have not passed the decade mark, this trend has not been seen in the United States. At this time 3rd-party maintenance contractors are not a viable option, and the turbine vendor will coordinate the maintenance under contract. Operations of many wind farms are also conducted from central locations. This is largely because wind farms are typically located in remote regions where local operations and maintenance crews would be difficult to maintain. Kenai Winds holds a significant advantage in this respect. The location in an industrial area allows on-site operations and maintenance personnel at all time, and locally sourced staff. As part of its Phase 3 activities, Kenai Winds will develop a definite operations plan, which may include personnel from Tesoro and other local new-hires. The business structure of many commercial wind farms has a mix of tax-equity investors and developers. The developers are largely responsible for the operations and maintenance of the wind farm, and become full owners of the project following the expiration of the tax benefits after 10 years of operation. As part of its Phase 3 activities, and securing financing, Kenai Winds will further refine the business structure. Note that Tim Ryan, a partner in BQ Energy, arranged project financing for over 19.000 MW of power projects prior to his entering the wind energy industry. He arranged financing for the 135 MW Judith Gap wind project in 2005. In 2006, BQ Energy arranged for construction and permanent financing of the 20 MW Steel Winds project. We have the experience and ability to finance the Kenai Winds project. 4.4.6 Analysis and Recommendations Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. 38 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 5– PROJECT BENEFIT Explain the economic and public benefits of your project. Include direct cost savings, and how the people of Alaska will benefit from the project. The benefits information should include the following: • Potential annual fuel displacement (gal and $) over the lifetime of the evaluated renewable energy project • Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price, RCA tariff, or avoided cost of ownership) • Potential additional annual incentives (i.e. tax credits) • Potential additional annual revenue streams (i.e. green tag sales or other renewable energy subsidies or programs that might be available) • Discuss the non-economic public benefits to Alaskans over the lifetime of the project 1. Direct Savings to Tesoro Tesoro is now and will remain connected to the public Homer Electric Association grid, and as such benefits to the Tesoro refinery energy needs are befits to the public. Indeed Tesoro in its own right is considered a member of the public under Alaska law. As the only business relationships between Tesoro and Kenai Winds (following construction of the project) will be land leases and power purchase agreements, Kenai Winds cannot be construed as a self generator and 100% of the energy generated will be used by the public. These public benefits are in addition to the local and statewide public benefits realized from the operation of the wind farm at this location. As noted, a significant benefit to Alaska is the fixed-price of electricity to the Tesoro Alaska Refinery. This will reduce the cost of operating the refinery and help ensure its economic viability. The chart below shows the historical cost of electricity at the Tesoro Alaska Refinery. The orange reflects the price already paid by the refinery, while the pink is the price of electricity for the remainder of 2008. Cost of Electricity at the Tesoro Alaska Refinery 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 Jan-05 Jul-05 Feb-06 Aug-06 Mar-07 Sep-07 Apr-08 Nov-08$/kWh The price projection for the remainder of 2008 is correct, because it is based on natural gas purchased by Chugach Electric. Chugach purchases natural gas using a complex formula, shown below, based on the historical costs of natural gas, fuel oil, and crude oil in the lower-48 states. 39 Renewable Energy Fund Grant Application AEA 09-004 Grant Application In this formula, B is the price of natural gas per mcf. Pb is the base price of natural gas when the contracts were signed in the late 1980’s. dG, dF, and dC are coefficients based on the increase in commodity prices since the late 1980’s. The final price is updated quarterly. Each time, the coefficients are recalculated based on commodity prices for a period beginning 15 months prior to the fiscal quarter and ending 3 months prior to the fiscal quarter. These contracts are publicly available, and the Alaska Energy Authority already knows the calculation method. The contract formulas were used by AEA to evaluate a previous grant solicitation. The Kenai Winds project is anticipated for 2010 and the benefits need to be evaluated for the twenty years from 2010 to 2039. Kenai Winds has estimated the price of natural gas per MMBTU through 2039. Prices are shown in the chart below for the period 2005 – 2030. Alaska Natural Gas Prices 0 5 10 15 20 25 Apr-05 Dec-07 Sep-10 Jun-13 Mar-16 Dec-18 Sep-21 May-24 Feb-27 Nov-29Real $/MMBTU$200oil MMBTU Parity $200oil MMBTU Parity $200oil $12NG Prices Constant Prices Constant $100oil $7.55NG $100oil $12NG AEA Projection $100oil $7.55NG Chugach Projection Probable Market Based Probable Regulated Known Prices Projected Prices Several pricing scenarios are included in this chart. In all cases, prepared by Kenai Winds, fuel oil and crude oil have equivalent prices on a per MMBTU basis. 1. Oil reaches $200/bbl. Natural Gas reaches parity with oil a per MMBTU basis by Sept. 2009. Prices escalate at 3% per year (as per general inflation). 2. Oil reaches $200/bbl. Natural gas reaches $12/MMBTU by Aug. 2008. Prices escalate at 3% per year. 3. Starting from August 2008, prices escalate at 3% per year. 4. Oil reaches $100/bbl. Natural gas reaches $7.55/MMBTU in Oct. 2008. Prices escalate at 3% per year. 40 Renewable Energy Fund Grant Application AEA 09-004 Grant Application 5. Oil reaches $100/bbl in Jan. 2009. Natural gas reaches $12/MMBTU in Aug. 2008. Prices escalate at 3% per year. 6. Projections based on the Energy Information Administration Annual Energy Outlook, as provided by the Alaska Energy Authority. 7. Projections from Chugach Electric based on a 2006 generation plan. 8. In 2016, current gas contracts expire, the natural gas pipeline to the lower-48 states is complete, and Alaska gas prices are de-regulated. The first 5 scenarios are each re- represented; assuming Alaska gas prices are equivalent to Henry Hub. 9. Probabilities were assigned to each of the preceding cases. Two further gas price scenarios were created based on the probability of each scenario. The first assumes gas prices are regulated and ignores the 2016 Henry Hub cases. The second assumes gas prices are de-regulated and includes all the cases. The probabilities assigned to each scenario are given in the table below. If the price of natural gas stays regulated post-2106, the pre-2016 probabilities apply. Gas Price Probabilities Scenario Pre-2016 Post-2016 $200oil, MMBTU Parity (market) 0.00% 2.00% $200oil, MMBTU Parity 5.00% 4.00% $100oil, $12NG (market) 0.00% 15.00% $200oil, $12NG 5.00% 0.00% Prices Constant (market) 0.00% 15.00% Prices Constant 16.25% 10.00% $100oil, $7.55NG (market) 0.00% 9.00% $100oil, $12NG 21.25% 10.00% AEA Projection 21.25% 15.00% $100oil, $7.55NG 21.25% 15.00% Chugach Projection 10.00% 5.00% Total Probability 100% 100% Using this probabilistic gas price model, Kenai Winds has estimated the cost of electricity to the Tesoro Alaska Refinery through 2030. Chugach is the primary provider of electricity to HEA, so the Chugach avoided cost was used as a starting point. Historical avoided costs, historical power prices at the refinery, the heat rates of Chugach generating stations, and the actual avoided cost filings were used to validate the model for the present day cost of energy shown above. The annual impact of the Bradley Lake hydro project is also included. In 2013 a change to the model is required. HEA, the provider of electricity to Tesoro, plans to develop its own generation and become independent of Chugach by 2013. This requires construction of a new natural gas generator. Assuming a capital cost of $1635/kW, operations and maintenance cost of $13.65/kW, 93% availability, and a 9.1% fixed charge rate, a new generation station will add two cents to the cost of electricity in HEA territory. The average annual power price from this scenario is shown below. The expected savings to Tesoro are also shown. This assumes the market-deregulation scenario, which seems more likely in an era of increasing fuel price volatility. Detailed spreadsheets with the calculations are available upon request. Year $/MWh Tesoro Savings 2009 72.88 Wind Farm Not Yet Built 2010 77.42 $450,159 2011 80.04 $768,609 41 Renewable Energy Fund Grant Application AEA 09-004 Grant Application 2012 82.39 $789,304 2013 95.86 $1,327,630 2014 97.41 $1,305,678 2015 99.27 $1,295,890 2016 119.22 $2,132,242 2017 122.05 $2,161,096 2018 124.97 $2,191,355 2019 127.99 $2,222,872 2020 130.75 $2,239,085 2021 133.54 $2,253,204 2022 136.92 $2,291,403 2023 140.4 $2,330,754 2024 144.07 $2,374,950 2025 147.79 $2,418,148 2026 151.68 $2,465,524 2027 155.43 $2,502,023 2028 159.79 $2,562,727 2029 164.14 $2,618,575 2030 168.54 $2,672,808 2031 174.03 $2,772,860 2032 180.01 $2,891,594 2033 186.23 $3,016,862 2034 192.7 $3,148,980 2035 199.44 $3,288,279 2036 206.45 $3,435,107 2037 213.74 $3,589,823 2038 221.33 $3,752,808 2039 229.23 $3,924,455 Using this model, it is possible to estimate how much fuel the wind farm displaces, and the total cost savings to Tesoro. Knowing the estimated monthly output of the wind farm, the known heat rate of existing generators, and an assumed heat rate of 7646 BTU/kWh for a new generator, the amount of displaced fuel can be forecast. A project of this size, over its 30-year lifetime, would displace 32,104,112 mcf ($207 million) of natural gas, and yield a total savings to Tesoro of $71,194,805. 2. Indirect Benefits to Kenai Benefits to this refinery can and should be construed as benefits to the state of Alaska and to the Alaskan public for a number of reasons. Firstly, the Tesoro Alaska Refinery has a direct impact on the economic life of its host community. Since the closure of Agrium Corp.’s fertilizer plant, Tesoro’s 575 employees with a combined payroll of $32 million makes it one of the largest employers on the Kenai Peninsula. A 2002 study of Agrium’s impact (by the Juneau-based McDowell Group) can be extended to Tesoro for an estimate of its total economic impact. Based on that study, it is estimated that payroll spending and employment by Tesoro creates 700 indirect jobs on the Kenai Peninsula. This supports 2700 people (including family members) and creates an additional $25million in payroll indirectly through local spending by employees of the plant. A further discussion of the refinery and its direct benefits to the community is included in Appendix O. Beyond its payroll, the Tesoro Alaska Refinery provides other direct benefits to the Alaska public which are enhanced by the Kenai Winds project. The Tesoro Alaska supplies the majority of the refined petroleum products used by state residents and businesses. Efforts, such as Kenai Winds, 42 Renewable Energy Fund Grant Application AEA 09-004 Grant Application to provide energy security to the refinery ensure energy security to south-central Alaska. Kenai Winds helps prevent a scenario where Alaska (like many oil-producing nations) would export crude oil at market rates and import refined petroleum at above-market rates. Kenai Winds also helps prevent a scenario where Kenai Peninsula residents would saddled with extra energy costs due to a closed refinery. Homer Electric currently purchases most of its electricity supply under take-or-pay contract structures. They are required to purchase a given amount of electricity, regardless of consumption. In the near term, a closed refinery would mean the same amount of electricity would be spread among fewer customers. Rates in HEA territory would go up to accommodate the excess power. Kenai Winds through its provision of energy price security to the refinery helps prevent this. In the future when Homer Electric installs new generation, a smaller system would be required if the refinery were to close. The incremental capital costs of such a system would be higher and the efficiency would be lower. These would yield higher power costs to Kenai consumers. Kenai Winds through its provision of energy price security to the refinery helps prevent this. Finally, in its roll as a good corporate citizen, Tesoro participates in the local community through its sponsorship of the Tesoro Iron Dog, Gallons for Grades program, and hundreds of community organizations like the Challenger Learning Center’s Starbase program. The integration of the Tesoro Alaska Refinery into Alaska’s and Kenai’s way of life makes a strong argument that benefits to the refinery are indeed benefits to Alaska as a whole. Beyond its direct benefits to the refinery which benefit Alaska as a whole, Kenai Winds has a direct and beneficial economic impact on the Alaska public. The McDowell group study on Agrium can be used to estimate the direct beneficial economic impact of the Kenai Winds project. During the construction period, the project would create approximately 100 jobs. Although these are temporary positions, the actual jobs created in Full-Time-Equivalents would be approximately 50 jobs, with a total payroll around $3million. Since construction would occur during the summer tourist months, any indirect job creation would be masked by seasonal workers. Additionally the construction workers would live and spend in the Kenai area, where the estimated indirect benefits would be approximately $2million. Following construction, the Kenai Winds project would have four full-time staff with a total yearly payroll of $450,000 (escalating with inflation at 3% per year). This would also create an additional $350,000 in annual pay indirectly through local spending. Over a 30-year project life, the jobs form Kenai Winds would have a economic impact of $29million. An additional benefit, which is difficult to quantify, is the educational benefits of a wind farm, in relation to training for construction workers on the project, training for operations personnel, and local schools. Due to the explosive growth in the wind industry, experienced construction personnel are in high demand. Work on this project will dramatically increase the value of construction personnel, and provide Alaska with a native workforce trained for renewable energy projects. Similarly the operations and maintenance of the wind farm, based in Kenai, will create a native workforce trained for the renewable energy projects this grant program supports. Kenai Winds is also committed to maximizing the educational providing tours and information to local schools and other interested educational groups. An unusual Indirect Benefit also results from Kenai Winds; corporate completion for green image. Several stakeholders in the Alaska energy community have urged “oil companies” to increase their use of sustainable energy in their Alaska operations. To date, this encouragement has not yielded results. Although Tesoro is not an “oil company” since they buy oil as a raw 43 Renewable Energy Fund Grant Application AEA 09-004 Grant Application material and do not have any production operations (hence their 75% drop in stock value over the past 12 months), Tesoro is nonetheless a leading corporate citizen in the Alaska energy sector. They already deserve credit for their strong support of the Kenai Winds development work to date. However, their desire to source a significant amount of their electric power from renewable resources will set a standard that other corporate citizens can emulate. Having an “oil company” such as Tesoro lead the way in the implementation of renewable energy in Alaska gives Alaska officials strong ammunition in convincing other industries to do the same or more in long-term sustainable planning. Wind energy will no longer be thought of as a niche technology sought only by environmentalists. It is a valuable energy resource supported by leading corporate citizens. This paradigm shift will greatly aid future project consideration and allow Alaska significant benefit. Another benefit, also difficult to quantify, is the benefit to Alaskans through increased efficiency of the electric power grid. In most of the lower-48 states, new power plants are constructed far away from load centers. For fossil fuel power plants, this is largely due to environmental concerns. For wind power plants, this is largely because wind resources are often not located near major cities. Both cases require long power lines and expensive system integration designs to accommodate new generation. Kenai Winds, through its location at a large electrical load, circumvents this problem. Utility engineers prefer to locate generation near load. It increases the efficiency and reliability of the system. By locating Kenai Winds next to an operating oil refinery with a large electrical load, the efficiency and reliability of the system are improved. As noted earlier, Kenai Winds reduces Alaska natural gas consumption significantly. Natural gas prices in Alaska have more than doubled in recent years and continue to rise. Perhaps more poignantly, natural gas is simply not always available at any price in the quantities required. The Agrium fertilizer plant in Nikiski ceased operations largely due to its inability to secure natural gas. Basic economic principles also dictate that natural gas supply and demand will impact prices. If demand is reduced, it is likely to have a mitigating impact on area prices. In the Kenai area where natural gas is widely used for essential heating, a prudent energy policy would seek to reduce gas consumption wherever possible. Kenai Winds is the most effective means of reducing natural gas usage by a significant amount without sacrificing the area economy or quality of life. In addition to education and electric power efficiency, Kenai Winds benefits Alaskans through the direct reduction of greenhouse gas emissions. The exact quantity of greenhouse gas emission reductions is impossible to state for certain for any power plant, prior to construction. System conditions and dispatch levels would need to be monitored for several years with the wind plant in operation to determine exactly the quantity of greenhouse gas emissions avoided. A preliminary estimate may be made based on the current generation mix of Chugach Electric (the provider of HEA’s power). Chugach’s primary resources are natural gas fired. Assuming all of the displaced electricity production is from natural gas, Kenai Winds would cause greenhouse gas emission reductions of the following quantities: Greenhouse Gas Emission Reductions CO2 53,153,185 lbs NOX 79,612 lbs SO2 4,683 lbs The dollar savings to Alaskans as a result of these reductions are not possible to estimate. Future 44 Renewable Energy Fund Grant Application AEA 09-004 Grant Application carbon regulation is likely, though the form is unknown. The effects of climate change are also currently unknown, but its effect is likely to be felt most acutely in Alaska. It is then not truly possible to estimate an economic impact of avoided greenhouse gas emissions, though it is highly likely to have a large impact. Finally, the Kenai Peninsula Borough (the host community) recognizes the benefits of this project. A letter, included in Appendix E, enthusiastically endorses the Kenai Winds project as a significant step towards meeting the policy goals of energy security for the Kenai Peninsula Borough. The Borough Mayor views Kenai Winds as a major stepping stone facilitating the further development of wind energy in the Borough, and welcomes the stabilizing effect it will have on the hard-hit Nikiski industrial zone. 3. Total Benefit The total estimated benefit of this project is the sum of the energy cost savings to Tesoro, and the effect of yearly payroll in Kenai as shown in the below table. The total benefit to Alaska is therefore $100,194,805. The total requested grant funding for this project is $11,700,000. This yields a benefit/cost ratio of 8.6. Kenai Winds Benefit Summary Direct Energy Savings to Tesoro $71,194,805 Indirect Economic Benefits $29,000,000 Total Benefit to Alaska $100,194,805 Benefit/Cost Ratio 8.6 4. Additional Revenue Streams and Incentives The project economics rely not only on the capital cost and power purchase agreement, but also on the Federal Production Tax Credit (PTC), accelerated depreciation on the capital equipment, and the sale of renewable energy credits (RECs). The project pro-forma assumes RECs can be sold for $15/MWh. This is far below the current retail rates for RECs and is considered a reasonable number. The project pro-forma also assumes that the depreciable capital cost will be reduced by the value of the grant. More important to project economics is the impact of the PTC. Kenai Winds, like most project developers is assuming the PTC will be extended. Historically it has been extended retroactively, and there is no reason why this should change. The only risk related to the PTC is actually a result of this grant. Structured as a “Capital Grant,” this grant is subject to the “Credit Offset” provision of the authorizing legislation for the PTC. Specifically, a “Capital Grant” will reduce the amount of the PTC by up to 50%, because it is considered “double dipping.” Both capital grants and subsidized financing are incentive programs affected by the “Credit Offset” provision. For a project receiving a government “Capital Grant”, the PTC is calculated as follows: PTC with grant = Capital Cost – Grant x PTC without grant Capital Cost This is a significant reduction in the value of the Federal tax incentive. The authorizing legislation for this grant offers an alternative grant form that will allow project developers to utilize the PTC at its full value. The following types of state incentive are not subject to the credit offset provision of the PTC: 45 Renewable Energy Fund Grant Application AEA 09-004 Grant Application • Price Support Payments • Production Incentive Payments • Operational Cost Grants • Loan Guarantees • Mandates to Purchase Renewable Energy The authorizing legislation allows for a “renewable power production reimbursement grant.” In the Alaska Legislative Act that authorizes the grant, Section 42.45.045 (d) 2 specifically allows for ”renewable power production reimbursement grants.” The production grants can be paid out in a lump sum, similar to a capital grant. The difference between the two types of grant is a production grant is contingent on performance; it is EARNED over time. As an example of the effect of a Production Grant, we can look at the value of the grant in terms of the project rate of return. The two charts below shows the impact of grant increments of $5,000,000 on the project. In the first, the effect on Internal Rate of Return (IRR) is dramatically lessened by a capital grant, as opposed to a Production Grant. In terms of IRR, Kenai Winds would use grant funds to first ensure that the business plan is met and keep an IRR satisfactory to investors. Additional grant funds would be used to lower the cost of power to Tesoro, thus increasing the benefits to Alaska. To make the best use of its money to benefit Alaska, the Alaska Energy Authority should structure the grant as a Production Grant, paid out in a lump sum. The second chart shows the equivalent value of a production grant versus a capital grant. As can be seen, a grant from the Alaska Energy Authority loses 14 – 24% of its value to a commercial installation if structured as a capital grant. Specifically, a $5 million capital grant has only $3.9 million of value to commercial projects dependent on the PTC. In this respect, the chart shows that capital grants are poor investments on the part of the Alaska Energy Authority. Price support payments, production incentive payments, and operational cost grants which are EARNED over time are grants which are allowable under ALA 42.45.045 (2) that allow the State of Alaska to realize the full value of its investment in renewable energy. 46 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Effect of Grant Funds on Project IRR 0 5 10 15 20 25 $0 $5 $10 $15 $20 $25 $30 $35 Funding ($ 000,000)IRR (%)Production Grant Capital Grant Effective Value of a Capital Grant for Kenai Winds - 5 10 15 20 25 30 35 123456$ millionsCapital Grant Amount Effective Value In view of the potential loss of value of the PTC, the Alaska Energy Authority has a number of options when structuring the contract. For instance, using a term other than “grant” may be appropriate. An “operating cost subsidy” rather than a sum tied to project capital costs might be more appropriate. The Alaska Energy Authority should structure its “grant” contract to mirror a program on which the IRS has already ruled. An email from an attorney at Chadbourne & Parke LLP that outlines this is attached in Appendix P. Two IRS rulings relating to this issue are also included in Appendix P. 47 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 6 – GRANT BUDGET Tell us how much your total project costs. Include any investments to date and funding sources, how much is requested in grant funds, and additional investments you will make as an applicant. Include an estimate of budget costs by tasks using the form - GrantBudget.xls The total budget through construction of the Kenai Winds project is $46.8 million. This grant application is for $11.7 million, leaving a funding requirement of $35.1 million. This will be provided by a combination of funds from BQ Energy and project-specific financing. To date, BQ Energy has provided $165,000 in funding for Phase 1 and Phase 2 of the project. A significant portion of the financing will be sourced from “tax equity” investors. Part of the financial return from Kenai Winds (and any wind energy project) is in the form of federal Production Tax Credits (“PTCs”). This credit is 2.1¢ per kWh for the first 10 years after commercial operation. The amount of the PTCs increases with inflation and is paid on actual production. Secondly, wind energy assets are considered to be five-year MACRS property under the U.S. tax code. As a result, the project creates significant depreciation over the first five years, which can be used to offset taxable income from other sources. These two items can be monetized; BQ Energy has experience in doing so, and has excellent relationships with such tax investors. These tax incentives typically allow Independent Power Producers (IPPs) to produce renewable energy at rates less than regulated electric utilities. Additional amounts of capital will be financed using the projected cash flow of the project. This may be in the form of debt and/or equity. Finally, construction financing will be required. This is typically provided by lenders who will convert part of their investment into long-term financing at commercial operation, when the tax equity investors contribute their funds. Again, BQ Energy has excellent relationships with providers of these kinds of financing. Note that Tim Ryan, a partner in BQ Energy, arranged project financing for over 19.000 MW of power projects prior to his entering the wind energy industry. He arranged financing for the 135 MW Judith Gap wind project in 2005. In 2006, BQ Energy arranged for construction and permanent financing of the 20 MW Steel Winds project. We have the experience and ability to finance the Kenai Winds project. 48 Renewable Energy Fund Grant Application AEA 09-004 Grant Application SECTION 7 – ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION: A. Resumes of Applicant’s Project Manager, key staff, partners, consultants, and suppliers per application form Section 3.1 and 3.4 B. Cost Worksheet per application form Section 4.4.4 C. Grant Budget Form per application form Section 6. D. An electronic version of the entire application per RFA Section 1.6 E. Governing Body Resolution per RFA Section 1.4 Enclose a copy of the resolution or other formal action taken by the applicant’s governing body or management that: - authorizes this application for project funding at the match amounts indicated in the application - authorizes the individual named as point of contact to represent the applicant for purposes of this application - states the applicant is in compliance with all federal state, and local, laws including existing credit and federal tax obligations. F. CERTIFICATION The undersigned certifies that this application for a renewable energy grant is truthful and correct, and that the applicant is in compliance with, and will continue to comply with, all federal and state laws including existing credit and federal tax obligations. Print Name Paul F. Curran Signature Title Managing Director Date 5 October, 2008 49 Renewable Energy Fund RFA AEA 09-004 Application Cost Worksheet Page 1 Application Cost Worksheet Please note that some fields might not be applicable for all technologies or all project phases. Level of information detail varies according to phase requirements. 1. Renewable Energy Source The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. Annual average resource availability. 98% (29.7% net capacity factor) Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel) 2. Existing Energy Generation a) Basic configuration (if system is part of the railbelt grid, leave this section blank) i. Number of generators/boilers/other ii. Rated capacity of generators/boilers/other iii. Generator/boilers/other type iv. Age of generators/boilers/other v. Efficiency of generators/boilers/other b) Annual O&M cost i. Annual O&M cost for labor ii. Annual O&M cost for non-labor c) Annual electricity production and fuel usage (fill in as applicable) i. Electricity [kWh] ii. Fuel usage (if system is part of the Railbelt grid, leave this section blank Diesel [gal] Other iii. Peak Load iv. Average Load v. Minimum Load vi. Efficiency vii. Future trends d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] ii. Electricity [kWh] iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other 50 Renewable Energy Fund RFA AEA 09-004 Application Cost Worksheet Page 2 3. Proposed System Design a) Installed capacity 18 MW b) Annual renewable electricity generation i. Diesel [gal or MMBtu] ii. Electricity [kWh] 46,831,000 iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other 4. Project Cost a) Total capital cost of new system $46,400,000 b) Development cost $400,000 c) Annual O&M cost of new system $891,825 (escalates 3% per year) d) Annual fuel cost $0 5. Project Benefits a) Amount of fuel displaced for i. Electricity 32,104,122 mcf, natural gas (June 2010 – Dec. 2039) ii. Heat iii. Transportation b) Price of displaced fuel $207,717,207 (June 2010 – Dec. 2039) c) Other economic benefits d) Amount of Alaska public benefits $29,000,000 6. Power Purchase/Sales Price a) Price for power purchase/sale $0.06/kWh escalating at 3% per year 7. Project Analysis a) Basic Economic Analysis Project benefit/cost ratio 8.56 Payback 8.7 years 51 BUDGET INFORMATIONBUDGET SUMMARY:Phase 3 BudgetMilestone or TaskFederal FundsState Funds (AEA Grant)Local Match Funds (Cash)Local Match Funds (In‐Kind)Other FundsTOTALS11 Year Meteorological Study$0.00 $5,000.00$5,000.002 Preliminary Environmental Review$5,000.00 $10,000.00$15,000.003 Electrical Interconnection Study at Refinery$15,000.00 $30,000.00$45,000.004 Electrical Interconnection Study with HEA$20,000.00 $55,000.00$75,000.005 Coastal Zone Management Review$5,000.00 $15,000.00$20,000.006 NEXRAD Bird Study$15,000.00 $35,000.00$50,000.007 PILOT Studies$20,000.00$20,000.008 Balance‐of‐Plant Cost Estimate$10,000.00$10,000.009 Surface and Geotechnical Survey$20,000.00 $45,000.00$65,000.0010 Management and Travel Expense$30,000.00$30,000.0011 Wind Turbine First and Second Payments$2,520,000.00$7,480,000.00$10,000,000.00$2,600,000.00 $7,735,000.00$10,335,000.00Milestone # or Task #BUDGET CATAGORIES:1234567891011TOTALSDirect Labor and Benefits$0.00Travel, Meals, or Per Diem$30,000.00$30,000.00Equipment$10,000,000.00 $10,000,000.00Supplies$0.00Contractual Services$5,000.00 $15,000.00 $45,000.00 $75,000.00 $20,000.00 $50,000.00 $20,000.00 $10,000.00 $65,000.00$305,000.00Construction Services$0.00Other Direct Costs$0.00TOTAL DIRECT CHARGES$5,000.00 $15,000.00 $45,000.00 $75,000.00 $20,000.00 $50,000.00 $20,000.00 $10,000.00 $65,000.00 $30,000.00 $10,000,000.00 $10,335,000.00Total52 Alaska Energy Authority ‐ Renewable Energy FundBUDGET INFORMATIONBUDGET SUMMARY:Phase 4 BudgetMilestone or TaskFederal FundsState Funds (AEA Grant)Local Match Funds (Cash)Local Match Funds (In‐Kind)Other FundsTOTALS1Remaining Wind Turbine Payments ¹$7,000,000.00 $17,234,820.00$24,234,820.002 Engineering$50,000.00 $140,405.00$190,405.003Construction ¹$1,940,000.00 $6,312,789.00$8,252,789.004 Allowances$0.00 $356,400.00$356,400.005 Power Factor Correction Equipment$110,000.00 $390,000.00$500,000.006 Contractor Fees$1,842,728.00$1,842,728.007 Contingency$334,270.00$334,270.008 Inflation$688,595.00$688,595.00$9,100,000.00 $27,300,007.00$36,400,007.00Milestone # or Task #BUDGET CATAGORIES:12345678TOTALSDirect Labor and Benefits$0.00Travel, Meals, or Per Diem$0.00Equipment$24,234,820.00$490,000.00$24,724,820.00Supplies$0.00Contractual Services$0.00Construction Services$190,405.00 $8,252,789.00 $356,400.00 $10,000.00 $1,842,728.00 $334,270.00 $688,595.00 $11,675,187.00Other Direct Costs$0.00TOTAL DIRECT CHARGES$24,234,820.00 $190,405.00 $8,252,789.00 $356,400.00 $500,000.00 $1,842,728.00 $334,270.00 $688,595.00 $36,400,007.00¹ Note: includes interest during constructionTotalRFA AEA09-004 Budget Form53 54 55 Appendix A: BQ Energy Resumes 56 ● BQ ENERGY, llc Our main business is to develop modern and economical wind energy and other clean energy facilities on existing industrial (“Brownfield”)sites BQ Energy is a developer of clean energy facilities facilities on existing industrial (Brownfield) sites. BQ Energy uses the advantage of recent advances in wind technology and the community goal of redeveloping brownfields and creating jobs. It particularly focuses on oil refinery, steel mills, and similar brownfield sites with heavy industry. Its yy product is to take such new clean energy facilities from the point of being “an idea” to the point where they are operating. In the wind industry, a project of this sort may take between 2 and 5 years to get from the “idea” stage to the operating stage. BQ Energy manages each project through that development period. We provide development services in almost all aspects of a project life including financial management, technology selection, communications, and environmental stewardship. Our business is to manage the development of such facilities, and to own and operate each once they begin to generate electricityelectricity. Clean energy now has the added advantages of being economic and secure. BQ Energy looks at the needs of a site and tailors a project to those needs. We develop projects whereneeds. We develop projects where the attributes of the site are important to the development of the project. Our main focus is to develop projects at existing and closed properties such as oil refineries, military bases, land fills, and steel plants. We have seen projects from the first idea through successful operation. 74 The BQ Energy Business PhilosophiesThe BQ Energy Business Philosophies •To only work on projects where all stakeholders agree that a 100% safety record is a requirement. •Develop clean energy facilities that create an enhanced environment for existing industrial facilities. •Own all or part of the projects that we develop. •Generate competitive and fair returns for all stakeholders. •Deepen a reputation for integrity from all business contacts. •Communicate to all stakeholders the level of risk associated with each venture. •Focus on commercial (not research) projects at all times.()pj •Employ “common sense” solutions to all project development challenges. •Encourage disagreement, but respect the ultimate need to make decisions, and stay on schedule. •Keep all communication simple to respect the need for clarity by stakeholders. BQ Energy was founded in 2002. Its management consists of experienced executives who have worked for over 20 years at leading industrial companies such as Texaco, Shell, Chevron GE Credit Mitsubishi Bank and others Their staff have collectively overseen theChevron, GE Credit, Mitsubishi Bank and others. Their staff have collectively overseen the development of many hundreds of megawatts of power plants and closed financing on hundreds of millions of dollars in projects. Although wind energy is a prime business sector for BQ Energy, we view the needs and long term plans for a site as the Prime business driver. Often the optimal solution involves the combination of many ideas. Our personnel look at the infrastructure and resources present at each site and tailor the project to be p pj compatible with the existing operations. BQ Energy personnel have the experience to design a site solution that combines the advantages of wind energy with other energy sources to best meet the site needs and strategies. BQ Energy llc 20 Jon Barrett Road, Suite 2 Patterson, New York 12563 USA www.bqenergy.com 75 Appendix B: Tesoro Resumes 76 Appendix C: Letter of Support From Tesoro 80 81 82 Appendix D: Potential Contractor Statement of Qualifications 83 September 12, 2008 Josh Berkow BQ Energy, LLC 20 Jon Barrett Road Patterson, NY 12563 Re: Signal Wind Energy: Statement of Qualifications Dear Josh: We are very interested in discussing ways that Signal Wind can assist you with your future Projects. Our Preconstruction Services division offers a variety of services to aid wind energy owners and developers in bringing their projects from the conceptual stage to construction. Currently, we are providing preconstruction assistance to a variety of developers and would be happy to discuss with you ways in which we can help you bring your projects to fruition. Our Projects division is currently constructing a 100MW project in Kansas for BP Alternative Energy, as well as over 200 MW in other areas of the United States for other owners, including Noble Environmental Power, an affiliate of JP Morgan. Signal Wind is one of the most experienced Balance of Plant general contractors in the United States. I am sending this letter to give you and your team more information about Signal Wind and its qualifications. Included in this letter is information about our parent company, our project history, our organizational structure, our Safety Program and our financial strength. A. Statement of Qualifications Signal Wind is a subsidiary of EMJ Corporation, one of the nation’s largest commercial general contractors. EMJ is consistently ranked as one of the nation’s top general contractors in terms of annual revenue volume (59th in 2007, Engineering News Record Magazine; 59th in 2006, Building Design and Construction Magazine;), total square footage built (4th in 2005, Retail Operations and Construction Magazine) and shopping center square footage built (3rd in shell space and 3rd in interior space for 2005, Retail Traffic Magazine). EMJ has offices in Chattanooga, Dallas, Boston and Sacramento, and is licensed in 45 states. EMJ has an unlimited bonding capacity Signal Wind brings the professionalism and expertise of EMJ to the wind industry. Signal Wind is a design/build general contractor and provides Balance of Plant (BOP) services for wind energy projects located throughout the continent. Our BOP contracts normally include basic infrastructure such as foundation design and construction for each wind turbine, access road design and construction to simplify wind turbine transport to each foundation, installation of turbines and 84 towers, an electrical collection system to bring the power to one point, design and construction of the project substation(s) and the interconnection of the wind farm to the power grid. The highly qualified project management team we have assembled has an established record of excellence within the wind energy industry, satisfying the requirements of a wide range of clients. Signal Wind utilizes experienced wind project personnel along with proven general contractor and project management systems to complete projects on schedule and within budget. As a full EPC Balance of Plant contractor, Signal Wind is experienced and fully capable in all aspects of wind farm balance of plant construction, including the following: • Design and construction of civil infrastructure, including: roads, crane pads, operations and maintenance buildings and all related structures; • Design and construction of WTG foundations; • Design and construction of electrical collection systems; • Design and construction of substations and interconnection facilities; • Design and construction of transmission lines; and • Turbine erection. Signal Wind has been an innovator in considering and implementing design alternatives that save our clients money and time with no sacrifice of quality. Our philosophy is to work with our clients to design a project that is optimized in the areas of cost, construction time, quality and safety. Below is a partial list of Signal Wind projects: Location Project Information Panhandle, TX 76 GE 1.5MW turbines—114 MW Signal Wind’s scope of work includes the design and construction of all aspects of this project, which will ultimately be a total of 240 MW. Phase I consists of two (2) 34.5kV/115kV substations, 76 WTGs, all civil infrastructure, foundations, underground collection system, turbine erection and overhead transmission to a central 115kV switchyard. Phase II will begin in early 2009 and will consist of 84 GE 1.5 MW WTGs. Medicine Lodge, KS 40 Clipper C-96 turbines – 100MW Signal Wind’s scope of work includes the design and construction of all aspects of typical BOP construction including all civil infrastructure, WTG foundations, electrical collection system, O&M Building and turbine erection. Forest Creek, TX 54 Siemens 2.3 MW turbines—124MW Signal Wind’s scope of work included the design and construction of all aspects of typical BOP construction including all civil infrastructure, WTG foundations, electrical collection system, substation (for this project as well as an adjacent 100+ MW project) and 5+ miles of 138kV transmission line. Turbine erection was performed by the manufacturer. Panhandle, TX 38 Suzlon S88 2.1 MW turbines-80MW 85 Signal Wind’s scope of work included the design and construction of all aspects of typical BOP construction, including all civil infrastructure, WTG foundations, electrical collection system, substation and turbine erection. Texhoma, TX 16 Suzlon S88 2.1 MW turbines-34MW Signal Wind’s scope of work included the design and construction of all aspects of typical BOP construction, including all civil infrastructure, WTG foundations, electrical collection system and turbine erection. Snyder, TX 21 Vestas V90 3.0 MW turbines-63MW Signal Wind’s scope of work includes the design and construction of all aspects of typical BOP construction including all civil infrastructure, WTG foundations, electrical collection system and substation Turbine erection will be performed by the manufacturer. St. Leon, MB, Canada 63 Vestas V82 1.65 MW turbines-104MW Signal’s scope of work included the managing design and construction of all aspects of typical BOP construction, including all civil infrastructure, WTG foundations, electrical collection system, substation and turbine erection as well as turbine delivery. Gruver, TX 24 Suzlon S64 1.25 MW turbines-30MW Signal Wind’s scope of work included the design and construction of all aspects of typical BOP construction, including all civil infrastructure, WTG foundations, electrical collection system and turbine erection. Panhandle, TX 40 Suzlon S64 1.25 MW turbines—50MW Signal Wind’s scope of work includes the design and construction of all aspects of typical BOP construction, including all civil infrastructure, WTG foundations, electrical collection system and turbine erection. Multiple Projects, MN & IL Suzlon S88 2.1 MW turbines Signal Wind’s scope of work includes the design and construction of all aspects of typical BOP construction, including all civil infrastructure, WTG foundations, electrical collection system and turbine erection. Signal Wind has an impressive staff of experienced wind farm professionals. Below is a list of wind farm construction projects in which Signal Wind personnel have been involved: Project Description Buffalo Mountain, TN 15 Vestas 1.8 MW turbines 2004 Hyde Cty. Wind Park, SD 27 GE 1.5 MW turbines 2003 Carroll, IA 1 Vestas V80 1.8 MW turbine 2003 Bowling Green, OH 2 Vestas V80 1.8 MW turbines 2003 Rio Vista, CA 15 Vestas V47 turbines 2003 Ft. Sumner, NM 136 GE 1.5 MW turbines 2003 Indian Mesa I, II, TX 107 GE 1.5 MW turbines 2001 Monfort, WI 20 Enron 1.5 MW turbines 2001 Lake Benton, MO 257 Zond 750 kW turbines 2000 86 Storm Lake, IA 259 Zond 750 kW turbines 1999 Evanston, WY 80 Vestas 1.8 MW turbines 2004 Fenner , NY 20 GE 1.5 MW turbines 2001 Sommerset, PA 6 GE 1.5 MW turbines 2002 Mill Run, PA 10 GE 1.5 MW turbines 2002 Mountaineer, W VA 44 NEG Micon 1.5 MW turbines 2003 Whitewater, CA 41 GE 1.5 MW turbines 2003 Sky River, CA 342 Vestas V27 turbines 2003 Oak Creek, CA 33 NEG Micon 48 turbines 1999 Delaware Mtn., TX 40 Enron 750 kW turbines 1999 Big Spring, TX 42 Vestas 660 kW turbines 2002 Sibley, IA 1 Vestas 660 kW turbine 2003 Sibley, IA 5 Gamesa 800 kW turbines 2003 Sibley, IA 10 Gamesa 950 kW turbines 2003 Kimball, NE 7 Neg Micon 1.5 MW turbines 2002 McCamey, TX 242 Vestas 670 kW turbines 2000-2006 McCamey, TX 214 1.3 MW Bonus turbines 2000-2006 Ainsworth, NE 36 NEG Micon V-82 1.65MW WTGs 2005 B. Pre-Construction Services Signal Wind emphasizes project efficiency and value engineering on all of its wind energy projects. As part of the services we offer to our clients, we can assist in the development and planning of your wind project in order to bring it to the point of constructability. Our Pre-Construction Services Department is available to help in the performance of a number of project tasks, including the following: • Assisting in the preparation of an outline project format, setting forth preliminary goals including the overall scope of work, design intent, preliminary budget, schedule, and assignment of project team responsibilities. • Preparing the preliminary master construction schedule. • Evaluating the existing site conditions and coordinating/procuring site investigations and studies. • Assisting in reviewing the requirements of governmental agencies having jurisdiction over the project, advising on the cost impact of these requirements and suggesting possible alternatives, if necessary. • Reviewing the project interconnection requirements and procuring engineering for interconnection with the utility, as well as coordinating meetings with the utility to verify design standards. • Monitoring the budget throughout the design development and working drawing preparation periods. 87 • Conducting a value engineering analysis including cost, construction feasibility, and schedule impact. Preparing cost estimates on alternate design considerations and making recommendations for a cost effective design to meet the project goals. • Conducting regular project team meetings. • Refining the project budget and schedule throughout the pre-construction phase based on preliminary findings. • Developing a procurement strategy for time critical engineering and suppliers with consideration for schedule and cost. • Reviewing plans and specifications while issuing invitations to bid. • Soliciting, receiving and analyzing engineering and supplier proposals. • Awarding engineering/supplier contracts to keep the project on schedule. • Awarding contracts for preliminary civil infrastructure design, preliminary foundation design, preliminary electrical collection system design and preliminary electrical substation design. Signal Wind is pleased to be able to offer these pre-construction services in an effort to help our clients bring their wind projects to fruition. Our intent in developing a relationship at the pre- construction phase is to be in a position to enter into a contract for the construction of the balance of plant for the wind project, assuming that we can meet the clients’ budget and scheduling requirements. C. Project Organizational Structure Signal Wind is committed to devoting to each of our projects a personnel structure that reflects our commitment to quality, safety and overall project success. Accordingly, we staff each of our wind projects with the following personnel: • Project Manager: Signal Wind Project Managers are responsible for overall project oversight. Each of our Project Managers are industry professionals, with all having extensive wind farm experience, engineering degrees and backgrounds, or both. • Site Managers: Signal Wind Site Managers are responsible for the day to day operation of the project. They are accountable to the Project Manager and are the primary contact for all subcontractors working on site. Our Site Managers have extensive experience in all aspects of wind farm construction. • Superintendents: Each Signal Wind project has a site Superintendent assigned to oversee the construction of specific areas of the wind farm construction: Mechanical, Electrical, and Civil. The Superintendents each have specific knowledge in their area of expertise and oversee this work to insure overall project success. 88 • Third Party Oversight: Signal Wind also employs third-party consultants to assist in the oversight of critical project construction items. On many projects, Signal Wind employs third party engineers to review the wind turbine foundation design engineering, typically in cases where the foundation design is unique or must withstand unusually challenging site conditions or loads. Signal Wind requires that the foundation design engineer observe the foundation installation to make sure that the construction is executed as designed. In addition, Signal Wind requires that the geotechnical engineer responsible for the geotechnical report for the project be present for the excavation to confirm that the soil conditions are the same as those contained in the geotechnical report. • Safety Manager: As explained more fully below, all Signal Wind projects have a Site Safety Manager that is in charge of implementing and enforcing our Safety Program. • Quality Manager: Each site has a Quality Manager that has the primary responsibility of overseeing the implementation of our site specific Quality Plan for the project. D. Safety Program and Record Signal Wind is committed to making safety an integral part of the wind farm construction process. Safety is our primary concern on each project. Our Safety Department, consisting of credentialed professionals, is intimately involved in the planning and execution of each project. They interface with clients and subcontractors to ensure a safe and productive work site. Staff Our Safety Department staff consists of a Corporate Safety Director, a Company Safety Director and Site Safety Managers. Each project is assigned an on-site Site Safety Manager. Project Safety Management 1. Safety Evaluation – Each bid proposal is evaluated by the Company Safety Director to determine specific project needs as well as client requirements. This process is intended to ensure adequate resources for the site management team. 2. Site Specific Safety Plan – The Company Safety Director, in conjunction with the Site Safety Manager, will prepare an initial site safety plan for each project. The plan will include, at a minimum, individual project safety responsibilities, site safety rules, job hazard assessments, special hazard considerations, emergency action plan, and any other items dictated by site conditions or client requirements. 3. Subcontractor Selection – Signal Wind selects qualified subcontractors to meet the specific needs of each project. In order to qualify, subcontractors are required to submit detailed safety documentation. Some of the Signal Wind subcontractor safety targets include: • EMR Rating Less than or equal to 1 • Recordable incidence rates at or below industry standards • Acceptable safety/environmental programs policies and procedures pertinent to their contracted scope of work 89 • In the event a subcontractor does not meet a specific requirement, Signal Wind will require a detailed explanation from the subcontractor and will make a hiring determination based on the information provided. If an exception is made, it is on a probationary basis and the subcontractor is scrutinized closely for safety performance. 4. Project Safety Administration – Each project is assigned a Site Safety Manager. This individual reports directly to the Company Safety Director and is responsible for the administration and enforcement of all safety programs, policies, and procedures pertaining to the project. He/she works closely with clients, subcontractors, and Signal Wind site personnel to ensure that safety is not compromised on any aspect of the project. 5. Safety Inspections/Audits – The identification and abatement of existing and predictable hazards in the workplace is paramount to injury prevention. Accordingly, Signal Wind imposes 5 levels of safety inspections/audits on each project. • Daily Inspections – The Site Safety Manager is required to perform daily visual inspections of all active construction areas. In addition to the Site Safety Manager, the Site Manager and Superintendents are also required to conduct these daily visual inspections in their respective areas of responsibility. Any deficiencies noted in these inspections, as well as assigned responsibilities and corrective actions, are logged and tracked on the Safety Audit Action Item Log. • Monthly Inspections – The Site Safety Manager is required to perform one documented Site Safety Audit each month. This audit includes a visual inspection for physical hazards, as well as a review of Signal Wind and subcontractor program documentation. Once complete, the audit is reviewed by the Site Manager, as well as the Project Manager, for any action required on their part. It is then submitted to the Company Safety Director for review and approval. • Quarterly Safety Inspections – The Company Safety Director will conduct a minimum of one safety inspection/audit per quarter for each Signal Wind project. This inspection is similar to the monthly inspection in that it includes both physical program inspections. The results of this audit are forwarded to the Vice President of Projects and the Corporate Safety Director for review. These audits are also tied to the Safety Bonus Program. • Corporate Safety Inspections – The Corporate Safety Director will conduct at least one safety inspection/audit per project. The basis of the inspection is similar to the quarterly inspection. The results of this audit are also sent to EMJ executive staff for review. This inspection is also tied to the Safety Bonus Program. • Third Party Inspections – Each Signal Wind project requires one safety inspection to be conducted by our current insurance carrier and one inspection through the OSHA Consultation Services. Both of these inspections are tied to the Safety Bonus Program 6. Subcontractor Safety Performance – In addition to following their own safety policies and procedures, subcontractors are required contractually to adhere to all Signal Wind and client safety policies, procedures, and processes. Compliance is monitored and enforced daily by our site management staff. In addition to compliance, subcontractors are also required to conduct daily safety meetings with their respective crews and attend at least one safety meeting per week, conducted by the Site Safety Manager. This meeting will consist of a weekly training topic, as well as discussion and resolution of any project open safety issues. All subcontractor personnel are 90 required to attend an initial site safety orientation, advising them of the programs, policies, and procedures associated with the project, as well as any special hazards. 7. Landowner Safety – It is understood that landowners may require access to the site. However, they will be informed of and held to the same safety standards as any other visitor. 8. Visitor Safety – Each visitor to the site will be required to attend a visitor’s safety orientation. This orientation will be conducted by the Site Safety Manager and will be appropriate to the scope of their visit. 9. Accident Investigation – Signal Wind believes firmly that all occupational injuries and illnesses are preventable. However, when they do occur, we are left only with the opportunity to learn from circumstances surrounding the event in order to prevent a re-occurrence. For this reason, each injury incident, property damage incident, environmental incident, and near miss is investigated by both Signal Wind and the employer involved in the incident. The impetus of this investigation is always to determine causal relationships and implement corrective actions. 10. Safety Statistics- As a subsidiary of EMJ, Signal Wind’s safety record is combined with that of EMJ for purposes of establishing a Workers Compensation Experience Modification Rating (EMR). The current combined Signal Wind/EMJ EMR is 0.62. Signal Wind’s consistent emphasis on safety is exemplified by this low rating, reserved only for the safest construction companies. E. Statement of Financial Strength In addition to being a leader in general contracting, EMJ Corporation has strong financial backing as evidenced in its unlimited bonding capacity. This gives Signal Wind the ability to bond any wind project. Signal Wind is capable of obtaining a performance and payment bond on any project of up to $100 million. If necessary, this amount can be increased for specific projects. We hope that this information will be helpful to you in assessing Signal Wind’s suitability for any projects you are considering. Please do not hesitate to contact us at any time if you would like to discuss Signal Wind, our availability to work on a project, or any other matter. We look forward to working with you. Sincerely, Jeffrey J. Krysiak Pre-Construction Manager cc: Julian Bell, Director of Pre-Construction Services 91 STATEMENT OF QUALIFICATIONS 11820 S. Gambell Street • Anchorage, Alaska 99515 • Phone: (907) 644‐4664 • Fax: (907) 644‐4666 info.stginc@gci.net • www.stginc.cc 92 Over the past fifteen years, STG, In remier construction services and management company. Dealing mainly in rural Alaska, the company has played a major role in high profile projects such as wind energy installations, communication tower installations, and community bulk fuel and diesel generation upgrades, to name a few. STG specializes in remote project logistics, pile foundation installations, tower erections, and construction management. STG takes pride in its wealth of experience, gained from years of work throughout “bush” Alaska, and through its ability to deal with the diverse and challenging logistics and conditions which it encounters on nearly every project it undertakes in remote locations. Company Overview In 1996, St. George Construction was incorporated as STG, Inc. Since incorporation, STG has become the preferred construction management company for both the Alaska Energy Authority (AEA) and the Alaska Village Electric Cooperative (AVEC). Many of the projects executed by these two entities are managed and constructed by STG. STG’s core competencies include bulk fuel systems, power plant construction (both modular and steel-framed), wind farms, and pile foundations (driven piles, post tension rock anchors, helical anchor systems, freeze back, and active refrigerated piles). STG is the prevalent pile foundation contractor for Interior and Western Alaska. Additionally, STG has expanded to become United Utilities’ preferred contractor for its “Delta Net Project”, which involves the installation of communication towers and related equipment throughout the Yukon Kuskokwim Delta. STG has achieved this preferred status by demonstrating competitive rates and the ability to perform in remote locations with extreme logistical challenges. Qualifications The STG team has developed and maintained the capacity to manage projects through a set of key deliverables to ensure appropriate management of jobs across the complete project cycle including: • Provision of a quality project at a fair and reasonable price • Timely delivery within budget • Safe and professional performance on all work • Positive relationships with clients to ensure that project deliverables are met • New modern equipment that results in high productivity • State of Alaska Professional Land Surveyor (Reg. 10192) on staff with modern Topcon GPS Control through Detailed Project Planning STG focuses pre-construction efforts on planning and preparation. A project team is identified which includes management, administrative, and field supervision personnel. The team establishes budgets, c. has grown and developed into a p 93 production targets, a master construction schedule, and detailed work plan for each project. The planning process involves key supervisory personnel as all aspects of the project are analyzed with particular attention to logistics, labor and equipment resource needs, along with specific material requirements. This results in a clear understanding of the goals of the client, the ontractual requirements, scope of work, and entification of potential obstacles that may impact ion of the job. ough to the administrative level , accurate documentation and reporting, and on to the field level where clear goals of roduction and quality are reinforced through the superintendent’s and foremen’s daily huddles and ost Containment anagement decisions. The project manager and field ork together through this reporting y potential problems and direct resources rform “crisis management” while providing clients with TG employees ’s civic responsibility to local c id the successful complet The project-planning phase also establishes key systems which help assure quality throughout the project. This begins at the management level with a commitment to providing a quality project to the client and carries thr with timely p schedule reviews. C STG maintains budgets for all labor, material, and equipment for each project allowing managers to effectively manage project costs. Expense categories are tracked and updated weekly by the project managers and this information is then communicated to the field pervision level for use in making timely, proactive su m superintendent w system to identif as required to address issues before they impact the work. This proactive approach prevents STG from having to pe on-budget, on-time, turnkey deliveries of completed projects built to engineered specifications. STG maintains a philosophy to deliver the highest level of quality within the industry. S also realize the company’s commitment to its clients along with STG communities. The work that STG performs is a reflection of this commitment. 94 Construction Management and Project Supervision Experience STG has built a reputation of professionalism an products within a set schedule and defined budget. construction services and management contracts wit • Alaska Village Electric Cooperative (A • Alaska Energy Authority (AEA) • United Utilities Inc. (Recently acquire STG has built a wealth of knowledge d thoroughness by delivering the highest quality As a result, STG has been awarded and maintains h the following clients: VEC) d by GCI, Inc.) and experience for lanning, execution, and completion of projects across ral Alaska. Over the years, STG has also enjoyed the ay of he company prides itself in its ability to professionally eal with all the different entities that are related to a roject. In this regard, STG maintains a close working relationship with AVEC’s engineering presentatives, a so id relationship with the AVEC management staff, along with strong connections to rs and vendors across the state of Alaska. e-of-the-art dump trucks, loaders, excavators, pile ural construction projects. During the efficiently supported logistically from two cation shop located in Anchorage, AK and its ons, company construction crews are fully needs that may arise during the course of the p ru opportunity to successfully implement a large arr projects specifically for AVEC including bulk fuel upgrades, diesel power, wind generation, and energy distribution systems. STG can also coordinate all project logistics from procurement, to transportation, to the final project demobilization. T d p re l various sub-contracto STG operates a modern fleet of fourteen cranes, stat drivers, and other equipment needed to support full scale r construction phase of STG projects, remote field crews are STG offices: the company’s headquarters and fabri staging yard located in Bethel, AK. From these locati supported in the field for parts, groceries, and any other project. 95 STG Projects Selawik Power Plant, Tank Farm, and Wind Turbine Installation Client: AVEC Year Completed: 2004 The Selawik Bulk Fuel Upgrade Project exemplifies STG’s diverse capabilities. STG was highly he tank farm and power plant. The company executed the pile site, erected four 65kW wind turbines, of pipelines. n Kasigluk, STG once again demonstrated its abilities to execute omplex, multi-faceted projects. This project entailed transferring primary power generation from Nunapitchuk to Akula Heights while maintaining power generation to these two villages and also m intaining power to Old Kasigluk. As part of this project, STG constructed a new bulk fuel retail facility for the communities of Akula Heights and Old Kasigluk along with a new bulk fuel storage facility, totaling over 600,000 gallons of storage capacity in all. This project also included the construction of a power distribution system to the three aforem villages, the installation of a new diesel generation plant, the erection of three 100 kW wind turbines, the installation of a heat recovery system, upgrades to the school districts bulk fuel facilities, and the installation of a standby generator in Nunapitchuk. involved with the planning and design of t foundation work, fabricated ten 50,000 gallon storage tanks on- and tied the completed system together with a complex network Nunapitchuk-Kasigluk Bulk Fuel Upgrade, Power Plant, and Wind Turbine Installation Client: AVEC Year Completed: 2006 I c a entioned 96 Toksook Bay Power Plant, Wind Generation, and Interties and Nightmute are located in Western Alaska on Nelson Island, an ideal installation of 23 miles of ower lines. STG orchestrated schedules, equipment, materials, field work and logistics to successfully bring this project to completion. Due to the impassible summer tundra conditions, all the intertie work took place in the winter season during sub-zero temperatures. many different levels of scope. iversity in rural construction and e Alaska Energy Authority the set-up, installation, and ties along the middle g the winter Client: AVEC d: 2008 Year Complete oksook Bay, Tununak,T location for wind generation. STG helped deliver a wind/diesel integrated power project for these communities. With three Northwind 100kW wind turbines and a new power plant complete with switch gear and heat recovery module in Toksook Bay, power can now be produced from either diesel fuel, or the natural powers of the wind. In order to capture the greatest value for all island residents, an intertie etwork was established, which connected the three communities through the n p Additional STG Projects STG has completed numerous projects for AVEC throughout the state on The company would also like to highlight a few other examples of its d management for other clients. STG has managed and constructed over a dozen bulk fuel upgrades for th across the western half of Alaska. The most notable of these projects was commissioning of eight modular power plants in eight unique communi Kuskokwim River. The units were built and prepared in STG’s Anchorage yard durin months, then delivered and installed on each site during the short summer season. 97 The company has also gained valuable experience dealing with tower erection and foundation design. ontract with UUI, STG has built foundations for, and has erected, over thirty hroughout western Alaska. This project, known as the Delta-Net Project, has nked dozens of communities for tele-medicine and broadband communication. Two of the most hich unity of St. Paul. Under its term c communication towers t li notable towers are the 305-foot tower in Eek, and the 60-foot tower on top of Marshall Mountain w also required construction of a five-mile access road from the village of Marshall. STG has grown into one of the most experienced integrators of alternative energy systems within the state of Alaska. In addition to the previously referenced projects, this experience is documented through STG’s work to erect and install two Vestas 225 kW wind turbines for TDX Power on the remote Bering Sea island comm 98 Key STG Personnel STG’s organization consists of approximately 25 full-time employees with many more returning seasonal workers. STG’s staff consists of experienced and professional project managers, a registered land surveyor, a full-time expediting crew, accounting and administrative personnel, welders, carpenters, crane and heavy equipment operators, pipe fitters, plumbers, and electricians. STG personnel have the nowledge and skills necessary to provide construction management services and su ccessfully complete ns STG, Inc. while overseeing the performance of projects roughout the state of Alaska. With over 30 years of varied construction experience, he specializes in nt and his expertise ranges from phases of work, including planni ary Matthews – Project Manager r. Matthews has over 30 years of construction experience. His experience includes the total oordination of projects starting with bidding/estimating; negotiating; scheduling manpower, equipment nd materials in extremely remote locations; communication tower erection; and government ontracting. For the last year Mr. Matthews has successfully managed the construction of the UUI elta-Net tele-medicine and broadband communication towers throughout Western Alaska for STG. se visit our website at www.stginc.cc or contact us at the information below. k projects anywhere inside of the state of Alaska. James St. George - President Mr. St. George operates and co-ow th rural construction manageme rm construction and upgrades as well as renewa xperience in the field involves all echanical, electrical, piling installation, and tank c ew and more efficient means for accom be a great asset in the company’s co avid E. Myers – Project Manager r. Myers has over 15 years of comp emediation. His responsibilities hav pliance, logistics, cost estima nergy upgrades, civil and vertical batement, demolition, drum remova reas of expertise include: remo overnment contracting. For the la elivery of multiple energy upgr communication tower construction, to tank ble energy projects. Mr. St. George’s extensive ng, logistics, budgeting, dirt work, onstruction. He has been progressive in introducing t goals. Mr. St. George’s versatility has proven letion of projects across rural Alaska. tion and environmental nagement, quality control, safety, porting and client relations in the areas of rural aterials, confined space entry, asbestos inated water treatment and soil remediation. civil construction, environmental remediation, responsible for the successful fa e m n to plishing projec mp rehensive experience in construc e included project ma ting, fieldwork, re construction, hazardous m l, mining, contam te construction, heavy st four years Mr. Myers has been ade projects for STG. D M r com e a A g d G M c a c D For further inquiries, plea 99 STG, Inc. • 11820 S. Gambell Street • Anchorage, Alaska 99515 • Phone: (907) 644-4664 • Fax: (907) 644-4666 info.stginc@gci.net • www.stginc.cc 100 Appendix E: Letter of Support From Kenai Peninsula Borough 101 JOHN J. WILLIAMS BOROUGH MAYOR KENAI PENINSULA BOROUGH Office of the Borough Mayor 144 North Binkley Street ● Soldotna, Alaska 99669-7599 Toll-free within the Borough: 1-800-478-4441, Ext. 2150 PHONE: (907) 714-2150 ● FAX: (907) 714-2377 www.borough.kenai.ak.us October 1, 2008 Butch White Manager Renewable Energy Fund Alaska Energy Authority 813 W Northern Lights Blvd Anchorage, AK 99503-2495 Dear Mr. White: Last year I met with a team from BQ Energy to talk about wind generation. They were here on behalf of Tesoro to look at the possibility of constructing a clean energy wind farm on the property surrounding the refinery. At that time, BQ Energy was erecting monitoring towers to begin the process of data collection. It was a detailed presentation. I was told because of years of wind data that Tesoro had already collected that it appeared to be a good location for wind energy technology. Tesoro and BQ Energy have kept me up to date on their year-long process to bring wind turbines to the Kenai Peninsula Borough. I heartily support BQ Energy/Kenai Winds LLC grant application. Energy for our Borough’s economy and citizens is a major priority of my administration. The Kenai Winds project would be a significant step towards meeting that priority. Your grant monies would essentially jump-start a wind-energy industry in the Borough, and in Alaska. As you know, our local utility has examined several areas that are conducive to wind energy, and I view the Kenai Winds project as facilitating the development of these other opportunities. Additionally, our industrial base in Nikiski has suffered several setbacks in recent years, and this grant’s ability to help one of our remaining refineries stabilize energy costs will be welcome benefit while helping to redevelop a brownfield site. If I can be of any assistance in your deliberations, please contact me. Sincerely, John Williams Mayor 102 Appendix F: Project Schedule 103 IDTask NameDurationStartFinishPredecessors1Preliminary Feasibility Study97 daysThu 3/1/07Fri 7/13/072Preliminary Economic Model67 daysThu 4/12/07Fri 7/13/071FF3Preliminary Stakeholder Meetings80 daysSat 7/14/07Thu 11/1/0714Meteorological Study292 daysFri 11/2/07Mon 12/15/08356 Month Meteorological Assessment30 daysWed 4/2/08Tue 5/13/084SS+108 days6Update Economic Model5 daysWed 5/14/08Tue 5/20/0857Infrastructure Review4 daysWed 5/14/08Mon 5/19/086SS8Preliminary Environmental Review30 daysWed 5/14/08Tue 6/24/087SS9Preliminary Plant Layout30 daysWed 6/25/08Tue 8/5/08810Turbine Commitment622 daysWed 8/6/08Thu 12/23/1026Electrical Interconnection Study Process230 daysWed 8/6/08Tue 6/23/0937Site Development Plan5 daysWed 8/6/08Tue 8/12/08938Media/Community Relations Plan5 daysWed 8/13/08Tue 8/19/083739Coastal Zone Management Review60 daysWed 8/13/08Tue 11/4/088,3740NEXRAD Avian Migration Study60 daysWed 11/5/08Tue 1/27/093941Community Stakeholders Meetings90 daysWed 11/5/08Tue 3/10/093942Negotiate Taxing Agreement90 daysWed 11/5/08Tue 3/10/0941SS43Preliminary Engineering90 daysWed 12/24/08Tue 4/28/0944BOP Estimate45 daysWed 12/24/08Tue 2/24/0929SS+40 days45Identify Long Lead Items 10 daysWed 12/24/08Tue 1/6/0944SS46Surface and Geotechnical Survey30 daysWed 2/25/09Tue 4/7/094447Finalize Layout15 daysWed 4/8/09Tue 4/28/094648Tesoro and HEA Offtake Agreements245 daysWed 5/14/08Tue 4/21/09549Site Lease30 daysWed 4/29/09Tue 6/9/0930SS,37,47,48,4050Financing421.5 days?Wed 3/18/09Thu 10/28/1051Financing Plan For Turbine Downpayments25 daysWed 3/18/09Tue 4/21/0939,42,4,13,34,4452Financing Plan for Development Work25 daysWed 3/18/09Tue 4/21/0951SS53Construction Financing128 daysWed 4/22/09Fri 10/16/0952,4854Tax Equity1 day?Wed 10/27/10Thu 10/28/1010855Long Term Debt1 day?Wed 10/27/10Thu 10/28/1010856Construction267.5 daysMon 10/19/09Wed 10/27/1057Order Long Lead Items10 daysMon 10/19/09Fri 10/30/0945,5358Finalize Project Scope and EPC Bid Docs1 dayMon 10/19/09Mon 10/19/095359Bid EPC20 daysTue 10/20/09Mon 11/16/095860Select Firm10 daysTue 11/17/09Mon 11/30/095961Negotiate Contract10 daysTue 12/1/09Mon 12/14/096062Full Notice to Proceed0 daysMon 12/14/09Mon 12/14/096163Engineering60 daysTue 12/15/09Mon 3/8/1064Electrical7 wksTue 12/15/09Mon 2/1/106265Foundation - Design3 wksTue 12/15/09Mon 1/4/106266Site Plan and Detail Drawings5 wksTue 1/5/10Mon 2/8/106567Construction Plan10 daysTue 2/9/10Mon 2/22/106668O&M Plan10 daysTue 2/23/10Mon 3/8/106769Owner Approval3 wksTue 2/2/10Mon 2/22/1064,6570Material & Equipment Procurement109 daysTue 12/29/09Fri 5/28/1071PMTs and Conductor19.5 wksTue 12/29/09Thu 5/13/1064SS+10 days,5772UG Material4 wksMon 5/3/10Fri 5/28/106912/143/04/05/06/07/08/09/010/11/12/1/02/03/04/05/06/07/08/09/010/11/12/1/02/03/04/05/06/07/08/09/010/11/12/1/12/13/14/15/16/17/18/19/110/11/12/1/1TaskPhase 3 TaskPhase 4 TaskSplitProgressMilestoneSummaryProject SummaryExternal TasksExternal MilestoneDeadlinePage 1Project: Kenai WindsDate: Fri 9/26/08104 IDTask NameDurationStartFinishPredecessors73OH Material4 wksMon 5/3/10Fri 5/28/106974Metering & Relays2 wksMon 5/3/10Fri 5/14/106975Embeds & Bolts2 wksMon 5/3/10Fri 5/14/106976Start of Construction0 daysMon 5/3/10Mon 5/3/106977Site Grading & Roads1.5 wksMon 5/3/10Wed 5/12/107678WTG Foundations45 daysWed 5/12/10Wed 7/14/1079Excavation10 daysWed 5/12/10Wed 5/26/107780Additoinal Sub-Grad Prep & Mud Mats9 daysWed 5/26/10Tue 6/8/1079SS+10 days81Install Steel, Bolt Cage, & Conduits10 daysWed 6/2/10Wed 6/16/1080SS+5 days,7582Pour6 daysWed 6/16/10Thu 6/24/1081SS+10 days,7283Install Grounding5 daysThu 6/24/10Thu 7/1/1082SS+6 days84Backfill5 daysThu 7/1/10Thu 7/8/1083SS+5 days85PMT Pads & Conduit4 daysThu 7/8/10Wed 7/14/1084SS+5 days86Collection System53 daysWed 5/12/10Mon 7/26/1087Trench, Cable, & Backfill1.5 wksWed 5/12/10Fri 5/21/107788Overhead1.5 wksWed 5/12/10Fri 5/21/107789Set PMT's & Terminate MV6 daysWed 7/14/10Thu 7/22/108590Test2 daysThu 7/22/10Mon 7/26/1087,88,8991Substation55 daysWed 5/12/10Wed 7/28/1092Test Existing Equipment1.5 wksWed 5/12/10Fri 5/21/107793Install New Metering4 daysMon 5/24/10Thu 5/27/1074,9294Install New Relays1 wkMon 5/24/10Fri 5/28/1074,9295Connect to Collection System1 dayMon 7/26/10Tue 7/27/1090,9496Collection System Backfeed1 dayTue 7/27/10Wed 7/28/109597WTG Installation26 daysThu 7/22/10Fri 8/27/1098Set Converters, Bases, Lower Mids, & Grou4 daysThu 7/22/10Wed 7/28/1077,8999Set Upper Mids, Tops, & Nacelles4 daysWed 7/28/10Tue 8/3/1098100Set Gearbox Assemblies4 daysTue 8/3/10Mon 8/9/1099101Install Rotors4 daysMon 8/9/10Fri 8/13/10100102Install Wiring & Elevators8 daysFri 8/13/10Wed 8/25/10101103Final Walkdowns and Punchlists1 dayWed 8/25/10Thu 8/26/10102104Backfeed and Turnover to Commission1 dayThu 8/26/10Fri 8/27/10103,96105Guaranteed Infrastructure Completion0 daysFri 8/27/10Fri 8/27/10104106Commissioning43 daysFri 8/27/10Wed 10/27/10104107Roads Reshaped & Reclaimed1 wkFri 8/27/10Fri 9/3/10104108Commerical Operations0 daysWed 10/27/10Wed 10/27/101065/38/2710/273/04/05/06/07/08/09/010/11/12/1/02/03/04/05/06/07/08/09/010/11/12/1/02/03/04/05/06/07/08/09/010/11/12/1/12/13/14/15/16/17/18/19/110/11/12/1/1TaskPhase 3 TaskPhase 4 TaskSplitProgressMilestoneSummaryProject SummaryExternal TasksExternal MilestoneDeadlinePage 2Project: Kenai WindsDate: Fri 9/26/08105 Appendix G: Homer Electric Transmission System 106 107 Appendix H: Refinery One-Line Diagram 108 109 Appendix I: Project Layout 110 111 Appendix J: Coastal Zone Questionnaire 112 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 1 of 18 Coastal Project Questionnaire and Certification Statement The Coastal Project Questionnaire (CPQ) is a diagnostic tool that will identify the state and federal permit requirements for your project that are subject to a consistency review. You must answer all questions. If you answer “Yes” to any of the questions, please call that specific department for further instructions to avoid delay in processing your application. You can find an agency contact list online at http://alaskacoast.state.ak.us/Contacts/PRCregcont.html. A complete project packet includes accurate maps and plan drawings at scales large enough to show details, copies of your state and federal permit applications, your answers to this questionnaire, and a complete consistency evaluation. DCOM will notify you within 21 days of receipt if the packet is incomplete and what information is still required. For additional information or assistance, you may call or email the Juneau Project Review at (907) 465-2142, or the Anchorage Project Review at (907) 269-7478.This CPQ document contains numerous hyperlinks (underlined text that has a connection to an internet web page) and is best viewed on-line. Additional instructions are available at http://www.alaskacoast.state.ak.us/Projects/pcpq.html APPLICANT INFORMATION 1. Name of Applicant Address City/State/Zip Daytime Phone Fax Number E-mail Address 2. Agent (or responsible party if other than applicant) Address City/State/Zip Daytime Phone Fax Number E-mail Address PROJECT INFORMATION Yes No 1. This activity is a: new project modification or addition to an existing project 2. If this is a modification or an addition, do you currently have any State, federal or local approvals for this activity? NOTE: Approval means any form of authorization. If "yes," please list below: Approval Type Approval # Issuance Date Expiration Date 3. If this is a modification, was this original project reviewed for consistency with the Alaska Coastal Management Program? ............................................................................................................................................................................. Previous ACMP I.D. Number: (example: AK 0706-05AA or ID2004-0505JJ) Previous Project Name: Previous Project Applicant: PROJECT DESCRIPTION Attach a complete and detailed narrative description of your new project or of your modification/addition including ALL associated facilities and changes to the current land or water use (if not already attached as part of an agency application). Clearly delineate the project boundaries and all property owners, including owners of adjacent land, on the site plan. The scale of the maps and plan drawings must be large enough to show pertinent details. Identify your proposed footprint or Josh Berkow - BQ Energy 20 Jon Barrett Rd. Suite 2 Patterson, NY 12563 845-228-3485 845-878-2139 josh.berkow@bqenergy.com 113 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 2 of 18 disturbed area. If this project is a modification to an approved project, identify existing facilities and proposed changes on the site plan. Proposed starting date for project: Proposed ending date for project: PROJECT LOCATION and LAND OWNERSHIP Yes No 4.Describe/identify the project location on a map (Including nearest community, the name of the nearest land feature or body of water, and other legal description such as a survey or lot number.). Township Range Section Meridian Latitude/Longitude / (specify Decimal Degrees or Degrees, Minutes, Seconds) USGS Quad Map 5.The project is located on: State land or water* Federal land Private land Municipal land (Check all that apply) Mental Health Trust land University of Alaska land Contact the applicable landowner(s) to obtain necessary authorization. State land ownership can be verified using Alaska Mapper.*State land can be uplands, tidelands or submerged lands to 3 miles offshore. 6.Is the project within or associated with the Trans Alaska Pipeline corridor? ...................................................................... COASTAL DISTRICT Yes No 7.Is the project located in a coastal district? .......................................................................................................................... If yes, identify the applicable coastal district(s) and contact them to ensure your project conforms with district policies and zoning requirements. Coastal districts are a municipality or borough, home rule or first class city, second class municipality with planning powers, or coastal resource service area. A coastal district is a participant in the State's consistency review process. Early interaction with the district can benefit you significantly; please contact the district representative listed on the contact list at http://www.alaskacoast.state.ak.us/Contacts/PRCregcont.html DEPARTMENT OF NATURAL RESOURCES (DNR) APPROVALS DNR DIVISION OF MINING, LAND & WATER- LAND SECTION Yes No 1. Is the proposed project on State-owned land or water or will you need to cross State-owned land for access? (NOTE: State land includes the land below the ordinary high water line of navigable streams, rivers and lakes, and in marine waters, below the mean high tide line seaward for three miles. State land does not include Alaska Mental Health Trust Land or University of Alaska Land.) ……………………………………………………………..……………………….. 2. If you answered yes to the question above, indicate the person you contacted at the appropriate Division of Mining, Land and Water regional office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? ..................................................................................................... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: DNR DIVISION OF MINING, LAND & WATER- MATERIALS SECTION Yes No 3. Do you plan to dredge or otherwise excavate or remove materials such as rock, sand, gravel, peat, or overburden from any land regardless of ownership? ...................................................................................................................................... a) Location of excavation site if different than the project site: Township Range Section Meridian 4. At any one site (regardless of land ownership), do you plan any of the following? ............................................................ Excavate five or more acres over a year’s time Excavate 50,000 cubic yards or more of materials (rock, sand, gravel, soil, peat, overburden, etc.) over a year’s time Have a cumulative, un-reclaimed, excavated area of five or more acres 5. Do you plan to place fill or excavated material on State-owned land?............................................................................... a) Location of fill or material disposal site if different than the project site: Township Range Section Meridian 6. If you answered yes to any question above, indicate the person you contacted at the appropriate Division of Mining, 5/30/2010 construction complete 1/1/2011 60°41'40.59" 151°23'59.00" ✔ Kenai Peninsula Borough ✔ ✔ ✔ ✔ 114 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 3 of 18 Land and Water regional office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? ...................................................................................................... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: DNR DIVISION OF MINING, LAND & WATER- MINING SECTION Yes No 7. Do you plan to mine for locatable minerals such as silver, gold, or copper? ..................................................................... 8. Do you plan to explore for or extract coal? ........................................................................................................................ 9. If you answered yes to any question above, indicate the person you contacted at the appropriate Division of Mining, Land and Water regional office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? ...................................................................................................... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: DNR DIVISION OF MINING, LAND & WATER- WATER SECTION Yes No 10. Will this project or development divert, impound, withdraw, or use any fresh water (regardless of land ownership)? (NOTE: If you know of other water users who withdraw from the same source or any potential conflicts affecting this use of water, contact the Water Section. If you are obtaining water exclusively from either an existing Public Water Supply or from a rainwater catchment system, you are not required to contact the DNR Water Section regional office.) ...................... a) Check all points-of-withdrawal or water sources that apply: Public Water system (name): Stream or Lake (name): Well Rain catchment system Other: b) Intended use(s) of water: c) Amount (maximum daily, not average, in gallons per day): d) Is the point of water withdrawal on property you own? …………………………………………………………........... 11. Do you plan to build or alter a dam (regardless of land ownership)? .................................................................................. 12. If you answered yes to any question above, indicate the person you contacted at the appropriate Division of Mining, Land and Water regional office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? ....................................................................................................... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: DNR DIVISION OF FORESTRY Yes No 13. Does your operation meet both of the following criteria on any land, regardless of ownership? a) The project will commercially harvest timber on 10 or more acres, or commercially harvest timber that intersects, encompasses, or borders on surface waters, and b) The project involves one or more of the following: site preparation, thinning, slash treatment, construction and maintenance of roads associated with a commercial timber harvest, or any other activity leading to or connected to a commercial timber harvest operation…………………………........................................................................................ 14. If you answered yes to any question above, indicate the person you contacted at the appropriate Division of Forestry regional office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? ...................................................................................................... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: ✔ ✔ ✔ ✔ ✔ 115 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 4 of 18 DNR DIVISION OF OIL & GAS Yes No 15. a) Will you be exploring for or producing oil and/or gas? ………………………………………………………………... b) Will you conduct surface use activities on/within an oil and gas lease or unit? ………………………………………. If yes, please specify: 16. Do you plan to drill a geothermal well (regardless of land ownership)? …………………………………………………. 17. If you answered yes to any question above, indicate the person you contacted at the appropriate Division of Oil & Gas office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: Visit the Division of Oil & Gas website for application forms and additional information. DNR OFFICE OF HISTORY & ARCHAEOLOGY Yes No 18. Will you investigate, remove, or impact historical, archaeological or paleontological resources (anything over 50 years old) on State-owned land?………………………………………………………………………………………………… 19. If you answered yes to the question above, indicate the person you contacted at the State Historic Preservation Office for information. a) Name/date of Contact: DNR DIVISION OF GEOLOGICAL & GEOPHYSICAL SURVEYS Yes No 20. Is the proposed project located within a natural hazard area designated by a coastal district in the approved district plan? (Refer to the district plan or contact the coastal district office.) ……………………………………………………. a) If “yes”, describe the measures you will take in the siting, design, construction, and operation of the proposed activity to protect public safety, services, and the environment from potential damage caused by the designated natural hazard(s) in the Natural Hazards portion of the attached Coastal Consistency Evaluation (11 AAC 112.210). 21. If you have contacted someone, please indicate the person you contacted at the Coastal District or the State for information. The Division of Geological & Geophysical Survey may have additional information on hazards for the area. a) Name/date of Contact: DNR DIVISION OF PARKS & OUTDOOR RECREATION Yes No 22. Is the proposed project located in a unit of the Alaska State Park System including navigable waters, tidelands or submerged lands to three miles offshore? …………………………………………………………………………………. 23. If you answered yes to any question above, indicate the person you contacted at the appropriate DNR Division of Parks & Recreation office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: DNR APPROVALS List the Department of Natural Resources permits or authorizations required for your project below: Types of project approvals or permits needed. Date application submitted DEPARTMENT OF FISH AND GAME (DFG) APPROVALS Yes No 1. Is your project located in a designated State Game Refuge, Critical Habitat Area or State Game Sanctuary? …………... 2. Does your project include construction/operation of a salmon hatchery? ………………………………………………… ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 116 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 5 of 18 3. Does your project affect, or is it related to, a previously permitted salmon hatchery? …………………………………… 4. Does your project include construction of an aquatic farm? ……………………………………………………………… 5. Will you work in, remove water or material from, or place anything in, a stream, river or lake? (NOTE: This includes work or activities below the ordinary high water mark or on ice, in the active flood plain, on islands, in or on the face of the banks, or, for streams entering or flowing through tidelands, above the level of mean lower low tide. If the proposed project is located within a special flood hazard area, a municipal floodplain development permit may be required. Contact the affected city or borough planning department for additional information and a floodplain determination.) …………………………………………………………………………………………………………….. a) If yes, name of waterbody: 6. If you answered yes to any questions above, indicate the person you contacted at the appropriate Department of Fish and Game office for information. (For projects involving Hatcheries or Aquatic Farms, please contact the Division of Commercial Fisheries. Other projects should contact the Division of Habitat.) a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………. c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: DFG APPROVALS List the Department of Fish and Game permits or authorizations required for your project below: Types of project approvals or permits needed. Date application submitted DEPARTMENT OF ENVIRONMENTAL CONSERVATION (DEC) APPROVALS DEC DIVISION OF WATER Yes No 1 a) Will a discharge of non-domestic wastewater to lands, waters, or the subsurface of the state occur? (NOTE: Non- domestic wastewater includes wastewater from commercial or industrial facilities, excavation projects, wastewater from man-made containers or containment areas, or any other non-domestic wastewater disposal activities see 18 AAC 72.990 for definitions.)…………………………………………………………………………………………... b) Will a discharge of domestic wastewater or septage to lands, waters or the subsurface of the state occur? (see 18 AAC 72.990 for definitions.) …………………………………………………………………………………………….. c) Will the wastewater disposal activity require a mixing zone or zone of deposit to meet Water Quality Standards (WQS)? (Many disposal activities require a mixing zone to meet WQS, contact DEC if unsure.) …………………….. d) Will the project include a stormwater collection/discharge system? …………………………………………………… e) Will the project include placing fill in wetlands? ………………………………………………………………………. f) Is the surrounding area inundated with water at any time of the year? …………………………………………………. g) Do you intend to construct, install, modify or use any part of a domestic or non-domestic wastewater treatment or disposal system? ………………………………………………………………………………………………………… 2. Does your project qualify for a general permit for wastewater? ............................................................... 3. If you answered yes to any questions above, indicate the person you contacted at the DEC-Division of Water for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 117 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 6 of 18 DEC DIVISION OF ENVIRONMENTAL HEALTH Yes No 4 a) Will your project result in construction, modification, or operation of a facility for solid waste disposal? (NOTE: Solid waste means drilling wastes, household garbage, refuse, sludge, construction or demolition wastes, industrial solid waste, asbestos, and other discarded, abandoned, or unwanted solid or semi-solid material, whether or not subject to decomposition, originating from any source. Disposal means placement of solid waste on land.) ………. b) Will your project result in treatment of solid waste at the site? (Examples of treatment methods include, but are not limited to: incineration, open burning, baling, and composting.) ……………………………………………………… c) Will your project result in storage or transfer of solid waste at the site? ………………………………………………. d) Will the project result in storage of more than 50 tons of materials for reuse, recycling, or resource recovery? ……… e) Will any sewage solids or biosolids be disposed of or land-applied to the site? (NOTE: Sewage solids include wastes that have been removed from a wastewater treatment plant system, such as a septic tank lagoon dredge, or wastewater treatment sludge that contain no free liquids. Biosolids are the solid, semi- solid or liquid residues produced during the treatment of domestic septage in a treatment works which are land applied for beneficial use.) .. 5. Will your project require application of oil, pesticides, and/or any other broadcast chemicals? …………………………. 6. Does your project qualify for a general permit for solid waste? ................................................................ 7. If you answered yes to any question above, indicate the person you contacted at the DEC- Division of Environmental Health for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………... c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: DEC DIVISION OF AIR QUALITY Yes No 8 a) Will you have an asphalt plant designed to process no less than five tons per hour of product? ……………………… b) Will you have a thermal remediation unit with a rated capacity of at least five tons per hours of untreated material? .. c) Will you have a rock crusher with a rated capacity of at least five tons per hour? …………………………………….. d) Will you have one or more incinerators with a cumulative rated capacity of 1,000 pounds or more per hour? ……….. e) Will you have a coal preparation plant? ………………………………………………………………………………... f) Will you have a Port of Anchorage stationary source? …………………………………………………………………. g) Will you have a facility with the potential to emit no less than 100 tons per year of any regulated air contaminant?..... h) Will you have a facility with the potential to emit no less than 10 tons per year of any hazardous air contaminant or 25 tons per year of all hazardous air contaminants?........................................................................................................ i) Will you be constructing a new stationary source with a potential to emit greater than: ……………………………… 15 tons per year (tpy) of PM-10 40 tpy of nitrogen oxides 40 tpy of sulfur dioxide 0.6 tpy of lead; or 100 tpy of CO within 10 km of a nonattainment area j) Will you be commencing construction, or (if not already authorized under 18 AAC 50) relocating a portable oil and gas operation? (answer “yes” unless you will comply with an existing operating permit developed for the portable oil and gas operation at the permitted location; or you will operate as allowed under AS 46.14.275 without an operating permit) ……………………………………………………………………………………………………….................... k) Will you be commencing construction or (if not already authorized under 18 AAC 50) relocating an emission unit with a rated capacity of 10 million Btu or more per hour in a sulfur dioxide special protection area established under 18 AAC 50.025? ………………………………………………………………………………………………………… l) Will you be commencing a physical change to or a change in the method of construction of an existing stationary source with a potential to emit an air pollutant greater than an amount listed in g) that will cause for that pollutant an emission increase (calculated at your discretion) as either an increase in potential to emit that is greater than: 10 tpy of PM-10 10 tpy of sulfur dioxide 10 tpy of nitrogen oxides; or 100 tpy of CO within 10 km of a nonattainment area; or actual emissions and a net emissions increase greater than: ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 118 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 7 of 18 10 tpy of PM-10 10 tpy of sulfur dioxide 10 tpy of nitrogen oxides; or 100 tpy of CO within 10 km of a nonattainment area m) Will you be commencing construction or making a major modification of a Prevention of Significant Deterioration stationary source under 18 AAC 50.306? ……………………………………………………………………………….. n) Will you be commencing construction or making a major modification of a nonattainment area major stationary source under 18 AAC 50.311? …………………………………………………………………………………………... o) Will you be commencing construction or reconstructing a major stationary source under 18 AAC 50.316, for hazardous air pollutants? Definition of Regulated Air Pollutants can be found at http://www.epa.gov/ttn/oarpg/t5/memoranda/rapdef.pdf .................................................................................................. 9. If you answered yes to any questions above, indicate the person you contacted at the DEC- Division of Air Quality for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: DEC DIVISION OF SPILL PREVENTION AND RESPONSE Yes No 10 a) Will your project involve the operation of waterborne tank vessels or oil barges that carry crude or non crude oil as bulk cargo, or the transfer of oil or other petroleum products to or from such a vessel or a pipeline system? …………. b) Will your project require or include onshore or offshore oil facilities with an effective aggregate storage capacity of greater than 5,000 barrels of crude oil or greater than 10,000 barrels of non-crude oil? ……………………………….. c) Will you operate facilities on land or water for exploration or production of hydrocarbons? …………………………. 11. If you answered yes to any questions above, indicate the person you contacted at the DEC-Division of Spill Prevention and Response office for information. a) Name/date of Contact: b) Is a plan required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed Oil Discharge Prevention & Contingency Plan to the DCOM. If “No”, explain why an application isn’t required. Explanation: DEC APPROVALS List the Department of Environmental Conservation permits or authorizations required for your project below: Types of plan approvals or permits needed Date application submitted FEDERAL APPROVALS U.S. ARMY CORPS OF ENGINEERS (USACE)Yes No 1. Will you discharge dredged and/or fill material or perform dredging activities in waters of the U.S? Section 404 of the Clean Water Act requires that a Department of the Army permit be obtained for the placement or discharge of dredged and/or fill material into waters of the U.S., including wetlands (33 U.S.C. 1344). (Your application to the USACE would also serve as application for DEC Water Quality Certification.) …………………………………. 2. Will you place fill or structures or perform work in waters of the U.S? Section 10 of the Rivers and Harbors Act of 1899 requires that a Department of the Army permit be obtained for structures or work in or affecting navigable waters of the U.S. (33 U.S.C. 403) (Waters of the U.S. include marine waters subject to the ebb and flow of the tide, rivers, streams, lakes tributaries, and wetlands.If you are not certain whether your proposed project is located within a wetland, contact the USACE Regulatory Division to request a wetlands determination. For additional information about the Regulatory Program, visit www.poa.usace.army.mil/reg)……………………………………….. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 119 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 8 of 18 3. If you answered yes to the question above, indicate the person you contacted at the US Army Corps of Engineers for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: BUREAU OF LAND MANAGEMENT (BLM)Yes No 4. Is the proposed project located on BLM land, or will you need to cross BLM land for access? …………………………. 5. If you answered yes to the question above, indicate the person you contacted at the Bureau of Land Management for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: U.S. COAST GUARD (USCG)Yes No 6 a) Do you plan to construct a bridge or causeway over tidal (ocean) waters, or navigable rivers, streams or lakes? ……... b) Does your project involve building an access to an island? ……………………………………………………………. c) Do you plan to site, construct, or operate a deepwater port? …………………………………………………………… 7. If you answered yes to any question above, indicate the person you contacted at the appropriate US Coast Guard office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: U.S. ENVIRONMENTAL PROTECTION AGENCY (EPA)Yes No 8 a) Will the proposed project have a discharge to any waters? ……………………………………………………………... b) Will you dispose of sewage sludge? ……………………………………………………………………………………. c) Will construction of your project expose 1 or more acres of soil? (NOTE: This applies to the total amount of land disturbed, even if disturbance is distributed over more than one season, and also applies to areas that are part of a larger common plan of development or sale.) …………………………………………………………………………... d) Is your project an industrial facility that will have stormwater discharge directly related to manufacturing, processing, or raw materials storage areas at an industrial plant? If you answered yes to c) or d), your project may require an NPDES Stormwater permit ……………………………………………………………………………………………… 9. If you answered yes to any question above, indicate the person you contacted at the US Environmental Protection Agency for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: FEDERAL AVIATION ADMINISTRATION (FAA)Yes No 10 a) Is your project located within five miles of any public airport? ……………………………………………………… b) Will you have a waste discharge that is likely to decay within 5,000 feet of any public airport? …………………… 11. If you answered yes to the question above, indicate the person you contacted at the Federal Aviation Administration for information. a) Name/date of Contact: ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 120 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 9 of 18 FEDERAL ENERGY REGULATORY COMMISSION (FERC)Yes No 12 a) Does the project include any of the following: ………………………………………………………………………… 1) a non-federal hydroelectric project on any navigable body of water 2) locating a hydro project on federal land (including transmission lines) 3) using surplus water from any federal government dam for a hydro project b) Does the project include construction and operation, or abandonment of interstate natural gas pipeline facilities under sections 7 (b) and (c) of the Natural Gas Act (NGA)? .....……………………………………………………… c) Does the project include construction and operation of natural gas or liquefied natural gas importation or exportation facilities under section 3 of the NGA? ......................................................................................................... d) Does the project include construction for physical interconnection of electric transmission facilities under section 202 (b) of the FPA? …………………………………………………………………………………………………… 13. If you answered yes to any question above, indicate the person you contacted at the appropriate Federal Energy Regulatory Commission office for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: U.S. FOREST SERVICE (USFS)Yes No 14 a) Does the proposed project involve construction on USFS land? ……………………………………………………….. b) Does the proposed project involve the crossing of USFS land with a water line? ……………………………………... c) The current list of Forest Service permits that require ACMP consistency review are online at http://alaskacoast.state.ak.us/Clawhome/handbook/pdf/11_AAC_110.pdf in Article 4, 11 AAC 110.400, pages 28-30. Does your proposed project include any of Forest Service authorizations found on pages 28-30 of the ACMP Handbook? ……………………………………………………………………………………………………………… 15. If you answered yes to any question above, indicate the person you contacted at United States Forest Service for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: U.S. FISH AND WILDLIFE SERVICE (USFWS)Yes No 16 a) Is your proposed project on land managed by the USFWS? ……………………………………………………………. b) Does your project require a Right of Way from the USFWS under 50 C.F.R. 29 and 50 C.F.R 36? .............................. 17. If you answered yes to any question above, indicate the person you contacted at the US Fish and Wildlife Service for information. a) Name/date of Contact: b) Is an application required for the proposed activity? …………………………………………………………………… c) If “YES” then submit a signed copy of the completed application to the DCOM. If “No”, explain why an application isn’t required. Explanation: OTHER FEDERAL AGENCY APPROVALS Yes No 18 a) Other Federal agencies with authorizations reviewable under the Alaska Coastal Management Program are posted online at http://alaskacoast.state.ak.us/Clawhome/handbook/pdf/11_AAC_110.pdf in Article 4, 11 AAC 110.400, pages 28-30. Does your proposed project include any of the Federal agency authorizations found on pages 28-30 of the ACMP Handbook? …………………………………………………………………………………………………... b) If yes, which federal authorizations? ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 121 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management CPQ Revised 8/15/2008 Page 10 of 18 19. Have you applied for any other federal permits or authorizations? ……………………………………………………….. Agency Approval Type Date Submitted Note: The Coastal Project Questionnaire (CPQ) identifies state and federal permits subject to a consistency review. You may need additional permits from other agencies or the affected city and borough government to proceed with your activity. Attach the documentation requested under the Project Description. ACMP Consistency Evaluation & Certification Statement Pursuant to 11 AAC 110.215 (a)(1)(c), the applicant shall submit an evaluation of how the proposed project is consistent with the statewide standards at 11 AAC 112.200 - 11 AAC 112.990 and with the applicable district enforceable policies, sufficient to support the consistency certification. Evaluate your project against each section of the state standards and applicable district enforceable policies using the template below or by submitting a narrative description in letter or report form. District enforceable policies are available on the ACMP website at http://www.alaskacoast.state.ak.us. Definitions of key terms can be found at: 11 AAC 110.990,11 AAC 112.990 and 11 AAC 114.990. If you need more space for an adequate explanation of any of the applicable standards, please attach additional pages to the end of this document. Be sure to include references to the specific sections and subsections that you are evaluating. STATEWIDE STANDARDS 11 AAC 112.200. Coastal Development Standard: (a) In planning for and approving development in or adjacent to coastal waters, districts and state agencies shall manage coastal land and water uses in such a manner that those uses that are economically or physically dependent on a coastal location are given higher priority when compared to uses that do not economically or physically require a coastal location. (b) Districts and state agencies shall give, in the following order, priority to (1) water-dependent uses and activities; (2) water-related uses and activities; and (3) uses and activities that are neither water-dependent nor water-related for which there is no practicable inland alternative to meet the public need for the use or activity. (c) The placement of structures and the discharge of dredged or fill material into coastal water must, at a minimum, comply with the standards contained in 33 CFR Parts 320 - 323, revised as of July 1, 2003. Evaluation: (a) How is your project economically or physically dependent on a coastal location? Why are you proposing to place the project at the selected location? (b) Evaluation of development priority. (1) How is the proposed project water-dependent? Explain. (2) How is the proposed project water-related? Explain. (3) If the proposed project is neither water-dependent nor water-related, please explain why there is not a practicable inland alternative that meets the public need for the use or activity. Explain. (c)DCOM defers to the United States Corps of Engineers (USACE) to interpret compliance with the referenced standards. If you plan to discharge or fill waters of the US, have you applied to the Corps of Engineers for the appropriate authorization? The project is intended to provide electric energy to an end-user in the coastal zone. To provide the lowest cost power possible and maximize economic beneifts, the project must by phyiscally adjacent to the end-user. The project is not water-dependent or related. The project is on the coast, because the end-user it serves is on the coast. Placement of individual turbines is designed to maximize energy output and economic benefits. We do not plan to discharge or fill waters. 122 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management Consistency Evaluation 8/15/2008 Page 11 of 18 11 AAC 112.210. Natural hazard areas. Standard: (a) In addition to those identified in 11 AAC 112.990, the department, or a district in a district plan, may designate other natural processes or adverse conditions that present a threat to life or property in the coastal area as natural hazards. Such designations must provide the scientific basis for designating the natural process or adverse condition as a natural hazard in the coastal area, along with supporting scientific evidence for the designation. (b) Areas likely to be affected by the occurrence of a natural hazard may be designated as natural hazard areas by a state agency or, under 11 AAC 114.250(b), by a district. (c) Development in a natural hazard area may not be found consistent unless the applicant has taken appropriate measures in the siting, design, construction, and operation of the proposed activity to protect public safety, services, and the environment from potential damage caused by known natural hazards. (d) For purposes of (c) of this section, "appropriate measures in the siting, design, construction, and operation of the proposed activity" means those measures that, in the judgment of the coordinating agency, in consultation with the department’s division of geological and geophysical surveys, the Department of Community and Economic Development as state coordinating agency for the National Flood Insurance Program under 44 C.F.R. 60.25, and other local and state agencies with expertise, (1) satisfy relevant codes and safety standards; or (2) in the absence of such codes and standards; (A) the project plans are approved by an engineer who is registered in the state and has engineering experience concerning the specific natural hazard; or (B) the level of risk presented by the design of the project is low and appropriately addressed by the project plans. Evaluation: (a) Describe the natural hazards designated in the district plan as they affect this site. (b) Describe how the proposed project is designed to accommodate the designated hazards. How will you use site design and operate the proposed activity to protect public safety, services and the environment from potential damaged caused by known natural hazards? (d)(1) Describe the measures you will take to meet relevant codes and safety standards in the siting, design, construction and operation of the proposed activity. (d)(2)(A) If your project is located in an area without codes and safety standards, how is your project engineered for the specific natural hazard? Give the name of the appropriately qualified registered engineer who will approve the plans for protecting public safety, services, and the environment from damage caused by hazards OR (d)(2)(B) If the level of risk presented by the design of the project is low, how do the project plans and project design address the potential natural hazard? 11 AAC 112.220. Coastal access. Standard: Districts and state agencies shall ensure that projects maintain and, where appropriate, increase public access to, from, and along coastal water. Evaluation: Please explain how the proposed project will maintain and, where appropriate, increase public access to, from and along coastal water. 11 AAC 112.230. Energy facilities. Standard: (a) The siting and approval of major energy facilities by districts and state agencies must be based, to the extent practicable, on the following standards: (1) site facilities so as to minimize adverse environmental and social effects while satisfying industrial requirements; (2) site facilities so as to be compatible with existing and subsequent adjacent uses and projected community needs; No known natural hazards. Wind turibnes are designed to international standards. Prior to delivery of the turbines, the vendor will approve all construction plnas for adherence to international standards for wind turbines. The public currently does not have access to the coast at this location. This is private land. Access is allowed by the land-owner on a case-by-case basis. For safety reasons, increased access would be inappropriate. 123 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management Consistency Evaluation 8/15/2008 Page 12 of 18 (3) consolidate facilities; (4) consider the concurrent use of facilities for public or economic reasons; (5) cooperate with landowners, developers, and federal agencies in the development of facilities; (6) select sites with sufficient acreage to allow for reasonable expansion of facilities; (7) site facilities where existing infrastructure, including roads, docks, and airstrips, is capable of satisfying industrial requirements; (8) select harbors and shipping routes with least exposure to reefs, shoals, drift ice, and other obstructions; (9) encourage the use of vessel traffic control and collision avoidance systems; (10) select sites where development will require minimal site clearing, dredging, and construction; (11) site facilities so as to minimize the probability, along shipping routes, of spills or other forms of contamination that would affect fishing grounds, spawning grounds, and other biologically productive or vulnerable habitats, including marine mammal rookeries and hauling out grounds and waterfowl nesting areas; (12) site facilities so that design and construction of those facilities and support infrastructures in coastal areas will allow for the free passage and movement of fish and wildlife with due consideration for historic migratory patterns; (13) site facilities so that areas of particular scenic, recreational, environmental, or cultural value, identified in district plans, will be protected; (14) site facilities in areas of least biological productivity, diversity, and vulnerability and where effluents and spills can be controlled or contained; (15) site facilities where winds and air currents disperse airborne emissions that cannot be captured before escape into the atmosphere; (16) site facilities so that associated vessel operations or activities will not result in overcrowded harbors or interfere with fishing operations and equipment. (b) The uses authorized by the issuance of state and federal leases, easements, contracts, rights-of-way, or permits for mineral and petroleum resource extraction are uses of state concern. Evaluation: (a) If this standard applies to your project, please describe in detail how the proposed project is designed to meet each applicable section of this standard: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (b) List the authorizations for state and federal leases, easements, contracts, rights-of-way, water rights, or permits for mineral and petroleum resource extraction you have applied for or received. 11 AAC 112.240. Utility routes and facilities. Standard: (a) Utility routes and facilities must be sited inland from beaches and shorelines unless (1) the route or facility is water-dependent or water related; or (2) no practicable inland alternative exists to meet the public need for the route or facility. none are requried. The existing and all future adjacent uses are industrial. This project adds to the community need for energy security. This project in no way expands the amount of industrial land in Nikiski. The turbines are distributed through the existing industrial zone. The project does not interfere with current and future industrial activities in the area, and improves the economics of existing industry. The project is to be privately developed on privately owned land. Districts and state agencies are not involved in siting this project. Expansion of a wind energy facility beyond the proposed project would be undesirable, given the current electrical load on the Kenai Peninsula. The present industrial nature of the site makes it an ideal site for wind energy due to the presence of nearby ports, roads, and power lines. Equipment will be brought in using well established shipping routes to the nearest ports. This is encouraged by the use of existing shipping routes and the nearest accessible port facility. The site is already cleared and zoned for industrial uses. No dredging will be required. The existing industrial nature of the site precludes the need for staging areas. The risk of spills is low, as this project is in no way involved with transport of liquids. This project has no impact on fish, and has a minimal impact on migratory birds. Birds have been proven to fly above or around turbines. The project is sited in an industrial location and could be argued improves the viewshed. The area is not of scenic, recreational, environmental, or cultural value. The project is at a location with personnel already trained in spill and effluent control. No spills or effluents will be created by this project. Vessel traffic will only occur during the short construction period, and will be coordinated to minimize impacts on harbor uses. This project has no airborne emmissions. This is a wind energy facility, which generates no pollution or adverse environmental impacts. It is located adjacent to existing heavy industry. 124 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management Consistency Evaluation 8/15/2008 Page 13 of 18 (b) Utility routes and facilities along the coast must avoid, minimize, or mitigate (1) alterations in surface and ground water drainage patterns; (2) disruption in known or reasonably foreseeable wildlife transit; (3) blockage of existing or traditional access. Evaluation: (a) If the proposed utility route or facility is sited adjacent to beaches or shorelines, explain how the route or facility is water dependent water related or why no practical inland alternative exits. (b) If the proposed utility route or facility is sited along the coast, explain how you will avoid, minimize or mitigate: (1) alterations in surface and ground water drainage patterns; (2) disruption in known or reasonably foreseeable wildlife transit; (3) blockage of existing or traditional access. 11 AAC 112.250. Timber harvest and processing. Standard: AS 41.17 (Forest Resources and Practices Act) and the regulations adopted under that chapter with respect to the harvest and processing of timber are incorporated into the program and constitute the components of the program with respect to those purposes. Evaluation: Does your activity involve harvesting or processing of timber? Yes No If yes, please explain how your proposed project meets the standards of the State Forest Resources and Practices Act. 11 AAC 112.260. Sand and gravel extraction. Standard: Sand and gravel may be extracted from coastal waters, intertidal areas, barrier islands, and spits if there is no practicable alternative to coastal extraction that will meet the public need for the sand or gravel. Evaluation: If your proposed project includes extracting sand or gravel from coastal waters, intertidal areas, barrier islands or spits, please explain why there is no practicable alternative to coastal extraction that meets the public need for sand or gravel. 11 AAC 112.270. Subsistence. Standard: (a) A project within a subsistence use area designated by the department or under 11 AAC 114.250(g) must avoid or minimize impacts to subsistence uses of coastal resources. (b) For a project within a subsistence use area designated under 11 AAC 114.250(g), the applicant shall submit an analysis or evaluation of reasonably foreseeable adverse impacts of the project on subsistence use as part of (1) a consistency review packet submitted under 11 AAC 110.215; and (2) a consistency evaluation under 15 C.F.R. 930.39, 15 C.F.R. 930.58, or 15 C.F.R. 930.76. (c) Repealed 10/29//2004, Register 172. The project provides electric energy to an end user in the coastal zone. To provide the lowest cost energy, the project must be adjacent to the end user. A change in location is not practical. Drainage patterns will not be altered as part of this project. WInd turbines do not disrupt wildlife transit. Wind turbines do not block existing or traditional access. ✔ 125 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management Consistency Evaluation 8/15/2008 Page 14 of 18 (d) Except in nonsubsistence areas identified under AS 16.05.258, the department may, after consultation with the appropriate district, federally recognized Indian tribes, Native corporations, and other appropriate persons or groups, designate areas in which a subsistence use is an important use of coastal resources as demonstrated by local usage. (e) For purposes of this section, "federally recognized Indian tribe," "local usage", and "Native corporation" have the meanings given in 11 AAC 114.990. Evaluation: (a) Is your proposed project located within a subsistence use area designated by a coastal district? Yes No If yes, please describe how the proposed project is designed to “avoid or minimize impacts to subsistence uses of coastal resources:” (b) If your project is located in a subsistence use area designated by the coastal district, provide an analysis or evaluation of its reasonably foreseeable adverse impacts to the subsistence uses. (c) No response required. (d) If your project is not located in a designated subsistence use area, please describe any subsistence uses of coastal resources within the project area. Please be advised that subsistence use areas may be designated by the department during a review. (e) No response required. 11 AAC 112.280. Transportation routes and facilities. Standard: Transportation routes and facilities must avoid, minimize, or mitigate (1) alterations in surface and ground water drainage patterns; (2) disruption in known or reasonably foreseeable wildlife transit; and (3) blockage of existing or traditional access. Evaluation: If your proposed project includes transportation routes or facilities, describe how it avoids, minimizes, or mitigates (1) alterations in surface and ground water drainage patterns; (2) disruption in known or reasonably foreseeable wildlife transit; and (3) blockage of existing or traditional access. 11 AAC 112.300. Habitats. Standard: (a) Habitats in the coastal area that are subject to the program are (1) offshore areas; (2) estuaries; (3) wetlands; ✔ There no current subsistence uses of the project area. 126 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management Consistency Evaluation 8/15/2008 Page 15 of 18 (4) tideflats; (5) rocky islands and sea cliffs; (6) barrier islands and lagoons; (7) exposed high-energy coasts; (8) rivers, streams, and lakes and the active floodplains and riparian management areas of those rivers, streams, and lakes; and (9) important habitat. (b) The following standards apply to the management of the habitats identified in (a) of this section: (1) offshore areas must be managed to avoid, minimize, or mitigate significant adverse impacts to competing uses such as commercial, recreational, or subsistence fishing, to the extent that those uses are determined to be in competition with the proposed use; (2) estuaries must be managed to avoid, minimize, or mitigate significant adverse impacts to (A) adequate water flow and natural water circulation patterns; and (B) competing uses such as commercial, recreational, or subsistence fishing, to the extent that those uses are determined to be in competition with the proposed use; (3) wetlands must be managed to avoid, minimize, or mitigate significant adverse impacts to water flow and natural drainage patterns; (4) tideflats must be managed to avoid, minimize, or mitigate significant adverse impacts to (A) water flow and natural drainage patterns; and (B) competing uses such as commercial, recreational, or subsistence uses, to the extent that those uses are determined to be in competition with the proposed use; (5) rocky islands and sea cliffs must be managed to (A) avoid, minimize, or mitigate significant adverse impacts to habitat used by coastal species; and (B) avoid the introduction of competing or destructive species and predators; (6) barrier islands and lagoons must be managed to avoid, minimize, or mitigate significant adverse impacts (A) to flows of sediments and water; (B) from the alteration or redirection of wave energy or marine currents that would lead to the filling in of lagoons or the erosion of barrier islands; and (C) from activities that would decrease the use of barrier islands by coastal species, including polar bears and nesting birds; (7) exposed high-energy coasts must be managed to avoid, minimize, or mitigate significant adverse impacts (A) to the mix and transport of sediments; and (B) from redirection of transport processes and wave energy; (8) rivers, streams, and lakes must be managed to avoid, minimize, or mitigate significant adverse impacts to (A) natural water flow; (B) active floodplains; and (C) natural vegetation within riparian management areas; and (9) important habitat (A) designated under 11 AAC 114.250(h) must be managed for the special productivity of the habitat in accordance with district enforceable policies adopted under 11 AAC 114.270(g); or (B) identified under (c)(1)(B) or (C) of this section must be managed to avoid, minimize, or mitigate significant adverse impacts to the special productivity of the habitat. (c) For purposes of this section, (1) "important habitat" means habitats listed in (a)(1) – (8) of this section and other habitats in the coastal area that are (A) designated under 11 AAC 114.250(h); (B) identified by the department as a habitat (i) the use of which has a direct and significant impact on coastal water; and (ii) that is shown by written scientific evidence to be biologically and significantly productive; or (C) identified as state game refuges, state game sanctuaries, state range areas, or fish and game critical habitat areas under AS 16.20; (2) "riparian management area" means the area along or around a waterbody within the following distances, measured from the outermost extent of the ordinary high water mark of the waterbody: (A) for the braided portions of a river or stream, 500 feet on either side of the waterbody; (B) for split channel portions of a river or stream, 200 feet on either side of the waterbody; 127 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management Consistency Evaluation 8/15/2008 Page 16 of 18 (C) for single channel portions of a river or stream, 100 feet on either side of the waterbody; (D) for a lake, 100 feet of the waterbody. Evaluation: (a) List the habitats from (a) above that are within your proposed project area or that could be affected by your proposed project. (b) Describe how the proposed project avoids, minimizes, or mitigates impacts to each of the identified habitat(s) in section (a) above. (c) No response required. 11 AAC 112.310. Air, land and water quality Standard: Not withstanding any other provision of this chapter, the statutes and regulations of the Department of Environmental Conservation with respect to the protection of air, land, and water quality identified in AS 46.40.040(b) are incorporated into the program and, as administered by that department, constitute the exclusive components of the program with respect to those purposes. Evaluation:No response required. 11 AAC 112.320. Historic, prehistoric, and archeological resources. Standard: (a) The department will designate areas of the coastal zone that are important to the study, understanding, or illustration of national, state, or local history or prehistory, including natural processes. (b)A project within an area designated under (a) of this section shall comply with the applicable requirements of AS 41.35.010 – 41.35.240 and 11 AAC 16.010 – 11 AAC 16.900. Evaluation: (a) Have you contacted the State Historic Preservation Office (SHPO) to see if your project is in a designated area of the coastal zone that is important to the study, understanding, or illustration of national, state, or local history or prehistory, including natural processes? (b) If your project is within an area designated under (a) of this section, how will you comply with the applicable requirements in the statutes and regulations listed in (b)? Offshore areas are adjacent to the project area, but will not be affected. The project is on bluffs overlooking the ocean. The project will not be built offshore, but is significantly elevated above the sea. The bluffs are already maintained by the site owners. The turbines will be back far enough from the edge to avoid impacts. The site is industrial. No. As this is an existing industrial site, cleared and zoned for industrial activities, it is anticipated this is not a designated area for important historical reasons. If project is deemed to be in one of these areas, a specific plan will be drawn up in cooperation with the State Historic Preservation Office. 128 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management Consistency Evaluation 8/15/2008 Page 17 of 18 Affected Coastal District Enforceable Policies Evaluate each applicable district enforceable policy using a format similar to the one you completed above for the State Standards. District enforceable policies are available at http://alaskacoast.state.ak.us/.If you need more space for an adequate explanation of any of the applicable district enforceable policies, please attach additional pages to the end of this document. Applicable District Plan(s) Enforceable Policy: Evaluation: Enforceable Policy: Evaluation: Enforceable Policy: Evaluation: Certification Statement The information contained herein is true and complete to the best of my knowledge. I certify that the proposed activity complies with, and will be conducted in a manner consistent with, the Alaska Coastal Management Program. ___________________________________________________ ____________________________ Signature of Applicant or Agent Date Note: Federal agencies conducting an activity that will affect the coastal zone are required to submit a federal consistency determination, per 15 CFR 930, Subpart C, rather than this certification statement. ACMP has developed a guide to assist federal agencies with this requirement. Contact ACMP to obtain a copy. This certification statement will not be complete until all required State and federal authorization requests have been submitted to the appropriate agencies. Kenai Peninsula Borough - June 2008 3.3 Public Access Public access is already limited for safety and security reasons. Public access will be enhanced in that tours of the proejct may be offered at some point in the future. 4.0 Energy Facilities KPB maintains no enforceable policies regarding energy facilitiies. Guidance Policy G-4.7 permits alternative energy projects, such as wind, provided they conform to CZMP and other applicable laws. 5.0 Transportation and Utilities Routes and Facilities KPB maintains no enforceable policies regarding energy facilities. Guidance police G-4.7 permits alternative energy, such as wind. 129 State of Alaska, Department of Natural Resources, Division of Coastal & Ocean Management Consistency Evaluation 8/15/2008 Page 18 of 18 Project Description:Please provide or attach a brief description of your project including the planned work, any effects to coastal uses and resources and how your project is being designed to avoid, minimize and mitigate those effects. Project Area:Please provide or attach a map of your project location and your proposed work. (Including nearest community, the name of the nearest land feature or body of water, and other legal description such as a survey or lot number.) Nearest Community: Nearest Waterbody: Legal Survey Description: BQ Energy proposes a wind energy generation facility in the Nikiski Industrial Zone. Project details, including layout and schedule are attached. Nikiski, Kenai Cook Inlet, Bernice Lake 130 Confidential to BQ Energy,llc BQ ENERGY,llc PROJECT TITLE: Kenai Winds DOCUMENT DATE: September 26, 2008 BRIEF DESCRIPTION OF PROJECT: BQ Energy has been working with Tesoro Corp, a leading US oil refining corporation, to explore the use of wind energy at their refining and terminal sites. BQ Energy has proposed the Kenai Winds project, a 15 – 18 MW wind energy facility located at the Tesoro Alaska Refinery, in the Nikiski Industrial Zone, in the Kenai Peninsula Borough of Alaska. The project would consist of 10 wind turbines, on land owned by Tesoro and its subsidiary Kenai Pipeline Company. The major components of a wind project are: turbines, foundations, and collection system. The turbines are purchased components for a vendor. The foundations are constructed on site of iron re-bar and poured concrete. This is typically a 60 ft diameter foundation, 15 ft in depth. The turbine tower is 15 ft in diameter at the base, and is the only above-ground disturbance post-construction. Wires from the turbine connect underground to a pad-mounted transformer at the base. Wire will continue underground in the vicinity of the turbines. Away from the turbines, the wires will be on overhead power poles following existing utility rights-of-way. These will all be on private property, with the exception of two road crossings. The wires and pad- mounted transformers make up the collection system. The wires will connect to the refinery substation. A desktop study has been done for this location. A meteorological tower installation occurred in November of 2007. The project would reach commercial operations in 2010 and operate for 30 years. PERMIT STATUS:The project has not filed for any permits but has initiated discussions with both the state and local permitting agencies. Alaska does not have any large wind farm in existence and also has none permitted. We have anecdotal evidence that those which have been proposed have had difficult discussions, possibly due to the lack of experience in the agencies. There are single wind turbines in Alaska, typically in remote locations supplying distributed power. 131 Confidential to BQ Energy,llc BQ ENERGY,llc Another project (Fire Island) has been proposed near Anchorage by a local utility and enXco. It is a very challenging project with major infrastructure required to be built. This project has clearly set expectations (positive or negative) for area regulators and permit officials. The Kenai project is located on private land in an unincorporated section of the Kenai Peninsula Borough. Discussions with the Office of the Mayor of the Kenai Peninsula Borough indicate that there are no local, municipal, or borough permits required for this project. As such, the project only needs to secure a consistency determination from the Coastal Zone Management Program in the Department of Natural Resources. The initial permitting step is to complete and file a coastal zone consistency questionnaire. This document covers all the pertinent state and federal agencies that may offer permits for a project. DNR will review the questionnaire for accuracy and confirm with the agencies. If a permit is required from any of these, then the DNR performs a coastal zone consistency determination. If no permit is required, the project may proceed with without any further state or local review. Staff at the Ecology & Environment office in Denver with Alaskan experience predict changes to the coastal zone review due to the recent interest of wind developers in Alaska. INTERCONNECTION:The project will be located behind the meter at the Tesoro Alaska Refinery and will connect to the 25kV power distribution system. The refinery is connected to the Homer Electric grid via a 25kV/69kV power. Electrically, the wind turbines generate at 600 V. A pad mounted transformer at the bottom of each tower will convert that to 25 kV. Each turbine will be connected in parallel to a collection system with a point of common coupling at the Tesoro substation. Most likely some form of reactive power compensation will be installed at the refinery to provide additional system stability. SITE:The project would be located on industrial land controlled by Tesoro. Tesoro operates a 72,000 bbl/day oil refinery in Nikiski and controls 640 acres of land near the shore of the Cook Inlet, roughly 70 miles southwest of Anchorage. The refinery is in a heavily industrial section of Alaska, adjacent to an ammonia plant owned by Agrium and a closed oil refinery site owned by Chevron. The region is also home to oil and gas production in the Cook Inlet which is brought to shore at this location. The wind turbines would be sited on Tesoro-owned land. BQ Energy plans to initiate discussions with neighboring landowners to locate some wind turbines on those sites. The number of turbines will remain fixed at 10. The additional land will be used for flexibility in siting the turbines to maximize output. Adjacent property owners are identified on the attached layout drawing. WIND RESOURCE: BQ Energy erected a 60m meteorological tower on site in November 2007. Preliminary analysis shows an economically viable wind resource. POWER SALES AND GREEN TAG SALES: The project will sell its output to the Tesoro Alaska Refinery. 132 Confidential to BQ Energy,llc BQ ENERGY,llc PROJECT SCHEDULE: The project should be planned to be constructed in summer for weather reasons. Current scheduling has project construction commencing in May 2010, with concluding in August 2010. 133 Appendix K: Detailed Development Budget 134 Preconstruction Budget Remaining 10,335,000$ Turbine Related Construction Cost Remaining 24,234,820$ BOP Cost Remaining 12,165,187$ Kenai Winds Project Development Budget - 10x Vestas V90-1.8 Budget Remaining Phase 3 - Preconstruction 10,400,000$ 65,000$ 10,335,000$ 1 Year Meteorological Study 50,000$ 45,000$ 5,000$ Preliminary Environmental Review 15,000$ ‐$ 15,000$ Electrical Interconnection Study at Refinery 45,000$ ‐$ 45,000$ Electrical Interconnection Study with HEA 75,000$ ‐$ 75,000$ Coastal Zone Management Review 20,000$ ‐$ 20,000$ NEXRAD Bird Study 50,000$ ‐$ 50,000$ PILOT Studies 20,000$ ‐$ 20,000$ Preliminary Engineering Balance‐of‐Plant Cost Estimate 10,000$ ‐$ 10,000$ Surface and Geotechnical Survey 65,000$ ‐$ 65,000$ Management and Travel Expense 50,000$ 20,000$ 30,000$ Wind Turbine First and Second Payments 10,000,000$ ‐$ 10,000,000$ Total 10,400,000$ 65,000$ 10,335,000$ Phase 4 - Construction 36,400,007$ ‐$ 36,400,007$ Remaining Turbine Payments 24,234,820$ ‐$ 24,234,820$ Balance of Plant Engineering 190,405$ ‐$ 190,405$ Civil Infrastructure 678,895$ ‐$ 678,895$ Foundations 2,292,499$ ‐$ 2,292,499$ Erection 1,934,331$ ‐$ 1,934,331$ Collection System 3,246,014$ ‐$ 3,246,014$ Substation 101,050$ ‐$ 101,050$ Subtotal 8,443,194$ ‐$ 8,443,194$ Allowances Subsurface Conditions 150,000$ ‐$ 150,000$ Wind/Weather Delays 100,000$ ‐$ 100,000$ Offsite Roads 40,000$ ‐$ 40,000$ Gravel Turnarounds 6,400$ ‐$ 6,400$ Security 20,000$ ‐$ 20,000$ Surveying 20,000$ ‐$ 20,000$ Teclo Improvements to Sub 20,000$ ‐$ 20,000$ Power Factor Correction 500,000$ ‐$ 500,000$ Total Allowances 856,400$ ‐$ 856,400$ Subtotal 9,299,594$ ‐$ 9,299,594$ Contractor Overhead 810,788$ ‐$ 810,788$ Contractor Fee 1,031,939$ ‐$ 1,031,939$ 3% Contingency 334,270$ ‐$ 334,270$ Inflation 3% per Year 688,595$ ‐$ 688,595$ BOP Subtotal 12,165,187$ ‐$ 12,165,187$ Bond 0.90%109,487$ ‐$ 109,487$ Total 36,400,007$ ‐$ 36,400,007$ Project Total 46,800,007$ 46,735,007$ BOP Cost Per MW 675,844$ Turbine Cost Per MW 1,901,934$ Preconstruction Cost Per MW 577,778$ Project Cost Per MW 2,600,000$ Previous Phase Spending 135 Appendix L: Detailed Operations Budget 136 Fixed Annual Costs509,232$ Variable Annual Costs382,593$ Total Annual Costs891,825$ Kenai Winds Project Operations Budget - 10x Vestas V90-1.8Budgetper MW BasisFixed Costs509,232$ 28,290.67$ Turbine Operations & Maintenance Service254,616$ 14,145.33$ GEEFS/BQ estimateTurbine Warranty254,616$ 14,145.33$ GEEFS/BQ estimateTotal Fixed Costs509,232$ 28,290.67$ Variable Costs382,593$ 21,255.17$ BOP Maintenance8,791$ 488.39$ BQ estimateSubstation Maintenance11,588$ 643.78$ BQ estimateTransmission Line Maintenance8,691$ 482.83$ BQ estimateRoad Maintenance1,450$ 80.56$ BQ estimateLand Rent and Royalty‐$ ‐$ No third‐party landO&M Building Lease‐$ ‐$ Use Existing Tesoro FacilitiesInsurance173,775$ 9,654.17$ HRH TP EstimateBackup Power19,163$ 1,064.61$ 125kW draw, 25% of yearly hoursUtility‐$ ‐$ Use Existing Tesoro FacilitiesTelecom33,600$ 1,866.67$ $2,800/month for 2 T1s and 4 POTS linesProfessional Fees19,667$ 1,092.61$ Independent engineer feesProject Management59,002$ 3,277.89$ BQ estimate. One full‐time equivalentFiscal Management19,667$ 1,092.61$ BQ estimateAudit Compliance13,111$ 728.39$ Annual auditTax Compliance13,111$ 728.39$ BQ estimateProperty Tax‐$ ‐$ Tax ExemptMiscellaneous Expense977$ 54.28$ RoundingTotal Variable Costs382,593$ 21,255.17$ Total Annual Costs891,825$ 49,545.83$ Fixed Cost Per MW28,291$ Variable Cost Per MW21,255$ Total AnnualCost Per MW49,546$ 137 Appendix M: Wind Turbine Datasheets 138 GE Energy 1.5MW Wind Turbine 139 Theindustryworkhorse With energy demand increasing, fuel costs rising and growing pressure to address greenhouse gas emissions, the world needs a reliable supply of cleaner, reliable power, which is why GE continues to drive cutting-edge wind turbine technology. Building on a strong power generation heritage spanning more than a century, our 1.5 MW wind turbine—also known as the industry workhorse—delivers proven performance and reliability, creating more value for our customers. Our product strategy is focused on results that contribute to our customers’ success. Every initiative we pursue bears our uncompromising commitment to quality and innovation, and our reputation for excellence can be seen in everything we do. 1.5 MW WIND TURBINE 32 140 Globalfootprint GE Energy is one of the world’s leading suppliers of power generation and energy delivery technologies—providing comprehensive solutions for coal, oil, natural gas and nuclear energy; renewable resources such as wind, solar and biogas, and other alternative fuels. As a part of GE Infrastucture—which also includes the Water, Transportation, Aviation and Oil & Gas businesses—we have the worldwide resources and experience to help customers meet their needs for cleaner, more reliable and efficient energy. GE has six wind manufacturing and assembly facilities in Germany, Spain, China and the United States. Our facilities are registeredtoISO9001:2000andourQualityManagementSystem,whichincorporatesourrigorousSixSigmamethodologies, provides our customers with quality assurance backed by the strength of GE. We believe wind power will be an integral part of the world energy mix throughout the 21st century and we are committed to helping our customers design and implement energy solutions for their unique energy needs. Manufacturing/ Assembly Tehachapi, CA Global Research Center Niskayuna, NY Customer Support Center Schenectady, NY Customer Service Center Sweetwater, TX Manufacturing/ Assembly and Engineering Salzbergen, Germany Noblejas, Spain Global Research Center Munich, Germany Customer Support Center Salzbergen, Germany Manufacturing/ Assembly Shenyang, China Global Research Center Bangalore, India Manufacturing/ Assembly and Engineering Greenville, SCManufacturing/ Assembly Pensacola, FL Global Research Center Shanghai, China Wind Parts Operations Center Memphis, Tennessee Energy Learning Center Niskayuna, NY Renewable Energy Headquarters Schenectady, NY 4 Proventechnology Drawing from our extensive manufacturing and operations experience, proven design and optimized components, and ongoing technology advancements in performance and reliability, GE’s 1.5 MW wind turbine continues to be one of the most widely used wind turbines in the world. 1.5sle — Classic workhorse, an efficient and reliable machine with proven technology 1.5xle —Builtonthesuccessofthe1.5sleplatform,capturesmorewindenergywith15%greatersweptarea GE 1.5xle Technical data Power Curve 1.5sle 1.5xle Operating Data Rated Capacity:1,500 kW 1,500 kW Temperature Range: Operation: (withColdWeatherExtremePackage)Survival: -30°C – +40°C -40°C – +50°C -30°C – +40°C -40°C – +50°C Cut-in Wind Speed:3.5 m/s 3.5 m/s Cut-out Wind Speed (10 min avg.): 25 m/s 20 m/s Rated Wind Speed:14 m/s 12.5 m/s Wind Class — IEC:IIa(Ve50 =55m/s Vare =8.5m/s) IIIb(Ve50 =52.5m/s Vave =8.0m/s) Electrical Interface Frequency 50/60 Hz 50/60 Hz Voltage 690V 690V Rotor Rotor Diameter:77 m 82.5 m Swept Area:4657 m 2 5346 m 2 Tower Hub Heights:65/80 m 80 m Power Control Active Blade Pitch Control Active Blade Pitch Control GE 1.5sle GE’s1.5MWwindturbineisdesignedtomaximizecustomer value by providing proven performance and reliability. With continuous technology enhancement programs, the 1.5 MW windturbinehasestablisheditselfasoneofthemostreliable turbines in the industry. This is evident through our model year performance trend, where availability performance significantly improves each year. Driving performance 96+% 2005 98+% 2007 1.5sle model year availability 1.5 MW WIND TURBINE 5 141 gearbox • HALT testing on every design • Cylindrical roller bearings • Improved oil filtration, heating and cooling SOFT BRAKE SYSTEM • Hydraulic secondary brake CONTROL • GE Mark VIe controller • Integrated pitch and converter diagnostics COUPLING • Slip coupling design to reduce gearbox loads ELECTRICAL SYSTEM • GE design • Easier installation • Reduced footprint MAIN SHAFT • Material upgrade • Expanded operating range BLADES • GE design • Improved capacity factor TOWER • Modular tower system • Hub height flexibility MAIN BEARING • Increased bearing robustness PITCH • GE designed pitch electronics • Increased pitch drive robustness • Greater torque Designed for performance reliability With technology centers of excellence in the United States, Europe, India and China, our teams of engineers and scientists use Six Sigma methodology, coupled with the latest computational modeling and power electronic analysis tools, to manufacture wind turbines with the performance and reliability necessary to meet the challenges our customers face in today’s energy environment. GE’s commitment to customer value and technology evolution is demonstrated in our ongoing investment in product development. Since entering the wind business in 2002, GE has invested over $750 million in driving reliable and efficient wind technology. Performanceandreliability GEalsoutilizestheexpertiseofourfourglobalresearchcenters, located in Germany, China, India, and the United States. Global Research has been the cornerstone of GE technology for more than 100 years, and is focused on developing breakthrough innovations in the energy industry. 6 1.5 MW WIND TURBINE 7 Technological expertise GE Infrastructure Energy • Controls, materials, power electronics • Fulfillment & logistics capability • Efficient supply chain management Aviation Aerodynamic and aero-acoustic modeling expertise GE Global Research • Energy conversion • Material sciences • Smart grids Rail Gearbox and drive train technologies GE 1.5 MW…the most widely used wind turbine in its class • 1 turbine shipped every 3 hours • As of June 2008,more than 8,500 turbines are in operation worldwide •19 countries •115+million operating hours •70,000+GWh produced 142 Optimizedwind powerplantperformance Wind turbine performance is a critical issue in light of increasingly stringent grid requirements. GE’s unrivaled experience in power generation makes us the industry leader in grid connection. By providing a sophisticated set of grid-friendly benefits similartoconventionalpowerplants,GE’suniqueintegratedsuiteofcontrolsandelectronicstakeyourwindpowerstationto thefrontlineofperformanceandseamlessgridintegration. WindFREE® Reactive Power Reactive Power even with no wind WindRIDE-THRU® Uninterrupted turbine operation through grid disturbances WindCONTROL® Voltage and power regulation like a conventional plant WindSCADA® Tools to operate, maintain, and manage the wind plant FEATURE DESCRIPTION BENEFITS WindRIDE-THRU® Turbine Operation System Uninterrupted turbine operation through grid disturbances Offered in two standard packages: • Low Voltage Ride Through • Zero Voltage Ride Through Meets present and emerging transmission reliability standards similar to those demanded of thermal generators WindCONTROL® Power Regulation System Voltage and power regulation like a conventional power plant Provides frequency droop and power ramp limiters to help stabilize power system frequency Reduces BOP costs WindFREE Reactive Power ® System Provides reactive power even with no wind Provides smooth fast voltage regulation by delivering controlled reactive power through all operating conditions Eliminatestheneedforgridreinforcementsspecificallydesignedfor no-windconditions,andmayallowformoreeconomiccommitment of other generating resources to enhance grid security WindSCADA® System Tools to operate, maintain and manage the wind power plant Intuitive operation and maintenance control Secure user-access 8 Projectexecution GE understands that grid compatibility, site flexibility, and on-time delivery are critical to the economics of a wind project. That’s why the 1.5 MW wind turbine has been engineered for ease of integration and delivery to a wide range of locations, including those with challenging site conditions. Our global project management and fulfillment expertise offer customers on-time delivery and schedule certainty. Regardless of where wind turbine components are delivered, GE’s integrated logistics team retains ownership and responsibility for this critical step. Utilizing the GE Energy Power Answer Center, our engineering and supply chain teams are ready to respond to any technical, mechanical or electrical questions that may arise. As one of the world’s largest power plant system providers, GE is uniquely positioned to provide customers with full-service projectmanagementsolutions.WithofficesinNorthAmerica,Europe,andAsia,ourworldclassPowerPlantSystemsdivision utilizes decades of fulfillment expertise in project management, logistics, plant start-up and integration from Gas Turbine, Combined Cycle, Hydro, and Aero plants. Here are some examples of how GE has worked with customers to solve project challenges and maximize their value through on-time delivery and advanced logistic capabilities: Challenge: Sitewithlategridavailabilityduetoprojectlocationchange GE’s solution: Pre-commissioning service: GE can bring portable generators on site and pre-commission turbines even without back feed power Customer benefit: Fastercommissioningoncegridbecameavailable Challenge: Projectsitewithdifficultgeographicaccess GE’s solution: Well-choreographed team with challenging terrain transportation expertise Customer benefit: More site flexibility; schedule target met 1.5 MW WIND TURBINE 9 143 World-classcustomerservice ForwindplantoperatorslookingforadditionalbenefitsthatacontractualpartsrelationshipwithGEcanoffer,thewindparts team has developed tailored offerings that can provide ongoing inventory-level support and parts lead-time guarantees. One of the exciting advantages of a GE wind parts and refurbishment program is membership in the capital parts pool, with a priority access to often hard-to-source capital parts. Conversions, Modifications and Uprates (CM&U) Continuous technological improvements are key for GE to be a world leader in the wind industry. Our CM&U offerings utilize the new technology developments in the 1.5 MW platforms to improve the performance of existing assets. These offerings are designed to improve reliability and availability, and increase turbine output and improve grid integration. Long-Term Asset Management Support GE is your reliable partner as we strive to build long-term relationships with asset managers. Utilizing our strengths, we can provide parts solutions, field technician and customer training, and a wide range of specialized services to complement local on-site capabilities. GE’s wind turbine fleet is one of the fastest growing and best-run fleets in the world. Utilizing our decades of experience in product services in the power generation industry, GE provides state-of-the-art solutions to ensure optimal performance for your wind plant. 24x7CustomerSupport GE’s customer support centers in Europe and the Americas provide remote monitoring and troubleshooting for our installed fleet of wind turbines around the world, 24 hours a day, 365 days a year. The customer support centers are able to quickly perform remote resets for over 250 turbine faults. It is one of the most effective ways to ensure continuous monitoring and fault resets of your wind assets by qualified technology experts. TechnicalSkillsandIn-depthProductKnowledge GE’s wind customer support centers have dedicated teams to dispatch for troubleshooting, repair and maintenance, available 24 hours a day, 365 days a year. This model ensures wide coverage of large wind turbine fleets without compromising technical skills or quality. GE taps into our extensive product knowledge for timely resolution of many issues. All turbine faults are investigated using a structuredtechnicalprocess,whichisthenescalatedasnecessary.Wealsousefeedbackfromthisprocessinproductdevelopment. OperationsandMaintenanceSupport Drivenbyahighlyskilledworkforceandtheoperatingknowledgeofover8,5001.5MWwindturbines,GEoffersawiderange ofservicestailoredtotheoperationandmaintenanceneedsofyourwindassets.Ourofferingsrangefromtechnicaladvisory services, transactional services and remote operations to full on-site operations support including availability guarantees. PartsOfferings GEhasutilizedtheextensivePartsandRefurbishmentexperienceofitsEnergyServicesbusinesstoestablishaglobalcenter of excellence for wind parts operations. The wind parts resources are aligned to provide a full range of offerings for all types of parts and refurbishment needs, including routine maintenance kits, consumables and flow parts, and key capital parts such as gearboxes and blades. Withthelaunchofour24/7partscallcenter,andthedevelopment of online ordering tools, we are increasing the channels that our wind plant operators can utilize to order required wind turbine parts, including emergency requests for down- turbine needs. Environmental HealthandSafety, aGEcommitment Maintaining high Environmental Health and Safety (EHS) standards is more than simply a good business practice; it is a fundamental responsibility to our employees, customers, contractors, and the environment we all share. GE is committed to maintaining a safe work environment. We incorporate these values into every product, service and process, driving EHS processes to the highest standards. 10 144 Poweringtheworld…responsibly. * Mark, WindCONTROL ®, WindFREE ®, WindRIDE-THRU ®and WindSCADA ®are registered trademarks of General Electric Company. ©2008, General Electric Company. All rights reserved. GEA-14954A (3/08) For more information, please visit www.ge-energy.com/wind 145 V90-1.8 MW V90-2.0 MW Built on experience 146 Optimal efficiency The OptiSpeed®* generators in the V90-1.8 MW and the V90-2.0 MW have been adapted from those in Vestas’ highly successful V80 turbine. OptiSpeed® represents a significant advance in wind turbine efficiency as it allows the rotor speed to vary within a range of approximately 60 per cent in relation to nominal rpm. This means that with OptiSpeed®, the rotor speed can vary by as much as 30 per cent above and below synchronous speed. Its purpose is simple: to maximise energy output. It does this by tapping the higher efficiency of slow and variable rotation, storing excess energy in rotational form and exploiting the full force of transient gusts. All told, OptiSpeed® boosts annual energy production. As an added benefit, OptiSpeed® also reduces wear and tear on the gearbox, blades and tower on account of lower peak loading. Moreover, as turbine noise is a function of wind speed, the lower rotation speeds made possible by OptiSpeed® naturally reduce sound levels. Finally, OptiSpeed® helps our V90s deliver better quality power to the grid, with rapid synchronisation, reduced harmonic distortion and less flicker. 3×44 metres of leading edge Vestas blades have always been among the lightest on the market, and with the V90 turbines, we have once again raised the bar. The new blades feature several new light-weight materials, most notably carbon fibre for the load-bearing spars. Not only is carbon fibre lighter than the fibre glass used in previous blades, but its strength and rigidity have also made it possible to reduce the amount of material required. This means that even though our V90s have 27 per cent more swept area than our V80s, the longer blades actually weigh about the same. The V90 blades also have a new profile that is aerodynamically superior to the previous generation. Vestas engineers developed this technologically advanced profile by optimising the relationship between the overall load impact on the turbine and the power generated annually. The fruit of their labours was an entirely new plane shape and a curved back edge. The resulting airfoil improves energy production, while making the blade profile less sensitive to dirt on its leading edge and maintaining a favourable geometrical relationship between successive airfoil thicknesses. For the V90 turbine, this translates into an increase in output combined with a decrease in load transfers - as well as improvements on the bottom line. Proven Performance Wind power plants require substantial investments, and the process can be very complex. To assist in the evaluation and purchasing process, Vestas has identified factors that are critical to wind turbine quality: energy production, power quality and sound level. We spend months testing and documenting these performance areas for all Vestas turbines. When we are finally satisfied, we ask an independent testing organisation to verify the results - a practice we call Proven Performance. At Vestas we do not just talk about quality. We prove it. Innovations in blade technology * Vestas OptiSpeed® is not available in the USA and Canada 147 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 0 5 10 15 20 25 g h i j k b d e c f6 7 89 a 1 3 2 4 5 1 2 3 4 5 6 7 8 9 a b c d e f g h i j k Hub controller Pitch cylinders Blade hub Main shaft Oil cooler Gearbox Mechanical disc brake Service crane VMP-Top controller with converter Ultrasonic wind sensors High voltage transformer Blade Blade bearing Rotor lock system Hydraulic unit Machine foundation Yaw gears Composite disc coupling OptiSpeed® generator Air cooler for generator Technical specifications Power curve V90-1.8 MW & 2.0 MW Wind speed (m/s) V90-1.8 MW V90-2.0 MWPower (kW)148 30 25 20 15 10 30 25 20 15 10 5 0 50 Hz 1,900 1,700 1,500 1,300 1,100 900 60 Hz 2,050 1,850 1,650 1,450 1,250 1,050 2,500 2,000 1,500 1,000 500 0 Rotor Diameter:90 m Area swept:6,362 m2 Nominal revolutions:14.9 rpm Operational interval:9.0-14.9 rpm Number of blades:3 Power regulation:Pitch/OptiSpeed® Air brake:Full blade pitch by three separate hydraulic pitch cylinders. Tower Hub height:80 m, 95 m, 105 m Operational data IEC IIA:IEC IIIA/DIBt II: 1,800 kW 2,000 kW Cut-in wind speed:3.5 m/s 2.5 m/s Nominal wind speed:12 m/s 13 m/s Cut-out wind speed:25 m/s 25 m/s / 21 m/s Generator IEC IIA:IEC IIIA/DIBt II: Type:Asynchronous with OptiSpeed® Asynchronous with OptiSpeed® Nominal output:1,800 kW 2,000 kW Operational data:50 Hz/60 Hz 690 V 50 Hz/60 Hz 690 V Gearbox Type:Planetary/helical stages Control Type:Microprocessor-based control of all the turbine functions with the option of remote monitoring. Output regulation and optimisation via OptiSpeed® and OptiTip® pitch regulation. Weight Nacelle:68 t Rotor:38 t Towers: Hub height:IEC IIA IEC IIIA DIBt II 80 m 150 t 150 t - 95 m 200 t -200 t 105 m --225 t t = metric tonnes. DIBt towers are only approved for Germany. All specifications subject to change without notice. OptiSpeed® allows the rotor speed to vary within a range of approximately 60 per cent in relation to nominal rpm. Thus with OptiSpeed®, the rotor speed can vary by as much as 30 per cent above and below synchronous speed. This minimises both unwanted fluctuations in the output to the grid supply and the loads on the vital parts of the construction. Wind Speed (m/s)Time Pitch Angle (degrees)Time Generator Speed (rpm)Time Output Power (kW)Time 149 State-of-the-art wind turbines are not developed in a vacuum. To create the new V90-1.8 MW and V90- 2.0 MW turbines for low and medium wind, we have drawn on the vast experience gained as the leading supplier of wind energy systems in the world. In particular, we applied successful design elements from our existing range of turbines. We began with the nacelles of our tried and tested V80 wind turbines, which feature OptiSpeed® generators for maximum productivity. To these, we fitted the revolutionary new blades from our high- wind V90-3.0 MW. We then modified the components to ensure optimal harmonisation and to make the very most of the target conditions. The resulting V90-1.8/2.0 MW turbines are optimised for sites with low turbulence and low and medium winds. These innovative wind turbines are so successful that they can actually generate 25 per cent more energy than the corresponding V80s. Naturally, the new integrated turbines feature innovations of their own innovations. For instance, Vestas engineers spent two years designing a more efficient and more robust gearbox. Moreover, while the 90-metre rotor weighs approximately the same as the V80 rotor, the longer blades mean higher loads, so we also reinforced the transmission and other major components of the V90. Built on experience 150 01/08 UKVestas Wind Systems A/S Alsvej 21 8900 Randers Denmark Tel. +45 97 30 00 00 Fax +45 97 30 00 01 vestas@vestas.com www.vestas.com To see a complete list of our sales and service units, visit www.vestas.com 151 Appendix N: 6-Month Meteorological Study 152 www.globalenergyconcepts.com www.dnv.com August 11, 2008 Mr. Paul Curran Managing Director BQ Energy, LLC 20 Jon Barrett Road, Suite 2 Patterson, NY 12563 Sent via email: pcurran@bqpes.com Subject: Preliminary Energy Analysis of Nikiski, Alaska, Wind Project Dear Paul: DNV Global Energy Concepts Inc. (DNV-GEC) is pleased to provide BQ Energy, LLC (BQ Energy) with the following preliminary energy analysis for the proposed Nikiski, Alaska, wind power project. The proposed project is located in the Cook Inlet, on the Kenai Peninsula. DNV- GEC prepared this assessment with a limited amount of data and without the benefit of a site visit to examine site conditions, measurement systems, and proposed turbine locations. As such, the findings herein are preliminary and subject to change as more on-site data are incorporated into a detailed assessment. In preparing this analysis, DNV-GEC: Evaluated all six months of available wind speed and wind direction data from the on-site meteorological (met) tower, known as Met 0004. Data processing included removal of erroneous data caused by issues such as sensor icing, tower shadow, wind flow obstructions, sensor failure, and sensor dragging. Estimated hub-height wind speeds at the met tower using site-derived diurnal shear pattern. Established a correlation to the nearby NOAA weather station wind speed data. Synthesized hourly data from the NOAA weather station to expand the on-site data to a full year. Completed a long-term wind speed assessment and adjusted site data to be representative of the long-term wind resource. Prepared a hub-height wind speed and direction frequency distribution for the 12 months of synthesized and on-site validated wind data. Prepared an estimate of gross energy production for the proposed project layout and turbine model. 153 Paul Curran August 11, 2008 Page 2 Estimated energy losses and net energy generation based on analysis of array losses and other technical losses (e.g., blade soiling, line losses, equipment downtime, and weather effects). Calculated net energy and derived a net capacity factor and 12-month by 24-hour energy production table. The analysis included estimating the annual net capacity factor of a turbine layout, provided by BQ Energy, consisting of 10 Vestas V90 turbines with a rating of 1.8 MW and a hub height of 105 m. We caution that this analysis presents preliminary results only; estimating energy based on less than a year of on-site met data introduces significant uncertainties into the estimate. As more data are obtained to complete a year of site data, the results may differ from those presented herein. This document summarizes the results of the analysis. Preliminary Wind Analysis Data from Met 0004 cover approximately six months, from November 30, 2007, through May 31, 2008. The tower was configured with two sensors installed at three measurement levels (40, 50, and 58.5 m). DNV-GEC evaluated wind speed and wind direction data and removed erroneous data caused by sensor icing, tower shadow, and sensor failure or dragging. Icing was minimal, leading to good overall data recovery. During the six-month period of record 3 days are missing due to unknown circumstances (April 2, April 3, and April 8). DNV-GEC calculated the wind shear exponent, , from Met 0004 wind speed measurements (V) at 40.0 m and 58.5 m above ground level: = ln (V 58.5 / V40.0) / ln (58.5 / 40.0). DNV-GEC computed average values for each month at each hour of the day (diurnal shear), as shown in Figure 1. The shear exponent was calculated for valid data where V58.5 and V40.0 were both greater than 4 m/s. The diurnal variations follow a pattern common to the region. DNV- GEC calculated an average shear exponent of 0.23 over the period of record. For the six month of the year where no on-site data were available, DNV-GEC assumed the average diurnal shear from the six months of available data. To estimate the wind speeds at the proposed turbine hub height (105 m), DNV-GEC applied the average shear exponent for the month and hour of the day to the 10-minute records (or hourly records where 10-minute records were not available) of the top tower measurement height (58.5 m). 154 Paul Curran August 11, 2008 Page 3 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 1415 16 17 18 19 2021 22 23 HourShear ExponentDecember January February March April May Figure 1. Hourly Average Shear by Month To obtain a full year of data for the project site, DNV-GEC developed a correlation between the on-site wind speeds and the NOAA Center for Operational Oceanographic Products and Services (CO-OPS) Data at Nikiski. The NOAA Nikiski station is located near Turbine 5 and was chosen as the most appropriate site for data synthesis due to its close proximity to the project site. Based on the daily average wind speeds, the two sites correlated very well with an R-squared value of 0.91. Based on the correlation, DNV-GEC synthesized hourly wind speed data for June 1 through November 29, 2007. The average hub-height wind speed during the six-month period of record at Met 0004 is 6.2 m/s. After synthesis, the average hub-height wind speed for June 2007 through May 2008 is 6.4 m/s. An annual wind speed distribution was generated from the six months of on-site data and six months of data synthesized from the nearby NOAA station. DNV-GEC chose to not make a long-term adjustment based on data from the NOAA Nikiski station. The approximately 12 years of NOAA Nikiski data suggest that the period of data used for the analysis, June 2007 through May 2008, was an average year. DNV-GEC investigated the data from the Anchorage radiosonde observation station (Anchorage RAOB) at 400 and 500 m. Data recovery was low at lower measurement levels. The monthly correlation with the six months of on-site data were only fair with an r-square of 0.74 at 400 m and only 0.65 at 500 m. Therefore, no further consideration was given to the Anchorage long-term data. A measure of the turbulence at the site, hub-height turbulence intensity (TI), was calculated as the ratio between the measured 58.5-m wind speed standard deviation and 105-m extrapolated wind speed. The average hub-height TI at Met 0004, over the six-month period of record, is 155 Paul Curran August 11, 2008 Page 4 relatively low at 10%. The site TI was used to calculate wake losses (losses due to one turbine reducing the energy generation of neighboring turbines). Preliminary Energy Analysis BQ Energy provided DNV-GEC with a turbine layout for 10 V90 turbines, shown in Figure 2. This turbine has a 90-m rotor diameter and a rated power of 1.8 MW. Due to limited changes in turbine location elevation and similar exposures, DNV-GEC used the met tower data and engineering judgment to estimate wind speeds at each turbine location. To estimate gross energy, DNV-GEC used the wind speed frequency distribution described above, and the turbine power curve provided by BQ Energy and adjusted to an average air density of 1.27 kg/m3. Figure 2. Nikiski, Alaska, Wind Project Site with Met Tower and Proposed V90 Layout DNV-GEC chose to estimate turbine wind speeds based on the differences in elevation of the turbine locations compared to the met tower elevation. These differences were not significant. Because a site visit has not been performed there were greater uncertainties in our understanding of the exposure of the turbine locations and potential wind flow obstructions. An average turbine hub height wind speed of 6.6 m/s was estimated for the proposed layout, which is slightly lower than the estimated hub-height wind speed (6.7 m/s) at the met tower. However, some turbines had slightly higher estimated wind speeds than the met tower and some turbines had slightly lower wind speeds based on the variation in elevations. There was an overall variation in turbine elevation of approximately 40 m. Gross annual energy was derived by integrating the met tower 156 Paul Curran August 11, 2008 Page 5 annualized hub-height wind speed frequency distribution, the estimated turbine wind speeds, and the V90 power curve. Wake loss is the reduction in energy at downwind turbines within an array caused by upwind turbines extracting energy from the wind. Wakes are influenced by turbine spacing, the site’s wind direction distribution, turbulence in the wind, and other meteorological phenomena. Wakes tend to propagate farther with lower turbulence and therefore wake losses typically decrease with increasing turbulence. DNV-GEC estimated wake losses by using different combinations of wake loss models and wake combination methods available within the WindFarm software package; these include the Ainslie axisymmetric and WAsP/Park wake velocity deficit models with sum of the squares and energy balance wake combination methods. The average of these results (2.7%) was used as the best estimate value for the project’s average wake loss, with all model combinations predicting losses within ±0.6% of this value. The resulting estimated wake loss averaged over all turbines and additional estimated losses are summarized in Table 1. The resulting total cumulative loss factor of 14.4% is reasonable for this type of project. Table 1. Summary of Estimated Losses Loss Source V90 18 MW Turbine availability1 5.4% Balance of plant downtime 0.5% Turbine wake/array 2.7% Electrical line 2.5% Blade soiling 0.5% Weather (including icing) 2.0% Turbulence and controls 1.0% Blade degradation 0.4% Power curve2 0.3% Total 14.4% 1 Turbine availability is the combination of routine maintenance, faults, minor component and major component losses. The reported value represents the percent of annual energy lost to unavailability. The corresponding percent of time lost is approximately 4.5%. 2 This accounts for the probability that the turbines will perform at a level different from that of the reference power curve. The estimated annual net energy generation is calculated from gross energy minus the total estimated losses. The estimated net capacity factor and main features of the estimate are shown in Table 2. A 12-month by 24-hour production table is presented in Table 3. 157 Paul Curran August 11, 2008 Page 6 Table 2. Energy Estimate at Nikiski, Alaska, Wind Project Site Average hub-height turbine wind speed (m/s) 6.6 Gross annual energy (GWh/yr) 57 Technical losses 14.4% Net annual energy (GWh/yr) 49 Net annual capacity factor 31% Table 3. 12-Month by 24-Hour Production Table (% of Net Annual Energy) Hour Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec DNV-GEC cautions that the net capacity factor presented in Table 2 has a wide range of uncertainty. No uncertainty analysis was performed as a part of this preliminary energy estimate. The largest sources of uncertainty in this estimate are the lack of a full year of data at the proposed site, and the limited understanding of how winds vary over the site due to having data from only one met tower without a clear understanding as to how it relates to the proposed wind 158 Paul Curran August 11, 2008 Page 7 turbine locations. There is significant uncertainty in the relationship between a long-term reference site and the on-site data because of the short period of record of on-site data. This uncertainty is present in both the synthesis of data (in this case, a very significant portion of the year) and assessing the long-term representativeness of the data. DNV-GEC corrected for the short period of record by synthesizing data as described above. Although there is a close correlation between the met tower and NOAA station wind speeds, this relationship may not be consistent over the entire year. For example, the wind shear measured from the six months of on- site data may not be representative of the wind shear during the other six months of the year. Another factor that may impact the wind shear estimates is related to wind direction. The wind direction data from the NOAA station correlated well to the met tower over the six-month data record. DNV-GEC observed that during the six-month period, December through May, the prevailing energy direction is from the north-northeast to northeast. However, during the remaining portion of the year, June through November, the prevailing energy direction is from the south to south-southwest. The uncertainties associated with this preliminary assessment will be reduced as additional data are collected at the site and a site visit is conducted. Without the benefit of a site visit, there is also greater uncertainty regarding the exposure of the turbine locations to the prevailing winds. Although the trees, refinery structures, and other potential obstructions are apparent from the aerial imagery, it is difficult to adequately assess the impact of these factors without an on-site investigation. We appreciate the opportunity to advise BQ Energy on the proposed Nikiski wind power project. Please contact me at (206) 387-4227 (rzucchi@globalenergyconcepts.com) if you have any questions regarding this information. Sincerely, Rana Zucchi Senior Technical Analyst 159 Appendix O: Tesoro Alaska Refinery Fact Sheet 160 Tesoro Alaska Producing Fuels that Alaskans Demand Refinery.Tesoro Alaska's Kenai refinery is located on the Cook Inlet 70 miles southwest of Anchorage.Opened in 1969,the Kenai refinery has been under Tesoro's operations longer than any of the other refineries.With the capacity to process up to 72,000 barrels of crude oil per day,the Kenai refinery produces ultra low sulfur gasoline,jet fuel,ultra low sulfur diesel (USLD),heating oil,heavy fuel oils,propane and asphalt.Crude oil is delivered by double- hulled tankers through the eastern Cook Inlet and Kenai Peninsula pipelines. Distribution.A 71-mile common-carrier products pipeline with a capacity of 40,000 barrels per day delivers jet fuel,gasoline and diesel from the refinery to the Port of Anchorage and the Anchorage International Airport.Wholesale delivery of refined products occurs at proprietary terminals at Kenai and Anchorage,a third-party terminal in Fairbanks and Tesoro's Nikiski dock next to the refinery. Retail.Tesoro operates 31 company-owned 2Go Tesoro retail stores throughout Alaska and has branding agreements with 60 independently owned Tesoro Alaska stations. About Tesoro Corporation Tesoro Corporation,headquartered in San Antonio,Texas,is a Fortune 150 and a Global 500 company with approximately 5,900 employees.As a leading independent refiner and marketer of petroleum products,Tesoro,through its subsidiaries,operates seven refineries primarily in the western United States with a combined crude oil capacity of more than 660,000 barrels per day. The seven refineries are located in: u Anacortes,Wash.u Kapolei,Hawaii u Kenai,Alaska u Mandan,N.D.u Martinez,Calif.u Salt Lake City,Utah u Wilmington,Calif. Tesoro's retail marketing system includes over 900 branded retail stations,of which more than 445 are company operated under the Tesoro®,Shell®,Mirastar® and USA Gasoline® brands. Tesoro's commercial marketing system includes sales of jet and marine fuels. Employing 575 full-time workers, Tesoro Alaska generates $32 million* annually in employee salaries and wages and property taxes in the state of Alaska FACT SHEET Tesoro Alaska KENAI REFINERY 54741 Tesoro Rd. P.O. Box 3369 Kenai, Alaska 99611 (907) 776-8191 REFINERY CONTACTS: Stephen W. Hansen Vice President, Kenai Refinery (907) 776-3833 Kip Knudson Manager, External Affairs (907) 261-7221 MARKETING CONTACTS: Rob Kinnear Senior Regional Manager (907) 261-7256 Jeff Evans Area Marketing Manager (907) 261-7219 WEB SITE:www.tsocorp.com * Based on 2006 data. All numbers are approximate. 161 Environment Operating a refining and marketing system in Alaska's sensitive environment requires a commitment to be the best possible stewards of the environment.Tesoro Alaska has demonstrated this commitment in many ways: • In 2001,Tesoro Alaska was awarded the Legacy Award for Oil Spill Prevention, Preparedness and Response from the Pacific States/British Columbia Oil Spill Task Force for collaborative efforts to reduce the likelihood of oil spills and related environmental impacts. • In cooperation with the Cook Inlet Region Citizens Advisory Council,Tesoro has helped develop Geographic Response Strategies in Alaska,including all of Prince William Sound, Central Cook Inlet and Kachemak Bay. • In February 2007,Tesoro deployed an assist tug in the Cook Inlet to strengthen marine operational safety. • In May 2007,our refinery became the sole producer of ultra low sulfur diesel (ULSD) in Alaska,through the completion of a Distillate Desulfurization Unit. • Tesoro Alaska worked with the Alaska Department of Fish and Game and the Municipality of Anchorage to help restore a salmon run to Anchorage's Chester Creek.During the summer of 2006,we rerouted a section of our products pipeline to allow for a deeper fish passage into the creek. Health and Safety Tesoro's vigilant safety programs have contributed to continuing improvement in employee safety. This can be seen in our 45 percent reduction in the injury rate since 2004. In 2006,we posted the lowest Occupational Safety and Health Administration recordable incident rate in our history. In 2006,the refinery received two awards from the National Petrochemical and Refiners Association: the Gold Award for outstanding safety performance and the Meritorious Safety Performance Award.In September 2007,the 2Go Tesoro retail store employees achieved an exceptional safety milestone,exceeding one million hours without a day away from work due to injury.In 2006,Alaska's retail employees received the Tesoro Chairman's Award in recognition of the best safety performance among all of Tesoro's retail operations. Community Tesoro Alaska employees are strong contributors to programs and activities that benefit Kenai Peninsula communities. We actively support a wide range of local events and programs—from the United Way to local youth sports. • Tesoro's Gallons for GradesTM program,which rewards academic achievement by awarding Tesoro gift cards to qualifying students,was first introduced in Alaska and has since expanded to retail gas locations operated by Tesoro in other states. •Tesoro Alaska provides funding to hundreds of community organizations,such as the Challenger Learning Center's Starbase program,which allows all sixth-grade classes on the Kenai Peninsula to participate in a simulated space flight mission. • Our employees support the Muscular Dystrophy Association (MDA) of Alaska. In 2006, we raised more than $45,000,including $22,000 raised at the annual Tesoro 2Go/MDA Golf Tournament,which attracted 105 teams. • Tesoro Alaska is the title sponsor of the Tesoro Iron Dog,the world's longest snow machine race. As a testament to Tesoro Alaska's involvement and commitment to community,the refinery has been managed by only four people since 1969.All four still reside on the Kenai Peninsula. 162 Appendix P: Production Tax Credit IRS Rulings 163 From: Martin, Keith [mailto:kmartin@chadbourne.com] Sent: Friday, September 26, 2008 5:56 PM To: Paul Curran Cc: Tim Ryan Subject: RE: Capital Grants and PTCs Paul, The two rulings the associate found are attached. Here again are my suggestions: PTCs are subject to a haircut of up to 50% to the extent the capital cost of the project is paid partly with the help of a grant or "subsidized energy financing." Subsidies that help pay operating costs are not a problem. In view of this, it would be best not to call the money from the state a "grant." It would be better still if the money were an operating cost subsidy rather than an amount tied to the capital cost of the project. Finally, money is not a grant if it might have to be repaid to the government. The condition that might require repayment should not be illusory. It would be best to pattern your program after one on which the IRS has already ruled. The two rulings are things on which the agency has already ruled. Keith Keith Martin Chadbourne & Parke LLP 1200 New Hampshire Ave N.W., Washington, DC 20036 tel 202-974-5674 | fax 202-974-5602 kmartin@chadbourne.com | http://www.chadbourne.com ************************************************************ This e-mail, and any attachments thereto, is intended only for use by the addressee(s) named herein and may contain legally privileged and/or confidential information. If you are not the intended recipient of this e-mail, you are hereby notified that any dissemination, distribution or copying of this e-mail, and any attachments thereto, is strictly prohibited. If you have received this e-mail in error, please notify me by replying to this message and permanently delete the original and any copy of this e-mail and any printout thereof. For additional information about Chadbourne & Parke LLP and Chadbourne & Parke, a multinational partnership, 164 including a list of attorneys, please see our website at http://www.chadbourne.com 165 Checkpoint Contents Federal Library Federal Source Materials IRS Rulings & Releases Private Letter Rulings & TAMs, FSAs, SCAs, CCAs, GCMs, AODs & Other FOIA Documents Private Letter Rulings & Technical Advice Memoranda (1950 to Present) 2003 PLR/TAM 200318076 - 200318001 PLR 200318066 -- IRC Sec(s). 45, 05/02/2003 Private Letter Rulings Private Letter Ruling 200318066, 05/02/2003, IRC Sec(s). 45 UIL No. 45.01-00 Tax credits—electricity produced from renewable sources. Headnote: IRS advised that with respect to project partnership's qualification for tax credits, following transfer of projectco membership interests to project partnership, production of electricity from project wind turbines will be attributable solely to project partnership, and so, project partnership will be entitled to Code Sec. 45; tax credits for electricity that is sold to unrelated persons. Reference(s): Code Sec. 45; Full Text: Release Date: 5/2/2003 Person to Contact: Telephone Number: Refer Reply To: CC:PSI:5 -- PLR-142985-02 Date: January 29, 2003 LEGEND: Taxpayer = Corp 1 = LLC1 = ProjectCo = Project = Partnership State A = State B = 166 State C = County = Utility = Vendor 1 = Vendor 2 = Agency 1 = Agency 2 = Act = a= b= c= d= e= f= g= j= o= p= r= s= t= v= w= x= y= z= aa= bb= cc= dd= Dear [Redacted text] 167 This letter responds to your letters dated August 5, 2002, and November 6, 2002, requesting rulings on behalf of Project Partnership, regarding Project Partnership's qualification for tax credits under section 45 of the Internal Revenue Code from an aa megawatt wind-based generation project consisting of bb separate cc MW wind turbine generators located in County (Project). You represent that the facts are as follows. LLC 1 formed ProjectCo on a. Following the formation of ProjectCo, Taxpayer acquired a b percent membership interest in ProjectCo in exchange for a cash contribution of $c. ProjectCo used this cash contribution to purchase ground lease options (described below) and other development rights for the Project from LLC1. LLC1 acquired various options to lease land for the Project (the “Ground Lease options”). The Ground Lease Options grant the holder of the option the right to lease (or, in certain circumstances, to purchase) all or part of the land (collectively, the “Ground Lease”). LLC1 sold the Ground Lease options to ProjectCo. ProjectCo will exercise the Ground Lease Options and will pay rent under the ground lease equal to the greater of (i) a fixed cash amount per wind turbine generator located on the leased land, (ii) an amount determined by multiplying a unit price by the number of kilowatt- hours of electricity produced by the wind turbine generators located on the leased land, or (iii) a fixed percentage of the gross revenue derived from the sale of electricity produced by the wind turbine generators located on the leased land (“Ground Lease Rent”). Pursuant to a power purchase agreement (the “PPA”) with Utility dated d, ProjectCo will sell to Utility electricity produced from the Project that is not needed to operate the Project over the PPA's approximately e-year term at a base price of a fixed amount per MWh. ProjectCo entered into an interconnection agreement with Utility on f (the “Interconnection Agreement”). Pursuant to the Interconnection Agreement, certain interconnection facilities will be constructed (at Taxpayer's cost) to permit the interconnection of the Project with Utility's system. ProjectCo will enter into a supply and installation agreement (the “Supply and Installation Agreement”) with Vendor 1, an unrelated party that is the vendor of the wind turbine generators to be used by the Project. ProjectCo also expects to enter into a balance of plant engineering, procurement and construction agreement with Vendor 2, an unrelated party, to build the rest of the Project (the “Balance of Plant Agreement”). Both agreements will require the Project to be substantially completed by a specified date and will include a liquidated damages clause providing that in the event of a non- excused delay in project completion, ProjectCo will receive liquidated damages proportional to the length of the delay. Vendor 1 will also warrant the performance of the installed wind turbine generators and it will pay liquidated damages to Project Partnership to the extent that the generators fall below certain performance standards. ProjectCo will purchase LLC1's b percent interest in ProjectCo at the commencement of construction of the Project. Upon the sale of LLC1's interest, ProjectCo will be treated as a disregarded entity for federal tax purposes. ProjectCo will borrow from third-party lenders to fund the expected $p construction cost of the Project. The permanent financing for the proj ect is expected to consist of a single tranche of approximately $dd combining both a term loan and a production tax credit loan (the “Combined Loan”). In connection with the financing, Taxpayer will enter into an agreement (the “Equity Contribution Agreement”) in favor of the lenders to make contributions to ProjectCo in the amount of $r when construction is completed (the “Fixed Contribution Obligation”) plus additional semi-annual contributions (the “PTC Contribution Obligation”) that are measured by the lesser of i) the debt service on the production tax credit portion of the Combined Loan, and ii) the product of cc cents, as adjusted pursuant to § 45(b) (1) and the “PTC Rate” and the number of kilowatt hours of electricity produced by the Project during t he semi- annual period. The contributions to satisfy the PTC Contribution Obligation are expected to be approximately s percent of the § 45 tax credits generated by the Project in each semi-annual period over a t-year period commencing when the wind turbines in the Project are placed in service. [Redacted text] The Partnership Agreement will provide that each partner will be required to contribute its pro rata share of i) an initial equity contribution equal in amount to the Initial Payment, the $v Initial Contribution, and ii) semi-annual capital contributions (the “Semi-Annual Partner Contributions”) equal to an agreed percentage of an amount equal to the product of the number of kilowatt hours of electricity produced by the Project during the applicable semi-annual period and the PTC rate. The initial Contribution, all Semi-Annual Partner Contributions and all current distributions will be made by the partners in accordance with their respective percentage interests. All items of income, gain, loss, deduction and credit of Project Partnership will be allocated to the partners in accordance with their respective percentage interests. Project Partnership will use the Initial Contribution to make the Initial Payment pursuant to the Purchase and Sale Agreement. The Semi-Annual Partner Contributions will be used by Project Partnership to make the PTC Capital Contribution to ProjectCo pursuant to the Equity Contribution Agreement. ProjectCo will use these contributions, together with any available operating cash flow after payment of expenses (including Combined Loan service and Ground Lease rent) to pay amounts due with respect to the Combined Loan. 168 After providing for such amounts, ProjectCo will make distributions to the Project Partnership, which amounts, together with the amounts by which the Partners Semi-Annual Contribution exceeds the PTC Contribution Obligation under the Equity Contributions Agreement, would be available for the Project Partnership to make the Periodic Payments under the Purchase and Sale Agreement. [Redacted text] ProjectCo expects to hire an operator to provide operation and certain maintenance services for the Project (the “O&M Agreement”). The operator under the O&M Agreement is expected to be an affiliate of the Taxpayer's parent corporation. Taxpayer also expects to enter into a maintenance and service agreement with Vendor 1 for the wind- turbine generators and related equipment for an initial y-year period (the “Maintenance and Service Agreement”). The compensation paid to the operator under the O&M Agreement and to the service provider under the Services Agreement is expected to be a fixed amount per year per wind turbine generator included in the Project, subject to an annual adjustment for inflation. The terms of the O&M Agreement and the Services Agreement will be negotiated at arm's length and the amounts paid to the operator and service provider will reflect reasonable compensation for services rendered. Agency 1 has agreed to provide cash proceeds to ProjectCo under the terms and conditions of an agreement between Agency 1 and ProjectCo (the “Agency 1 Agreement”). Under the Agency 1 Agreement, Agency 1 will disburse the proceeds to ProjectCo when the Project is completed and in service (the “Commencement Date”) in the form of a single advance supplemental production payment. ProjectCo is required to spend the proceeds on operating expenses during the j-year period beginning on the Commencement Date (the “Expenditure Requirement”). ProjectCo will earn the proceeds as it produces and sells electricity during the y-year period commencing with the Commencement Date (the “Performance requirement”). To the extent that either the Expenditure Requirement or the Performance Requirement is not satisfied, ProjectCo is required to repay Agency 1. Pursuant to a loan guarantee and reimbursement agreement, (the Agency 2 Loan Guarantee”), between ProjectCo and Agency 2, Agency 2 will provide a loan guarantee in favor of the lender to ProjectCo under the construction and term financing. The Agency 2 Loan Guarantee will be for approximately z months' debt service on the Combined Loan. ProjectCo has applied to the relevant local authorities for designation of the Project Site as an Enterprise Zone. An enterprise zone is an area that meets the requirements set forth in the Act. The purpose of the Act is to stimulate business and industrial growth and retention in, and stimulate neighborhood revitalization of, areas in which pervasive poverty, unemployment and economic distress exist. If the Project site is designated as an enterprise zone under the Act, the acquisition of building materials to be incorporated into the Project would not be subject to certain sales and use taxes imposed by State C. Taxpayer represents the following. The Utility is not a related person to the Project Partnership within the meaning of § 45(d)(3). The electricity generated by the wind turbines within the Project is not being sold to a utility pursuant to a contract originally entered into before January 1, 1987. The Project Partnership projects that at the end of the term of the Ground Lease, it will be economically feasible for ProjectCo to remove the Project's wind turbines from the land. Taxpayer requests the following rulings: 1. Following the transfer of the ProjectCo membership interests to Project Partnership, the production of electricity from the Project wind turbines will be attributable solely to Project Partnership, and as a result, Project Partnership will be entitled to the § 45 tax credits for electricity that is sold to unrelated persons. 2. The § 45 credit attributable to Project Partnership may be passed through to and allocated among the partners of Project partnership under the principles in § 702(a)(7), in accordance with each partner's interest in the Project partnership at the time the § 45 credit arises. 3. Any termination of the Project Partnership under § 708(b)(1)(B) arising from sales or exchanges of interests in Project Partnership will not preclude Project Partnership as reconstituted from taking the § 45 credit for the production and sale of electricity from the Project wind turbines to unrelated persons. 4. The proceeds from the Agency 1 Agreement, the Agency 2 Loan Guarantee, and the State C sales/use tax exemption will not be considered 1) grants provided by the United States, a State, or a political s ubdivision of a State for use in connection with the Project; 2) proceeds of an issue of State or local government obligations used to provide financing for the project the interest on which is exempt from tax under § 103; 3) subsidized energy financing provided (directly or indirectly) under a Federal, State, or local program provided in connection with the Project; or 4) other credit within the meaning of § 45(b)(3)(A)(1)(iv). Under § 45, the renewable electricity production credit for any taxable year is an amount equal to the product of 1.5 cents, multiplied by the kilowatt hours of electricity 1) produced by the taxpayer from qualified energy 169 resources, and at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service, and 2) sold by the taxpayer to an unrelated person during the taxable year. Under § 45(b)(3), the amount of the credit with respect to any project for any taxable year is reduced by an amount equal to the product of 1) the amount of the credit otherwise allowable for such year and 2) a fraction, the numerator of which is the sum of i) grants provided by the United States, a State, or a political subdivision of a State for use in connection with the project; ii) proceeds of an issue of State or local government obligations used to provide financing for the project the interest on which is exempt from tax under § 103; iii) the aggregate amount of subsidized energy financing provided (directly or indirectly) under a Federal, State, or local program in connection with the project; and iv) the amount of any other credit allowable with respect to any property which is part of the project, and the denominator of which is the aggregate amount of additions to the capital account for the project for the taxable year and all prior taxable years. A similar reduction exists under § 29(b)(3) relating to governmental grants or subsidized energy financing provided in connec tion with a nonconventional source fuel project. Section 29 was added to the Code as a part of the Crude Oil Windfall Profit Tax of 1980, section 231, 1980-3 C.B. 1, 40. The Conference Report, in explaining the reduction mechanism found in § 29(b)(3), states that the § 29 credit is reduced in proportion to federal grants provided in connection with the construction or acquisition of the facility. H.R. Rep. No. 96-817 (Conf. Rep.), 96th Cong., 2d Sess. (1980), 1980-3 C.B. 245, 300. Section 45(c)(1) defines “qualified energy resources” to include wind. Section 45(c)(3)(A) defines a “qualified facility” in the case of a facility using wind to produce electricity as any facility owned by the taxpayer that is originally placed in service after December 31, 1993, and before January 1, 2002. Section 45 does not define the term “grant.” However, the term is defined in § 1.148-6(d)(4)(iii) of the Income Tax regulations (involving arbitrage bonds) as a transfer for a governmental purpose of money or property to a transferee that is not a related party to or an agent of the transferor. The transfer must not impose any obligation or condition to directly or indirectly repay any amount to the transferor. [Redacted text] Section 45(b)(3)(A)(ii) provides that for purposes of § 45, tax-exempt bonds consist of an issue of State or local government obligations used to provide financing for the project the interest on which is exempt from tax under § 103. The proceeds of such reduce the amount of credit for any taxable year. Section 45 does not define subsidized energy financing. However, under § 48(a)(4)(C), the term means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy. Section 702(a)(7) provides that each partner determines the partner's income tax by taking into account separately the partner's distributive share of the partnership's other items of income, gain, loss, deductions, or credit to the extent provided by regulations prescribed by the Secretary. Under § 1.702-1(a), the distributive share is determined under § 704 and § 1.704-1. Section 704(a) provides that a partner's distributive share of income, gain, loss, deduction, or credit is, except as otherwise provided in chapter 1 of subtitle A of Title 26, determined by the partnership agreement. Under § 704(b), a partner's distributive share of income, gain, loss, deduction, or credit (or item thereof) is determined in accordance with the partner's interest in the partnership (determined by taking into account all facts and circumstances), if (i) the partnership agreement does not provide for the partner's distributive share of income, gain, loss, deduction, or credit (or item thereof), or (ii) the allocation to a partner under the agreement of income, gain, loss, deduction, or credit (or item thereof) lacks substantial economic effect. Section 1.704-1(b)(4)(ii) provides that allocations of tax credits and tax credit recapture (except for § 38 property) are not reflected by adjustments to the partners' capital accounts. Thus, these allocations cannot have economic effect under § 1.704-1(b)(2)(ii)(b)(1), and the tax credit and tax recapture must be allocated in accordance with the partner's interest in the partnership as of the time the credit or recapture arises. If a partnership expenditure (whether or not deductible) that gives rise to a tax credit in a partnership taxable year also gives rise to valid allocations of partnership loss or deduction (or other downward capital account adjustment) for the year, the partners' interests in the partnership regarding the credit (or the cost giving rise to it) are in the same proportion as the partners' respective distributive shares of the loss or deduction (and adjustments). See § 1.704-1(b)(5), Example 11. Identical principles apply in determining the partner's interest in the partnership regarding tax credits that arise from income of the partnership (whether or not taxable). If a partnership receipt gives rise to a tax credit, such as the credit under § 45, and that receipt also gives rise to a valid allocation of partnership income, the partners' interests in the partnership with respect to the item of credit will be in the same proportion as the partners' respective distributive shares of such income. See § 1.704-(b)(4)(ii). 170 Section 708(b)(1)(B) provides that a partnership will be considered as terminated if, within a 12 month period, there is a sale or exchange of 50 percent or more of the total interests in partnership capital and profits. Under § 1.708-1 (b)(4), if a partnership is terminated by a sale or exchange of an interest, the following is deemed to occur. The partnership contributes all of its assets and liabilities to a new partnership in exchange for an interest in the new partnership. Immediately thereafter, the terminated partnership distributes interests in the new partnership to the purchasing partner and the other remaining partners in proportion to their respective interests in the terminated partnership in liquidation of the terminated partnership, either for the continuation of the business by the new partnership, or for its dissolution and winding up. Section 7701(a)(14) provides that the term “taxpayer” means any person subject to any internal revenue tax. Section 7701(a)(1) provides that when used in Title 26, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof, the term “person” will be construed to mean and include an individual, trust, estate, partnership, association, company, or corporation. Section 301.7701-3(b) of the Procedure and Administration Regulations provides that unless it elects otherwise, a domestic eligible entity is disregarded as an entity separate from its owner if it has a single owner. Based solely on the representations and the relevant law and regulations set forth above, we conclude as follows: 1. Following the transfer of the ProjectCo membership interests to Project Partnership, the production of electricity from the Project wind turbines will be attributable solely to Project Partnership, and as a result, Project Partnership will be entitled to the § 45 tax credits for electricity that is sold to unrelated persons. 2. The § 45 credits attributable to Project Partnership may be passed through and allocated among the partners of Project Partnership under the principles of § 702(a)(7) in accordance with each partner's interest in Project Partnership at the time the § 45 credit arises. 3. A future termination of Project Partnership under § 708(b)(1)(B) will not preclude the reconstituted partnership from claiming the § 45 credit for the sale of electricity to unrelated persons that is generated from the Project wind turbines. 4. The proceeds from the Agency 1 Agreement, the Agency 2 Loan Guarantee, and the State C sales/use tax exemption will not be considered 1) grants provided by the United States, a State, or a political s ubdivision of a State for use in connection with the Project; 2) proceeds of an issue of State or local government obligations used to provide financing for the project the interest on which is exempt from tax under § 103; 3) subsidized energy financing provided (directly or indirectly) under a Federal, State, or local program provided in connection with the Project; or 4) other credit within the meaning of § 45(b)(3)(A)(1)(iv). Except as specifically set forth above, no opinion is expressed concerning the federal income tax consequences of the above described facts under any other provision of the Code or regulations. In particular, no opinion is expressed or implied regarding how the partners' interests in the Partnership are determined. This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent. In accordance with the power of attorney filed with this request, we are sending copies of this letter ruling to your authorized representative. This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. Sincerely, Walter H. Woo Senior Technician Reviewer Branch 5 Office of Associate Chief Counsel (Passthroughs and Special Industries) Enclosure: 6110 copy © 2008 Thomson Reuters/RIA. All rights reserved. 171 Checkpoint Contents Federal Library Federal Source Materials IRS Rulings & Releases Private Letter Rulings & TAMs, FSAs, SCAs, CCAs, GCMs, AODs & Other FOIA Documents Private Letter Rulings & Technical Advice Memoranda (1950 to Present) 2004 PLR/TAM 200439050 - 200439001 PLR 200439038 -- IRC Sec(s). 45, 09/24/2004 Private Letter Rulings Private Letter Ruling 200439038, 09/24/2004, IRC Sec(s). 45 UIL No. 45.01-00 Tax credits—electricity produced from renewable sources. Headnote: Advance payment made by utility to state LLC project that produces electricity from megawatt-based wind generation won't be considered: grant provided by U.S., state or political subdivision of state for use in connection with project; proceeds of issue of state or local govt. obligations used to provide financing for project, interest of which is exempt from tax under Code Sec. 103; ; subsidized energy financing provided under federal, local or state program in connection with project; or other credit under Code Sec. 45; . Reference(s): Code Sec. 45; Full Text: Date: 05/27/04 LEGEND: Partner = Parent = LLC = ProjectCo = Trust = Agency = State A = State B = County = a= c= d= e= 172 State C = f= g= h= Dear This letter responds to your letter dated December 10, 2003, requesting rulings on behalf of Projectco, regarding ProjectCo's qualification for tax credits under section 45 of the internal Revenue Code. You represent that the facts are as follows. Partner is an entity that is disregarded as an entity separate from its owner for federal income tax purposes. All of the membership interests in Partner are owned by LLC, a State A limited liability company. LLC is a direct wholly- owned subsidiary of Parent, a State C corporation. ProjectCo is a State A limited liability company, which was formed on a, for the purpose of developing and owning the Project. ProjectCo is owned by Partner and an affiliated corporation. ProjectCo is treated as a partnership for federal income tax purposes. The Project is an e megawatt wind-based generation project consisting of e separate MW wind turbine generators located in County. The Trust is a tax-exempt organization formed in response to State B legislation to establish a g percent public purposes charge to the rates paid by the customers of f utilities in State B for, among other things, the above- market costs of renewable energy resources. State B laws authorize Agency to direct the manner in which the funds are collected and spent. State B laws further provide Agency with the authority to direct that funds collected be paid to a nongovernmental entity for investment in, among other things, renewable energy resources. The Trust is this nongovernmental entity. ProjectCo has agreed to transfer the environmental attributes (including all credits, benefits, emissions, reductions, offsets, and allowances resulting from the avoidance of any emission of any gas, chemical, or other sources) associated with the production of electricity at the project to Trust in exchange for an advance payment (the “Advance Payment”). ProjectCo will earn th e Advance Payment as it delivers kilowatt hours of electricity to the utility that has agreed to buy power from the Project. ProjectCo must repay Trust an amount equal to any portion of the Advance Payment that has not been earned by the 15 th year after commencement of commercial operations. State B provides a transferable, nonrefundable business energy tax credit (the “BETC”) in the amount of c percent of up to $d million of the cost of energy or conservation projects, including wind projects, for projects located in Sate B. The BETC may be used to offset State B income tax over an h-year period. ProjectCo expects the project to qualify for the BETC. ProjectCo expects to transfer the right to the BETC to LLC who will t hen sell the BETC to an unrelated entity for an amount approximately the present value of the BETC. Partner requests the following ruling on behalf of ProjectCo: The Advance Payment and the BETC will not be considered 1) a grant provided by the United States, a state, or a political subdivision of a state for use in connection with the Project; 2) proceeds of an issue of state or local government obligations used to provide financing for the Project the interest on which is exempt from tax under § 103; 3) subsidized energy financing provided (directly or indirectly) under a federal, state, or local program provided in connection with the Project; or 4) an other credit within the meaning of § 45(b)(3)(A)(iv). Under § 45, the renewable electricity production credit for any taxable year is an amount equal to the product of 1.5 cents, multiplied by the kilowatt hours of electricity 1) produced by the taxpayer from qualified en ergy resources, and at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service, and 2) sold by the taxpayer to an unrelated person during the taxable year. Under § 45(b)(3), the amount of the credit with respect to any project for any taxable year is reduced by an amount equal to the product of 1) the amount of the credit otherwise allowable for such year and 2) a fraction, the numerator of which is the sum of i) grants provided by the United States, a State, or a political subdivision of a State for use in connection with the project; ii) proceeds of an issue of State or local government obligations used 173 to provide financing for the project the interest on which is exempt from tax under § 103; iii) the aggregate amount of subsidized energy financing provided (directly or indirectly) under a Federal, State of local program in connection with the project; and iv) the amount of any other credit allowable with respect to any property which is part of the project, and the denominator of which is the aggregate amount of additions to the capital account for the project for the taxable year and all prior taxable years. A similar reduction exists under § 29(b)(3) relating to governmental grants or subsidized energy financing provided in connection with a nonconventional source fuel project. Section 29 was added to the Code as a part of the Crude Oil Windfall Profit Tax of 1980, section 231, 1980-3 C.B. 1, 40. The Conference Report, in explaining the reduction mechanism found in § 29(b)(3), stat es that the § 29 credit is reduced in proportion to federal grants provided in connection with the construction or acquisition of the facility. H.R. Rep. No. 96-817 (Conf. Rep.), 96 th Cong., 2d Sess. (1980), 1980-3 C.B. 245, 300. Section 45(c)(1) defines “qualified energy resources” to include wind. Section 45(c)(3)(A) defines a “qualified facility” in t he case of a facility using wind to produce electricity as any facility owned by the taxpayer that is originally placed in service after December 31, 1993, and before January 1, 2004. Section 45 does not define the term “grant.” However, the term is defined in § 1.148-6(d)(4)(iii) of the Income Tax r egulations (involving arbitrage bonds) as a transfer for a governmental purpose of money or property to a transferee that is not a related party to or an agent of the trans feror. The transfer must not impose any obligation or condition to directly or indirectly repay any amount to the transferor. Section 45(b)(3)(A)(ii) provides for purposes of § 45 tax-exempt bonds consist of an issue of State or local government obligations used to provide financing for the project the interest on which is exempt from tax under § 103. The proceeds of such reduce the amount of credit for any taxable year. Section 45 does not define subsidized energy financing. However, under § 48(a)(4)(C), the term means financing provided under a federal, state, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve of produce energy. Based solely on the representations and the relevant law and regulations set forth above, we conclude that the Advance Payment will not be considered 1) a grant provided by the United States, a state, or a political subdivision of a state for use in connection with the Project; 2) proceeds of an issue of state or local government obligations used to provide financing for the project the interest on which is exempt from tax under § 103; 3) subsidized energy financing provided (directly or indirectly) under a federal, state, or local program in connection with the Project; or 4) other credit within the meaning of § 45(b)(3)(A)(1)(iv). Section 6.08 of Rev. Proc. 2004-1, I.R.B. 1, 15, provides that the Internal Revenue Service will not issue a letter ruli ng if the request presents an issue that cannot be readily resolved before a regulation or any other published guidance is issued. We have determined that the issue of whether the BETC falls within one of the categories under 45(b)(3) cannot be readily resolved before published guidance is issued. Therefore, we decline to rule on this issue. Except as specifically set forth above, no opinion is expressed concerning the federal income tax consequences of the above described facts under any other provision of the Code or regulations. This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent. Sincerely, Walter H. Woo Senior Technician Reviewer Branch 5 Office of Associate Chief Counsel (Passthroughs and Special Industries) cc: © 2008 Thomson Reuters/RIA. All rights reserved. 174 Appendix Q: Letter of Support From Homer Electric 175 176 Appendix R: Draft Interconnection Study Scope of Work 177 1 of 3 Draft #1 9/26/2008 Scope of the System Reliability Impact Study for Kenai Winds, Nikiski, AK 1. Purpose The purpose of this study is to evaluate the impact of the proposed Kenai Winds, LLC’s Kenai Winds Project (the “Project”) on the reliability of the Homer Electric Association (HEA) Transmission System. The Point of Interconnection (“POI”) will be the 25 kV bus at the Tesoro Alaska Refinery. The Project is expected to have a maximum new potential generating capacity of 15 - 18MW. The Project will be located in the Nikiski Industrial Zone in an unincorporated area of the Kenai Peninsula Borough and has a proposed in-service date of September, 2010. The study will assess the impact of the Project on the base case power system, including potentially Affected Systems, and will provide a list of the facilities required to make the interconnection, and non-binding good faith estimates of cost and time to construct those facilities. The study will be conducted in accordance with the applicable reliability and design standards; and in accordance with applicable Alaska study guidelines, procedures and practices. The study will be conducted in accordance with the documents entitled “ASCC Planning Criteria for the Reliability of Interconnected Electric Utilities” and “ASCC Operating Guidelines for Interconnected Utilities and Alaska Intertie Operating Guides.” 2. Interconnection Plan The study will include a description of the proposed facilities and the conceptual design of the Interconnection to the transmission system. The description will include a one-line diagram depicting the proposed facilities and their integration with the existing facilities. 3. Study Period The study will focus on the period of 2 years in the future, 2011 load level. The study will be conducted using applicable Power Flow, Short Circuit and Stability base cases provided by HEA, and will include the representation of other any proposed projects known to HEA likely to be operational by 2010. 4. Study Area The study will evaluate the impact of the Project on the power system in Homer Electric service territory. For the lower voltage local systems, the study will focus on the Point of Interconnection and the surrounding underlying network (local load, nearby industrials) elements impacted by the Project. 5. Base Case Conditions The impact of the proposed Project will be evaluated for summer peak load, winter peak load, and light load for the following base case conditions, and as specified under the subsequent sections of this Scope. 178 2 of 3 Case 1 – Base case without the Project. The base case will include the baseline system and the proposed projects likely to be operational by 2010. The Short Circuit base case will model all the projects as in-service. The Power Flow base case will normally model all projects in- service at full output, but may model some projects as out-of-service or less than full output as necessary to establish a feasible base dispatch. Generation will be dispatched in accordance with Homer Electric practices. Case 2 – Case 1 with the Project modeled. The Project will be modeled as in-service at full output. Unit and facility reactive resources for the Project will be represented. Generation will be re-dispatched in the Power Flow case in accordance with Homer Electric practices. 6. Analysis Thermal, Voltage, Stability and Short Circuit analyses will be conducted to assess the performance of the base system conditions within the Study Area, with and without the Project, in accordance with Applicable Reliability Standards, Guidelines and study practices. Modifications to Base Cases, during analyses, will be documented in the Study Report. Power Flow Analyses Thermal and voltage analyses, using the PSS/E power flow or comparable program, will be performed for summer and winter peak load conditions in the Study Area. These analyses will include performing a test for evaluating power factor requirements. Stability Analysis Stability analysis will be performed for summer peak and light load conditions to determine the impact of the Project on system performance within the Study Area. This analysis will evaluate the performance of the system for normal criteria contingencies, and will address issues including, but not limited to, transient stability, dynamic stability (i.e. damping), critical clearing time, coordination of protection and control systems, and performance of any Special Protection Systems that may be affected. Short Circuit Analysis Short Circuit analysis will be performed to evaluate the impact of the Project on system protection and adequacy of existing circuit breakers, other fault current interrupting devices, and related equipment within the Study Area to identify impacts of 100A or more. Initially fault levels will be determined with all transmission lines that are normally in service represented as such, and those transmission lines that are normally open (e.g. a “normally open” bus tie) shall be represented as such. However, all reasonably realizable system configurations that yield the highest fault current shall be considered, consistent with local operating practice and procedure as determined by the Homer Electric. Sensitivity Analysis Sensitivity thermal and voltage analyses will be performed for summer and winter load 179 3 of 3 conditions, using design criteria contingencies, on the following cases, to assess the impact of the Project on system performance within the Study Area. Case A – Tesoro Alaska Refinery not operating Case B – Agrium Nitrogen Operations re-opened at full output 7. Modeling Assumptions Phase angle regulators (“PARs”), switched shunts, and LTC transformers will be modeled as regulating pre-contingency and non-regulating post-contingency. SVC and FACTS devices will be set to zero pre-contingency and allowed to operate to full range post-contingency. 8. System Upgrade Facilities If study results indicate that the Project, as proposed, would result in violations of reliability standards, analyses will be performed to identify any System Upgrade Facilities (SUFs) that would be required. 9. Cost Estimates of Facilities/Time to Construct A description of facilities (Connecting Transmission Owners’ Attachment Facilities and System Upgrade Facilities, if any) required to interconnect the Project, and non-binding good faith estimates of cost and time to construct those facilities, will be provided. 10. Report A report will be prepared presenting the results of these studies. This report will be provided to BQ Energy, Tesoro, and the Alaska Energy Authority. 180 Appendix S: Letter of Support from Alaska House Finance Committee 181 182