HomeMy WebLinkAboutDiesel Brewing Renewable Energy Project App
Renewable Energy Fund
Grant Application
AEA 09-004 Grant Application Page 1 of 40 9/2/2008
Application Forms and Instructions
The following forms and instructions are provided for preparing your application for a
Renewable Energy Fund Grant. An electronic version of the Request for Applications (RFA)
and the forms are available online at http://www.akenergyauthority.org/RE_Fund.html
The following application forms are required to be submitted for a grant recommendation:
Grant Application
Form
GrantApp.doc Application form in MS Word that includes an outline of
information required to submit a complete application.
Applicants should use the form to assure all information is
provided and attach additional information as required.
Application Cost
Worksheet
Costworksheet.doc Summary of Cost information that should be addressed
by applicants in preparing their application.
Grant Budget
Form
GrantBudget.xls A detailed grant budget that includes a breakdown of
costs by task and a summary of funds available and
requested to complete the work for which funds are being
requested.
Grant Budget
Form Instructions
GrantBudgetInstr.pdf Instructions for completing the above grant budget form.
If you are applying for grants for more than one project, provide separate application
forms for each project.
Multiple phases for the same project may be submitted as one application.
If you are applying for grant funding for more than one phase of a project, provide 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.
If you have additional information or reports you would like the Authority to consider in
reviewing your application, either provide an electronic version of the document with
your submission or reference a web link where it can be downloaded or reviewed.
REMINDER:
Alaska Energy Authority is subject to the Public Records Act, AS 40.25 and materials
submitted to the Authority may be subject to disclosure requirements under the act if no
statutory exemptions apply.
All applications received will be posted on the Authority web site after final
recommendations are made to the legislature.
Renewable Energy Fund
Grant Application
AEA 09-004 Grant Application Page 2 of 40 9/3/2008
SECTION 1 – APPLICANT INFORMATION
Name Diesel Brewing Company, LLC (DBA Diesel Brewing of Ketchikan)
Type of Entity:
Independent Power Producer
Mailing Address
P.O. Box 4483, Salem, Oregon 97302
Physical Address
3991 Fairview Industrial Drive S, Salem, Oregon 97302
Telephone
503 588-8028
Fax
503 588-8260
Email
Jeff@northwestwind.com
1.1 APPLICANT POINT OF CONTACT
Name: Jeff Raines
Title: Chief Executive Officer
Mailing Address
P.O. Box 4483, Salem, Oregon 97302
Telephone
503 588-8028
Fax: 503 588-8260
Email
Jeff@northwestwind.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
XX 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.)
Renewable Energy Fund
Grant Application
AEA 09-004 Grant Application Page 3 of 40 9/3/2008
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.
Diesel Brewing of Ketchikan is a renewable energy project dedicated to taking low-grade or
waste products from the timber industry, such as hog fuel, and turning it into a combination of
liquid fuel products (diesel, heating oil and kerosene) and producing electricity as a by-product
of the process. Therefore, the kind of renewable energy used will be waste forest products.
Although this project spans the four phases listed within the RFA, much of the preliminary work
performed is directly transferrable to the other phases. For example, information gathered for
items listed under Reconnaissance is also directly transferrable to the second phase, Feasibility.
Therefore, although the project spans the four phases of the State of Alaska, Renewable
Energy Grant Application, less than 20% of the time and effort will go to the first three phases
will more than 80% will go into the final phase, Construction, Commission, Operation and
Reporting. With this in mind, the Project elements required in order to successfully complete
this project are:
The Project elements are:
1. Reconnaissance; which includes initial site visit and further analysis of the project
potential in order to move on to a full feasibility study.
2. Resource Assessment and full Feasibility Study; the full feasibility study will include
resource assessment, full permit reviews, initial engineering evaluation of selected
sites, site design modifications, final economic impact study and work force
assessment.
3. Final Design and Permitting; This phase will include both final site design and
equipment integration engineering design. Final permitting with all agencies and first
stage workforce integration.
4. Construction and Commissioning; Final phase, at this point construction and final
workforce integration will lead to commissioning and operations.
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 proposed project is to convert bio-mass (forest products residuals) to liquid fuels,
specifically heating fuels and diesel, and electricity through gasification of the bio-mass and
converting the resulting synthesis gas (SynGas) to #1 heating fuel and diesel for transportation
applications. Electricity is a by-product of the proposed process and will be produced to meet
facility electrical needs with any excess electricity made available to the local utilities. The
technologies used in the process are, for the most part, well known and proven technologies in
use since the mid-1930’s. The gasses produced will be converted to liquids fuel using a catalytic
Renewable Energy Fund
Grant Application
AEA 09-004 Grant Application Page 4 of 40 9/3/2008
conversion process called Fischer-Tropsch, and the electricity will be produced and generated
by capturing the waste heat and making steam through heat exchangers and standard turbines
and generators. The preferred site for this facility is Ketchikan, AK, specifically at the industrial
park located adjacent to the airport and co-located with one of the mills in the area. Ketchikan
has a large volume of woody bio-mass available from both the National Forest and the local
wood products industries. Long term supply appears to be available and transportation of the
raw material and the finished product is limited to very short distances. It is envisioned that the
majority of the finished product will be consumed in the local area, off-setting high transportation
costs for heating oil and diesel and providing a nominal amount of electricity to the industrial
park, local area and community as needed.
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.
The total amount of funds needed for all phases of this project is $25,625,000.00. We anticipate
two sources for the funding, grant funding and cost share funding or matching funds. Cost-
shared (Private) funding in the amount of $5,125,000.00 will be combined with a Renewable
Energy Fund Grant of $20,500,000.00. The cost share for this project equates to a 20% cash
match. A project specific corporation will be formed (Diesel Brewing of Ketchikan, LLC), to
ensure project specific accounting. Private investors will become members of Diesel Brewing of
Ketchikan, LLC. All private funding will be collected prior to beginning the project to avoid
potential funding shortfalls once the project has begun.
Project Cost Summary:
The plant will be under construction for the first 14 months of the project.
First year (12 months)costs:
Capital Expenses:$19,235,842.00
Salaries and Wages:$501,962.92
Other Operating Expenses:$1,379,670.00
Total:$21,117,474.92
Second Year
The plant is scheduled to be fully commissioned in the fourth month of the second year.
Capital Expenses:$234,000
Salaries and Wages:$800,553.00
Other Operating Expenses:$2,249,646.00
Total: $3,284,199
Renewable Energy Fund
Grant Application
AEA 09-004 Grant Application Page 5 of 40 9/3/2008
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 general benefits, without a full feasibility study, are fairly straight forward;
1. The primary product produced will be #1 heating oil or diesel and secondarily electricity.
Currently, liquid fuel products are transported from locations such as Seattle,
Washington, on barges and are stored for a period of time for later consumption. By
producing fuels locally, several costs are eliminated for the local distributor and/or the
local power provider. These savings include: 1) Transportation costs are immediately
reduced by the cost of barging the liquid fuels from Washington to Ketchikan. The cost
per gallon of barging the liquid fuels is passed on directly to the consumer. By reducing
the amount of fuel oil that is transported, cost savings can be transferred to the end user
without effecting the bottom line of any of the distributers; 2) Inventory costs are
reduced since there would no longer be a need to store large quantities of finished
product for long periods of time, the products are produced and consumed as needed.
2. The direct community benefit is that as a company policy, Diesel Brewing Company
returns a percentage of its net revenue to the local community in the form of nonprofit
and educational support programs. The executive management of Diesel Brewing
Company has a long track record and an ongoing commitment to support youth and
youth activities in all communities that we do business in and we will continue this
tradition in Alaska.
3. Lastly, because this facility is a new, local source of electricity, the strains that the power
grid appear to be under, can be mitigated. In our recent discussions with KPU, the local
electrical utility provider, it appears that as the price of fuel oil for domestic and
commercial heat increases, the conversion to electric heat is increasing. With limited
ability to wheel power across Alaska, the local utility will potentially have to generate a
significant portion of their own power by using expensive diesel generated power.
Excess electricity generated in this facility will be made available for purchase by the
KPU, or any other user, at wholesale prices. It is interesting to note that electricity from
this facility is less expensive to produce then the current hydro power (as reported to
Diesel Brewing Company by the KPU) therefore there is the potential for significant
savings on this renewable electricity, although Diesel Brewing Company recognizes the
intricacies of selling power to local PUDs.
Having said this, Diesel Brewing Company recognizes that it is difficult to fully quantify the cost
savings to the community in hard numbers without a more in-depth feasibility study to include
pre-negotiating pricing for its products and services. However, since the plant will produce
some 900,000-1,000,000 gallons of liquid fuels per year with an additional 20,000,000-
80,000,000 kWh of electricity annually; it is easy to envision the potential for vast savings to the
community.
2.5 PROJECT COST AND BENEFIT SUMARY
Include a summary of your project’s total costs and benefits below.
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Grant Application
AEA 09-004 Grant Application Page 6 of 40 9/3/2008
2.5.1 Total Project Cost
(Including estimates through construction.)
$25,625,000.00
2.5.2 Grant Funds Requested in this application. $20,500,000.00
2.5.3 Other Funds to be provided (Project match) $5,125,000.00
2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $20,625,000.00
2.5.5 Estimated Benefit (Savings) $2,505,600.00 per year
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.)
$ 5,137,439.20 in the first
five years.
2.5.5
Estimated Benefit:
Diesel Brewing Ketchikan will generate at least 1,560,000 total gallons of liquid fuels every year.
Collectively, 900,000 gallons of synthetic diesel, 260,000 gallons of kerosene and more than
400,000 gallons of other petroleum based products. All of these renewable energy resources
will be consumed directly by the city of Ketchikan or communities within Southeast Alaska.
Assuming a conservative transportation cost component of $.26 per gallon savings at the retail
level, multiplied by the total number of gallons produced, will easily save the community
$405,600 in petroleum based energy costs every year.
In addition to the liquid fuel cost savings to the public, Diesel Brewing can generate up to
10MWh of electricity from the plant facility to be made available to the public. Assuming a cost
savings of $.05 cents per kilowatt, the difference between the Diesel Brewing wholesale rate of
$.07 cents per kilowatt and an assumed average cost of $.12 cents per kilowatt being produced
today from the Ketchikan Public Utilities, the savings benefit to the community calculated daily
would equal $6,000. Assuming Diesel Brewing can solidify power purchase agreements from
the local KPU for 5MWh and based on 350 days of operation every year, an annual savings to
the public would equal $2,100,000.
2.5.6 Public Benefit
When the plant becomes fully operational, the expected payroll and benefits will be in excess of
$875.000 per year. The total Salary and Benefit costs during the first five years would be
$4,087,439.21. Our estimated costs for Excavation, concrete and asphalt are $1,050,000.00.
Other construction and ongoing operational needs will be purchased from the local area. The
Public Benefit in Wages and hard surface construction costs alone will be $5,137,439.20. We
would expect this number to be much higher once we have a more detailed plan for
construction, and availability of local subcontractors.
Another public benefit that would warrant further investigation to quantify the public benefit,
would be conversion of Municipal Solid Waste (MSW).
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Grant Application
AEA 09-004 Grant Application Page 7 of 40 9/3/2008
It appears that a significant portion of the MSW in South East Alaska and potentially all of
Alaska is shipped from the point of origin in containers to Seattle for trans load to rail cars and
then sending MSW to the Regional Landfill in Roosevelt Washington.
By gasifying a significant portion of the MSW and converting the gas to electricity and some
liquid fuels, there would be a significant reduction of tonnage being sent to Eastern Washington
resulting in direct savings to the rate payer. In addition to the cost savings resulting from not
moving the tonnage to Washington, there would be a new revenue stream for the Cities and
Boroughs that host a MSW conversion facility. Not only would there be significant job creation
(80 to 100 new jobs) there would also be the potential of revenue sharing with the operator of
the conversion facility and reduced cost of electricity that is delivered on a distributed basis.
Renewable Energy Fund
Grant Application
AEA 09-004 Grant Application Page 8 of 40 9/3/2008
SECTION 3 – PROJECT MANAGEMENT PLAN
Describe who will be responsible for managing the project and provide a plan for successfully
completing the project within the scope, schedule and budget proposed in the application.
3.1 Project Manager
Tell us who will be managing the project for the Grantee and include 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.
Project Manager: Kevin Caldwell, COO, Diesel Brewing Company
Kevin Caldwell
Mr. Caldwell comes to Diesel Brewing after more than 30 years in the Wood Products industry. Mr. Caldwell has
held a variety of positions from commodity lumber trading through plant management, general management and
executive management. More recently Mr. Caldwell was President of TechFuels of Oregon, a company
dedicated to the thermal processing of lingo-cellulosic bio-mass to liquid fuels.
After graduating with a B.S. in History from Eastern Oregon State College in 1979, Mr. Caldwell attended
graduate school at Gonzaga University in Spokane Washington and then began his industrial career with
Fleetwood of Oregon in LaGrande, OR as a quality control inspector. During his seven years with Fleetwood he
was introduced to manufacturing methods, sales and marketing management, customer service as a Regional
Customer Service manager, inventory control and purchasing.
For the last 20 years, Mr. Caldwell has developed specialty wood products markets in Chile, Japan and the U.S.
These markets were to meet specific production and recovery needs for an industry in transition. During the
transition and consolidation of the wood products industry in the 1990’s, Mr. Caldwell was instrumental in
developing not only new production facilities designed to deliver specialized products to a changing market, but
also was involved in many retro-fits of existing facilities to improve efficiency of wood products and energy
production.
As a result of the work he was involved with in plant energy improvements, Mr. Caldwell became increasingly
aware of the need to produce higher value energy products from underutilized resources in the United States,
such as wood products and bio-mass. The low commercial value associated with electricity, especially in the
Pacific Northwest; lead him on a ten year search for technologies and processes that would add maximum value
to waste bio-mass. The culmination of this effort is the creation of Diesel Brewing Co. and the formation of the
current executive business and science team of Diesel Brewing Co.
Additional site supervision and management will be provided by a construction engineering company chosen for
project.
Strategic Business Partner: Alkai Consultants, LLC
Alkai Consultants, LLC Bio
Renewable Energy Fund
Grant Application
AEA 09-004 Grant Application Page 9 of 40 9/3/2008
World class, Consulting and Engineering
ALKAI’s Engineers, Scientists & Biologists are uniquely qualified to provide exceptional
professional services to our clients. We ensure the success of your projects. Our Senior
personnel have authored and participated in the development of industry guidelines, regulations
and methodology in all of our professional service areas.
More than 150 publications.
Over 30 prestigious awards.
Two Bronze Medals for EPA program accomplishments.
National Merit Award presented by the Vice President of the United States.
ALKAI is exceptionally pleased to be able to provide our clients with this wealth of knowledge
and contacts. Our unique multi-disciplinary mentoring program ensures propagation of the vast
resources of ALKAI’s senior staff. We look forward to providing exceptional professional
services and establishing long term relationships.
Alkai Roles
Alkai Consulting, LLC staff is composed of:
Environmental Engineers
Geotechnical Engineers
Chemical Engineers
Civil Engineers
Structural Engineers
Fish & Wildlife Biologists
Wetlands Scientists
Project Designers
Project Managers
Scientists
Chemists
Planners
Riley D. Evans
Managing Partner
Mr. Evans has an exemplary history in Planning, Design, Engineering and Construction
Management. He has managed design and construction teams of Architects, Civil,
Environmental, Structural and Geotechnical Engineers, Surveyors and Contractors for large
Commercial Construction and Industrial Waste Water Facilities for Municipalities and Puget
Sound Naval Shipyard and large commercial projects of 150 to 450 unit apartment complexes
and senior care facilities, . These projects have included Wetlands, Shoreline Management,
Natural Resource Planning Design Development, Hearing Representation, Land Use
Entitlement, Permitting, Water Systems, Storm Water Runoff, Detention Systems, Sewer Pump
Stations, Waste Water Systems, Electrical Power, Natural Gas, Communications, Road,
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Grant Application
AEA 09-004 Grant Application Page 10 of 40 9/3/2008
Highway design and Construction. They have involved all areas of RCRA, NPDES,
NEPA/SEPA, CERCLA, and MTCA issues. Mr. Evans was CEO of a Professional Architecture
Engineering and Surveying firm for 12 years. He planned and implemented a long range
strategic management and marketing plans to develop the firm from under 1 million dollars a
year to well over forty million dollars a year in design and construction. He planned designed
permitted and successfully completed (CRID #6) “Old Town Silverdale” Kitsap County Road
Improvement District #6 with AES Consultants Inc. He managed an average of four to ten of
AES Consultants largest projects each year and coordinated quality control of plans and
specifications for all projects. Mr. Evans organized and developed minimum plans, specification
and contract standards, negotiated consulting contracts and oversaw all aspects of business
administration. He represented the majority of projects at all public meetings for City annexation
entitlement and hearings. He has conducted area and regional meetings and negotiations with
governmental agencies and concerned citizens groups. Mr. Evans has provided Initial
Conception and Preliminary Planning for many of the projects he has worked on taking each
project successfully from inception to completion. Mr. Evans has an extensive successful
Engineering Design, Development and Construction history.
GEORGE R. WEBSTER, P.E., D.E.E.
Senior Professional Environmental Engineer
Mr. George R. Webster has exceptionally distinguished himself as an Environmental Engineer
who over the last forty years has been awarded two Bronze Medals for EPA program
accomplishments in the development and promulgation of “Industrial Waste Treatment
Guidelines”. These Awards were presented by the Administrator of the Environmental
Protection Agency (EPA). Mr. Webster was also appointed the US Representative to the OECD
Environmental Committee in Paris, France for two years. As the US Representative, he
authored numerous position “white” papers that formed the basis of International Environmental
agreements on technology for environmental controls and standards and methods of industrial
effluent treatments. As a Senior Environmental Engineer, he was appointed to EPA
Headquarters, in Washington D.C. as a GS-15 first responsible for assisting in the development
of unit operations for industrial and hazardous waste treatment techniques under the EPA
Industrial Wastes Research and Development programs. He was promoted to the Director of
the Industrial Branch of the Effluent Guideline Division of the Office of Water Quality Programs.
With the assistance of many Consulting Engineering firms and personnel in ten Regional Offices
of the EPA, he developed the database on which many of the Industrial Waste Regulations
were promulgated. These programs also generated the data on which the Hazardous Waste
RCRA Standards are based. Mr. Webster has designed systems from “closed loop”, zero-
discharge air-water emissions systems for secondary aluminum smelters in Michigan, to the
pulp and paper mill deep tank aeration waste treatment and combined primary/secondary
sludge filtration systems for Weyerhaeuser Co. of Longview, Washington. Local project
examples include the City of Seattle Parks Department, asbestos abatement projects for Piers
62 and 63, the Woodland Park Zoo, Evergreen Floral Building, the City of Everett, Everett Public
Library, and City of Tacoma Bates Vocational Center. Mr. George R. Webster serves as Alkai
Consultants Senior Environmental Professional Engineer, mentor and permit administrator. We
are exceptionally pleased to be able to provide our clients and staff the wealth of his vast
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resources of knowledge and contacts.
DONALD K. BALMER, R. H. G.
Senior Environmental Hydrogeologist
Mr. Balmer has over 30 years of exceptional experience managing and conducting projects in
the areas of environmental site studies, petroleum and hazardous waste disposal
characterization and remediation, groundwater resource evaluation and geological and
geotechnical investigations. He is also an AHERA-Certified Asbestos Building Inspector. Mr.
Balmer has specialized experience in site evaluation studies to determine the nature and extent
of subsurface chemical contamination. He is experienced in the design and installation of
monitoring well systems, the design of soil and water quality testing programs, and the design of
remedial action programs for soil and aquifer remediation. He has been involved with all aspects
of groundwater supply development, including resource evaluation, water well design,
installation, and testing, well performance evaluation and rehabilitation, and resource (well-
head) protection. Mr. Balmer is also experienced in a variety of environmental impact and
geotechnical projects related to land development, including Phase I and II Environmental Site
Assessments for commercial properties, geotechnical investigations, and highway EIS
preparation. One of Mr. Balmer’s more notable projects has been the drafting and co-authoring
of the Environmental Impact Statement and Level 1 Environmental Site Assessment of the 850
million dollar Tacoma Narrows second suspension bridge project that is currently under
construction. He has managed Brownfield and Superfund site remediation on numerous
projects with multiple causes and levels of contamination. His remediation approved plans and
techniques have helped to set the standards for bioremediation and air sparging innovation and
developments.
ROBERT CIPRA
Senior Environmental Program Manager
Mr. Cipra has managed award winning environmental programs world wide. He has served as
Naval Shipyard OSHE Standardization Program Manager at the Naval Sea Systems Command
(NAVSEA), Washington, DC; Environmental Department Director, Director of Radiological
Monitoring, Deputy Director of Radiological Controls, and Nuclear Project Manager at the Puget
Sound Naval Shipyard (PSNS), Bremerton, WA. He has been responsible for full environmental
compliance and all environmental programs world wide for NAVSEA. He participated in the
Environmental Leadership Pilot Program and Project XL/ENVVEST; served as the Navy Co-
chair on two Restoration Advisory Boards; and was the Navy’s Native American tribal
coordinator concerning mitigation for a multi-million dollar military construction project. He
worked with EFA-NW, the U.S. EPA, and the Washington State Department of Ecology (WDOE)
to remediate contaminated sediments in situ in a marine operable unit through steam injection
and disposal in a Pit Combined Aquatic Disposal site. He has ensured Navy compliance with
environmental regulations through adherence to the Code of Federal Regulations, State of
Washington and California statutes, and local and county rules and regulations. He has worked
with DoD, ASN, CNO, Fleet, the regulatory and business communities, and various
stakeholders in establishing an active research and development program, integrating it into the
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compliance program. He actively sought marketing opportunities for the PSNS Environmental
Department by becoming involved with innovative technologies, such as: recycling of hazardous
waste (Molten Metals Technology), piloting a part of the Navy program associated with Uniform
National Discharge Standards, supporting congressionally funded research into bilge water and
storm water test beds and asbestos/PCB recycling, beta testing a new bio-assay technology
and underwater organic spill detection system. He participated in various ventures, such as
seeking an active multi-media partnership with WDOE, and seeking to place technical personnel
in a position to “affect” upcoming legislation – versus waiting to be “effected” by legislation that
would have resulted in adverse impact on the business. Chairman of the Joint Test Group
ensuring all work and testing accomplished safely and in accordance with the Reactor Plant and
other associated Manual(s) and procedures.
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Grant Application
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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.)
Table 1 is a rudimentary Gantt Chart that outlines the project schedule. Phases I-III will be
completed in parallel while Phase IV will be the major thrust of this project.
Month 1 2 3 4 5 6 7 8 9
1
0
1
1
1
2
1
3
1
4
1
5
1
6
1
7
1
8
Phase I, II, and III -
Reconnaissance,
Feasibility
Analysis and
Conceptual
Design and Final
Design and
Permitting
Proposed Energy
Resource
Existing Energy
System
Proposed System
Design
Proposed System
Costs
Project Benefits
Energy
Purchase/Sales
Land Ownership
Environmental
Analysis and
Recommendations
Phase IV -
Construction,
Commission,
Operation and
Reporting
Renewable Energy
Resource
Existing Energy
System
Proposed System
Design
Project Costs
Permitting
Analysis and
Recommendations
Construction
Commissioning
Operation
Reporting
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As indicated in by yellow, quarterly reports will be submitted to the Authority. Also, a final report
will be submitted at the completion of the project. This report will detail the operating state of the
plant, expected versus actual output and any other items of interesting to the Authority.
Phases I-III will be completed within the first 6 months of the project with the majority of the items
completed within the first 1-3 months as detailed. In fact, some of the ground work towards
these goals has been achieved already. During this period, the site assessment will be
performed, all applicable permit applications pursued, preliminary engineering design will be
completed and submitted to the independent engineering firm for evaluation, energy sales
agreements negotiated, feedstock availability identified and long term agreements with feedstock
suppliers negotiated. As required, monthly and quarterly reports will be submitted to the
Authority detailing progress.
Phase IV is the major thrust of this application. Once the preliminary design/analysis has been
reviewed and accepted by the appropriate local officials, final plans will be drawn and
construction will begin in earnest. Site preparation will take approximately 3 months. This
includes leveling the site, pouring concrete for foundations, pads and flooring and installing the
required buildings. Meanwhile, orders to the fabricator for the Gasifier and Fischer-Tropsch
reactor will be submitted. Build time for these items is expected to be 6 months. Installation of
the equipment will take an additional 6 months. Commissioning of the plant is expected to take
3-4 months with the final ramp-up of operations ensuing. The entire production of the facility,
from grant award to operation is expected to take 18-24 months depending on permitting,
construction and transportation of the plant infrastructure, site preparation and other intangibles
such as weather.
3.3 Project Milestones
Define key tasks and decision points in your project and a schedule for achieving them.
Decision Points:
Months 1-3
1. Resource Availability and Contract.
2. Site availability and Letter of Intent to lease.
3. Market analysis and Letter of Intent to purchase finished product.
4. Funding Availability and terms.
5. Permitting feasibility and process.
Months 4-6
6. Site design feasibility and final design.
7. Permitting completion and acceptance.
8. Final contracts on land, input resource, finished product sales.
9. Funding approval and equity commitment.
Months 7-21
10. Construction begins and commissioning in approximately 14 months.
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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.
One of the major keys to success for this project is to build strong alliances with people,
contractors, state and local Governments, and elected officials. The principals of Diesel Brewing
Company have a long track record of building consensus through partnerships and include that
mind-set as part of their business strategy. Of primary importance, Diesel Brewing Company
has begun to build partnerships with forest products suppliers, the Borough, local officials and
contractors in order to ensure that not only is the project a good fit for the area, but the project
meets with current Ketchikan economic development plans, that all applicable rules and
regulations are disclosed early on so that they can be met and that there is a strong candidate
base for plant managers and employees in the area.
Alkai Consultants, LLC of Silverdale, WA, an engineering and consulting firm, has been selected
through a competitive process to act as independent engineers for evaluation of the site, to
include geotechnical, environmental and structural engineering services. A brief bio of Alkai and
its employees is included in the Appendices.
Key technology components will be fabricated in Oregon and shipped from Seattle to Ketchikan
for assembly by the primary fabricator. The site preparation and building construction will be
done by local construction companies. Local construction crews in conjunction with the primary
fabricator will do final assembly and erection of the facility. Because many of the components of
the finished facility are proprietary, the primary fabricator will do final assembly and calibration of
the plant. The non-compete/non-disclosure that has been agreed to by the primary fabricator
does not extend to third parties. All production components are individually shop fabricated by
the primary fabricator.
3.5 Project Communications
Discuss how you plan to monitor the project and keep the Authority informed of the status.
Progress towards project deadlines, milestones and decision points will be tracked and
recorded in monthly status reports. These status reports will be submitted by the Project
Manager to the Authority or it’s designee by the 10th of each month. In addition, quarterly
progress meetings will be held with all principals involved. These meetings are intended to
record progress, shortfalls and potential issues and to determine a course of action, as required,
in order to overcome any problems. Included in these meetings will be representatives from the
companies and public and private interests that are key to the success of the project as listed in
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the Project Resources section. This necessarily includes a representative of the Authority.
Minutes from these meetings will be distributed to the Authority and the representatives within
10 working days of the progress meeting. The Project Manager will schedule the first quarterly
meeting upon receipt of acceptance of the grant application.
As problems may arise during the course of permitting or construction, for example, that effect
the project time line, the Project Manager will contact the Authority immediately upon verification
that the problem exists. This contact will take the form of an informational phone conversation
followed by an official, written account of what the problem is, how it affects the project time line
and what the possible solutions are in order to meet the project goals.
A sound working relationship with the Authority, the Project Resources and the community is
one of the major keys to success to the implementation of this project. Because the community
stands so much to gain from the implementation of the combined hydro-carbon products (e. g.,
diesel, fuel oil, etc.) and low cost electricity, it is imperative that Diesel Brewing Company has
good communication with the community and the utilities. Upon notification that the grant has
been approved, a town hall meet will be scheduled in order to inform the community of the
scope of the project, the intended benefits and the need for skilled and unskilled jobs that will
come from the community, as well as to answer any questions or concerns as necessary.
3.6 Project Risk
Discuss potential problems and how you would address them.
Diesel Brewing of Ketchikan has identified three major risks that impact successful, long term
operation of the facility. These are: 1) loss of feedstock for the plant; 2) Under-capitalization at
the onset of the project; and 3) A drop in the market price of fuel/electricity. Each of these risks
are outlined below, including Diesel Brewing Company’s solution to the pitfalls of that risk.
1. Potential problem: Lack of feedstock. - The Plant depends on a reliable and consistent
source of feedstock (biomass) in the form of waste wood byproducts. Diesel Brewing of
Ketchikan intends to form long term alliances with one, or several, of the mills in the area
to take their waste product in order to turn it into liquid fuels and electricity. There are
three lumber mills in close proximity to the plant. Diesel Brewing of Ketchikan has
already talked with one of the mills and are in the process of obtaining a letter of intent
from that company to supply Diesel Brewing of Ketchikan with all of the fuel it needs.
However, redundancy in the production of wood byproducts offers a built in solution to
supply issues and therefore, Diesel Brewing of Ketchikan will strive to develop a similar
working relationship with the other mills in the area. In this manner, consistent
availability will be achieved. Diesel Brewing of Ketchikan will also be drying and storing
a supply of feedstock on site. This will avoid down time associated with a lack of
feedstock. Finally, in the extreme case that none of the mills are able to supply waste
wood byproducts to Diesel Brewing of Ketchikan, the option to buy chip at market
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premium prices exists, at least for a short duration, in order to maintain consistent
operations throughout the years.
2. Potential Problem: Lack of adequate funding prior to commissioning. - Diesel Brewing of
Ketchikan will have collected private investment funds in addition to committed
Renewable Energy Grant funds, prior to beginning construction. We have created a
conservative business plan and construction schedule which offers a degree of flexibility
for unforeseen events such as delays caused by weather, shipping, hiring, fabrication,
and installation. In the event that any unforeseeable short fall does, in fact, occur, Diesel
Brewing of Ketchikan will invite other investors to participate, this increasing the project
matching funds supplied by Diesel Brewing of Ketchikan.
3. Potential Problem: Fuel and electric prices drop. - While the cost of energy has been
rising at alarming rates over the last 10 years, and all indications and reports from the U.
S. Department of Energy indicate that they will continue to rise, we have taken a
conservative approach to revenue forecasts associated with the production of diesel,
kerosene, and other petroleum products, and the generation of electricity. As an
example, our business model is sustainable even if prices for liquid fuels such as diesel,
drop as much as five percent below the average price per gallon in Alaska(1), during
2006. ((1) Energy Information Administration U.S. Government) As of June 2008, the
average price per gallon of diesel in Alaska was $4.275, which is just over $1.90 per
gallon higher than the average price in 2006. The retail price per gallon of diesel in
Ketchikan was $5.21 as of September 30, 2008. The cost for petroleum based products
is generally rising. Our Model has no increases in revenue based on price increases
over the next five years. While the market will dictate pricing, our model provides
sustainability in even the highly volatile energy sector. Our solution for periodic price
drops is based on a business model that does not rely on prices always going up.
SECTION 4 – PROJECT DESCRIPTION AND TASKS
Tell us what the project is and how you will meet the requirements outlined in Section 2 of
the RFA. The level of information will vary according to phase 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.
Diesel Brewing of Ketchikan will produce liquid petroleum fuels as well as electricity. Liquid fuels
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production includes what Diesel Brewing of Ketchikan is calling Synthetic Diesel in order to
separate it from food-based bio-diesels, kerosene, and other valuable petroleum products.
Diesel Brewing of Ketchikan plans to produce over 900,000 gallons of synthetic diesel, 260,000
gallons of kerosene, and more than 400,000 gallons of other petroleum products per year. The
plant will also produce in excess of 33,500 kilowatt hours of electricity per year as a by-product,
through the generation of steam during the cooling processes.
Ketchikan is an isolated community which depends upon barge service for the transport of liquid
fuels to service the community’s needs. While electricity is largely produced by Hydroelectric
generation, diesel generators currently provide peak demand coverage. Ketchikan continues to
rely on barges to supply heating fuel, diesel and gasoline. According to The State of Alaska,
Department of Commerce, Community, and Economic Development, “Stable Market demand for
both heating fuel and gasoline despite record high prices, is likely indicative of rural communities
needing a consistent minimum quantity of both resources simply to meet basic survival needs.
Significantly increased fuel and energy costs combined with high unemployment rates, limit local
economies, and local governments struggling to provide basic local services, continue to present
rural Alaska communities and households with challenging circumstances with no long term
solution in sight.” Our plant will provide a long term local source for liquid fuels and electricity.
The energy will be generated by the gasification of wood waste, which is currently being burned
with zero positive impact on the community. It is anticipated that the local production of fuels will
lower the cost of fueling and heating, while providing a cost effective addition to existing
electrical generation. The number of fuel barges crossing open ocean will be reduced which will
help avoid harmful spills, and environmental damage. The Diesel Brewing plant will provide
Ketchikan with a greater level of energy independence, lower costs, lower environmental risk,
reduced air pollution, more jobs, and more money that stays within the community.
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.
In the city of Ketchikan, existing residential homes and commercial buildings are primarily heated
with No. 2 heating oil utilizing traditional boiler furnace systems. Heating oil is distributed locally
by tank trucks and stored above ground in storage tanks. Alternative sources for heat, propane
and natural gas are either not available or cost prohibitive.
Since 1932, Ketchikan Public Utilities (KPU) has delivered electrical power to the community of
Ketchikan. Currently, KPU maintains two power generation systems, hydro electric sources and
diesel backup units. The hydro electric supply comes from a number of local dams, including,
Ketchikan Lake, Beaver Falls, Silvis and Swan Lake. KPU also participates in the Four Dam
Pool Power Agency, a consortium of four hydroelectric projects. Total hydro capacity is about 34
megawatts. When the weather turns cold and hydroelectric is unavailable, the KPU relies on
diesel generated electricity from five standby diesel units located at local substations totaling 24
megawatts of electricity.
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Both power supply systems are entirely independent of one another and must be capable of
supplying 100% of the power load to Ketchikan. In October of 2009, KPU anticipates the
completion of the Swan Lake – Tyee Intertie project which will serve to provide an additional 20
megawatt capacity to Ketchikan. More importantly, this 57 mile power line will connect
Ketchikan with other communities of Southeast Alaska and finally plug Ketchikan into a common
power grid.
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.
During the initial plant build out and until the facility is commissioned, Diesel Brewing will be
purchasing the necessary electricity and other energy resource requirements from local energy
retailers. Diesel Brewing will utilize propane, contained in a 1,000 gallon storage tank, as the
feedstock source during the initial testing and engineering phases.
Once operational, the manufacturing plant for Diesel Brewing will not require any energy
resources from the community of Ketchikan. The gasification facility will be entirely self
sustainable. For operations purposes, Diesel Brewing will produce and consume our own
electrical and transportation fuel requirements.
Diesel Brewing will be contributing too, not drawing from, the current energy resource
infrastructure of Ketchikan.
4.2.3 Existing Energy Market
Discuss existing energy use and its market. Discuss impacts your project may have on energy
customers.
Due to the high cost of petroleum based heating oil, Ketchikan home owners are finding
alternative ways to heat their homes more economically including installing baseboard electric
heat and burning more firewood. In 2007, the KPU reported approximately 6% of commercial
and residential users converted from heating oil to electricity. This trend has put a tremendous
strain on the ability of KPU to forecast peak loads and community demand. In 2007, due to
severe weather conditions, the KPU generated electricity from their diesel units for a total of 88
days, resulting in substantially higher heating bills due to the higher cost of diesel generated
power compared to hydroelectric power. Retail energy prices in Ketchikan, including
transportation fuels, heating oil and electricity are inflated mostly due to transportation costs.
The Diesel Brewing community-based energy model will substantially reduce transportation
costs of energy products into Ketchikan; therefore, benefiting residents by lowering energy
pricing, increasing energy redundancy, providing added capacity and ultimately achieving energy
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independence. The production and consumption of energy, including electricity and liquid fuels,
within the same community will ensure energy sustainability for the future.
Diesel Brewing will not sell energy products directly to the public. Instead, Diesel Brewing will
negotiate wholesale purchase agreements with existing energy distribution companies including
the KPU, liquid fuel companies and heating oil delivery businesses. Because transportation and
production costs are kept low, Diesel Brewing will offer more competitive wholesale energy
pricing to distribution companies. It is the assumption of Diesel Brewing, that these distribution
companies will in “good faith” pass a significant portion of the energy savings down to the
consumer. As an example of cost savings, Diesel Brewing can generate between 5 and 10
MWh of electricity at roughly .07 cents per kilowatt, compared to the current range of electrical
costs from the KPU of between .11 and .22 cents per kilowatt.
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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
Wood waste and low value wood products, such as hog-fuel, have been utilized as a renewable
energy source for a long time. Typically, this comes in the form of co-generation or steam
boilers where the waste products are used to make steam or through a gasification process to
reclaim the energy units for steam or power generation. Most often, this energy, whether it is in
the form of steam or electricity, is used within the plant, deferring costs of plant operation, and is
not sold on the open market. This project, on the other hand, proposes to use new and
emerging gasification technologies to produce liquid petroleum fuels and electricity utilizing these
low grade fuel sources. The fuel and electricity is to be sold on the open market, contributing to
the green power generation milestones set forth by the Federal and State Governments.
Traditional wood gasification technologies produce a bio-gas containing an energy content of
120-170 Btu/ft3 of gas produced (for reference, natural gas is approximately 1020 Btu/ft3). The
methodology licensed too, and utilized by Diesel Brewing of Ketchikan produces a bio-gas in
excess of 350 Btu/ft3 of gas produced from the same feed stock. The bio-refinery portion (Figure
1) of the plant utilizes the wood waste to form a SynGas (a combination of CO and H2). This is
accomplished through the use of a bubbling, fluidized bed gasifier coupled with a proprietary in-
situ allothermal reforming unit. The combination of these devices produces a SynGas of the
appropriate CO:H2 ratio to make it an ideal fuel feedstock for traditional Fischer-Tropsch catalytic
fuel generation. Because this blended gas stream has roughly 3 times the energy content of
traditional gases generated from wood wastes, fuel and electrical generation is more efficient,
with less waste wood products required to generate the same energy content.
This project proposes to install a 100 ton per day gasification unit, co-located at a mill or wood
processing plant, in order to produce liquid fuels and generate power. The primary fuel source
for the plants is hog fuel, which is a low grade by-product of the wood processing process. The
resultant gas is then passed through an iron-catalyst Fischer Tropsch reactor in order to
generate the desired liquid fuels. Throughout the process, hot gases will need to be cooled. For
example, the iron-catalyst Fischer-Tropsch process operates at temperatures in the 500-750 F
regime, while the fluidized bed outputs a gas in the temperature range of 1850 F. These hot
exhaust gases will be utilized to generate steam through a heat recovery, steam generator
system, generating enough steam to turn a 10 MW turbine.
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Figure 1 – Bio-refinery schematic detailing the fluidized bed operations, heat recovery for power
generation and liquid fuels production through the Fischer-Tropsch catalytic process.
The key elements of this process are:
The bio-refinery portion which includes the feed hopper, metering bin, bubbling,
circulating fluidized bed, char removal and post combustion, and ash removal. In this
process, the raw SynGas is passed through to a secondary fluidized bed where the
allothermal process “supercharges” it, creating a medium Btu Syngas (350 Btu/ft3). The
ash from the post-combustion process is removed and stored for sale, it is an ideal
additive to concrete mixes or can be used as a soil amendment.
Heat recovery is utilized through heat recover, steam generators (HRSG) in order to
recover lost heat, generate process steam and to turn a steam turbine. Several HRSGs
are included in this process in order to cool the flue gases as well as the SynGas.
Fischer-Trposch catalytic processing of the SynGas. The chemistry of the F.-T. process
is quite simple, the catalysts take the carbon monoxide and hydrogen molecules and
assemble them into complex hydro-carbon chains. The final composition of the F.-T.
liquids is dictated by such operational parameters as temperature, pressure and
residence time. Iron based catalysts, coupled with the ideal SynGas ratio that the
gasification unit gives, lends itself naturally to producing large quantities of either diesel
or heating oil.
A complete accounting from all waste streams is not possible without a thorough analysis of the
feedstock. However, utilizing standard spruce and hemlock hog fuel compositions, no unwanted
species (e.g. high amounts of Chlorine or Sulfur) should exist. The ash will be composed of
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primarily silica (SiO2), magnesia (MgO), calcia (CaO) and magnetite (Fe2O3) but will also contain
such elements as potassium and phosphorous in their oxide states. As is evident, the ash
becomes a value-added product. The flue gas will be composed of primarily carbon dioxide.
Roughly 1/3 of the carbon entering the system through the bio-mass will exit as carbon dioxide.
This is a by-product of the gasification process. Note, however, that should the same waste be
utilized in a combustion process or be allowed to decompose naturally, 100% of the carbon will
be converted to carbon dioxide. The flue gases will be monitored continuously for composition in
order to ensure that all applicable emissions regulations are met.
The optimum capacity of this plant is based upon 100 dry tons per day of hog fuel feedstock.
This amount of hog fuel is easily obtainable from the local forest products industry. Ideally, the
plant will be co-located or adjacent to one of the forest products facilities in order to omit any
transportation costs of the feedstock. Based upon 100 dry tons per day of input, the plant will
make approximately 4000 gallons per day of diesel or heating oil and an additional 3000 gallons
per day of kerosene and other light petroleum products. These products will be stored in on-site
storage tanks until such time as there is ample supply to be transported to the re-saler. As such,
Diesel Brewing of Ketchikan will install 300,000 gallons of storage capacity for the liquid fuel
products.
Diesel Brewing anticipates a high capacity factor but recognizes the fact that down time for
maintenance is an inevitability. Therefore, all production and economic evaluations have a built
in 30% capacity factor, that is, estimates are based upon the plant operating at 70% capacity.
Based upon the capacity factor indicated above, it is expected that the plant will produce in
excess of 900,000 gallons of diesel or heating oil per year with an additional 700,000 gallons of
kerosene and other light hydro-carbons per year. Additionally, it is expected that the plant will
produce 5 MWe nominally of power with approximately 4 MWe available for sale, the plant will
require approximately 1 MWe for its own, internal use. This equates to an additional 31,000,000
kWh of electricity available annually.
Anticipated barriers to the successful completion of this project include securing the appropriate
permits to include air and waste water, permits to site liquid storage facilities, and appropriate
land use permits. Also, if there is substantial resistance from either the community or the
retailers of the liquid fuels and electricity, this could cause large problems with the project.
Specifically, of the energy retailers do not enter into good faith negotiations for the products, the
facility is left without a mechanism for selling the product and operations would come to a halt.
Diesel Brewing intends to secure the retailer buy-in early on in the process in order to circumvent
this potential pitfall.
Diesel Brewing will either sell the liquid products FOB their plant or contract with local
transportation contractors to transport the fuels to the retailer. In this case, transportation
includes barging or trucking (via ferry) the fuel across the Tongass Narrows to the city of
Ketchikan. Meanwhile, Diesel Brewing of Ketchikan will be tied into the local electrical grid in
standard ways in order to deliver any excess electricity for sale.
4.3.2 Land Ownership
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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.
Land Ownership and access in Ketchikan is fairly straight forward. If a project is done in
Ketchikan, the Borough’s Industrial Park would be the preferred site. If construction is at the
Industrial Park, the Borough has indicated that a long term lease would be available for initial site
and options for expansion available. By using the Industrial Park as the site, appropriate zoning
would already be in place so there would not be issues that would surround a brown field site.
Moreover, all applicable environmental, archeological and geotechnical issues have been
resolved in this area.
4.3.3 Permits
Provide the following information as it may relate to permitting and how you intend to address
outstanding permit issues.
List of applicable permits
Anticipated permitting timeline
Identify and discussion of potential barriers
Known Permits without feasibility study are:
o Zoning – The proposed site is in the Industrial Park near the airport. Therefore, it
is not anticipated that there will be any zoning issues.
o Construction permits – it is anticipated that construction permits will take up to 90
days from the submission of full, detailed and stamped engineering drawings. It is
not envisioned that any untoward issues will arise with regards to the construction
of the plant.
o Air Quality Permitting, State and or Federal. – In general, the plant will not be
putting anything into the air that the biomass itself wouldn’t already be putting into
the air. As such, it is not expected to be an issue. The plant will be emitting
carbon dioxide in excess of 10,000 tons per year as a point source in the
industrial park. Because of this, State and Federal environmental offices will be
contacted during the feasibility study in order to determine what, if any
requirements and regulations must be met. In addition, because there will be a
plume near the airport, the FAA will be consulted as to allowable height of stack
and plume characteristics.
o Water discharge permit if Industrial Park not used – This will only be required
should there be a need to move the plant to another site. At this time, we do not
see that this is an issue.
o Coast Guard, waterways permit issues - The only potential barrier that we see at
this point, without more investigation, would be the Coast Guard permitting
process. Because the plant will have the ability to bring in feedstock and to
transport product via barges, the Coast Guard must be consulted. This will also
be performed during the feasibility study.
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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 primary location of choice is within the Industrial Park boundaries North of the airport. It is
Diesel Brewing’s understanding that all applicable studies for Threatened and Endangered
Species, Habitat Issues, Wetlands, Archaeological and Historical Resources and Land
Development Constraints have already been worked out in this area. In fact, this is one of the
prime motivating factors for siting the plant in this area. Considerations for telecommunications
interference, aviation considerations and visual aesthetics will be addressed in during the
feasibility study. The plant is not large. The plant is significantly smaller than the mills that would
supply the feedstock and it does not stand extraordinarily tall. Therefore, it is not felt that any
aesthetic questions will arise. However, as previously stated, there may be issues with aviation
being located within a mile or so of the airport. Questions regarding the impact this has on
aviation will be raised with the FAA at the earliest possible time.
Threatened or Endangered species
No threatened or endangered species, including all marine and land mammals listed by the
Alaskan Department of Fish and Game for the Southeast Alaskan region, will be directly or
indirectly affected by a Diesel Brewing manufacturing plant located on Gravina Island.
Habitat, Wetlands and other protected areas
The location site targeted for the Diesel Brewing Ketchikan plant is located on the proposed
Gravina Island industrial development property managed by the Ketchikan Gateway Borough.
Transportation and power improvements will be complete by the fall of 2008. Extensive
environmental studies have already been completed. Diesel Brewing will utilize an already
developed building site which would eliminate the need for further encroachment of undeveloped
lands. Diesel Brewing does not anticipate any issues having to do with habitat, wetlands or
potentially other protected areas surrounding the construction and operations of a liquid fuels
manufacturing plant. Diesel Brewing would strictly adhere to any environmental regulations, as
defined by state or Federal law, having to do with sensitive environmental land issues on
Gravina Island.
Archaeological and historical resources
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The Ketchikan Gateway Borough industrial site on Gravina Island has already conducted the
mandatory archaeological surveys required for industrial building permits within the properties
owned by the county. There were no findings of archaeological or historical artifacts which
would affect the construction of a Diesel Brewing plant within the designated industrial sites.
Land development constraints
The Ketchikan Gateway Borough will incorporate land development constraints and restrictions
in the lease agreements for industries wanting to build on the designated industrial sites for
Gravina Island. Any land use or development issues will be disclosed in the terms and
conditions of the lease and will be closely monitored for compliance. Diesel Brewing will closely
adhere to the land development constraints established by the County.
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
The total anticipated project cost is $25,625,000.00.
The requested Grant funding is $20,500,000.00.
The total applicant matching funds are $5,125,000.00.
We have identified no other funding sources.
The total estimated Capital Expense cost during the first year of construction would be
$19,257,174.00. The Cap Ex costs for year two would be $234,000, and the following years we
project Cap Ex costs of roughly $204,000.00 per year. This would include costs associated with
development, engineering, and construction up to the point of commissioning the plant roughly
16 months from the start of construction. Detailed cost information can be found within the five
year projections for Cost of Operations, Cash Flow, and Capital Expenditures files which are
included with this application. We have budgeted for three specific phases, and identified the
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expected costs associated with each phase. We could not determine what specific cost elements
should be included as “Development costs”, so we have included our phased approach, with
detailed back up information in the spreadsheets referenced above.
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
Operating and Maintenance costs will be funded by a combination of Private Capital
Contributions and Renewable Energy Fund Grants. Private Capital Contributions will provide
roughly 20% of the funding, and Renewable Energy Grant funds will provide the remaining 80%
of the funding.
Operating and Maintenance costs are projected for the first five years as shown below. The
Operating and Maintenance cost detail projections can be found as “Summary of Operations
Ketchikan Sep2.xls”
Year One: $ 2,392,170.00
Year Two:$ 3,262,146.00
Year Three:$ 3,374,628.30
Year Four:$ 3,492,734.72
Year Five: $ 3,616,746.45
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
4.4.3 Power Purchase/Sale
Potential wholesale buyers of Diesel Brewing company’s renewable energy products would
include a number of both local Ketchikan businesses and regional Southeast Alaska distributors
of electricity, liquid fuels and other petroleum products. By product, the list would include, but
not be limited to the following company description and/or business names:
Synthetic Diesel fuels for ground transportation purposes.
Petro Alaska Incorporated Ketchikan, AK
Petro Marine Services Ketchikan, AK
Delta Western, Inc. Wrangell, AK
Petro Alaska Thorne Bay, AK
Heating Oil and Kerosene for residential and commercial purposes.
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Anderes Oil Inc. Ketchikan, AK
Petro Alaska Incorporated Ketchikan, AK
Petro Marine Services Ketchikan, AK
Electricity
Ketchikan Public Utility Ketchikan, AK
Borough Ketchikan County Ketchikan, AK
Light and Heavy Wax products
Industrial lubrication
Manufacturing of household products and clothing
Food Industry as preservatives for fruits, vegetables and candy
Pricing for liquid fuels fluctuate on a daily basis. The price volatility is a result of a number of
domestic and global factors, none of which, Diesel Brewing will have any control over. Diesel
Brewing will set energy prices based on current market conditions in the Southeast region of
Alaska, minus an established dollar amount per gallon for the avoided costs of transportation.
As a result of this consideration, the wholesale fuel pricing to local distribution companies will be
lower. The reduction of current transportation surcharges will benefit consumers by as much as
$.26 cents per gallon. As transportation costs continue to climb, the consumer will continue to
benefit from locally produced transportation and heating fuels.
Power generation from the Diesel Brewing plant will be available for resell to the Ketchikan
Public Utility. The Diesel Brewing facility can produce electricity more efficiently, more reliably
and more cost effectively than the current hydro and diesel generated units supplying electricity
to Ketchikan today. By connecting to the existing power transmission and distribution grids,
Diesel Brewing could realistically be supplying power for as little as $.07 cents per kilowatt, a
savings to the consumer of between 20% and 35% for their electrical needs.
The proposed rate of return from this grant-funded Diesel Brewing Ketchikan project is described
in detail in the Summary of Cash Flows Ketchikan section of this application.
4.4.4 Cost Worksheet
Complete the cost worksheet form which provides summary information that will be considered
in evaluating the project.
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AEA 09-004 Grant Application Page 29 of 40 9/3/2008
Renewable Energy Fund
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AEA 09-004 Grant Application Page 30 of 40 9/3/2008
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.
Once the project has been completed and the plant commissioned, we will begin a phase of
operation where we can focus on refining various processes and procedures. The operation of a
new plant in a new community will present opportunities to make adjustments. As an example
we may find that feedstock may require more or less drying time during various weather
conditions. We may find that we need to adjust the amount of feedstock storage capacity at the
plant site based on feedstock supply from various mills. This process of refinement will never
stop. The refining process will however begin to focus on smaller issues as larger challenges are
solved along the way.
We have broken down the various business activities in to four different categories. The four
categories are Finance, Sales and Marketing, Operations, and Technology. Each of these four
disciplines will be managed by individual founders of Diesel Brewing Company. Finance: Jeff
Raines, Sales and Marketing: Mark Stapleton, Operations: Kevin Caldwell, and Technology: Dr.
Paul King.
A plant Manager, Plant Maintenance, and Plant Engineer will be hired during the early stages of
development. By filling these positions while the plant is being built, they will have intimate
knowledge of how the plant was constructed. Familiarity with the plant will help keep down time
to a minimum after commissioning. We will also hire the balance of the work force in advance of
the commissioning date. This will provide time for systems training as well as safety training prior
to the plant coming on line.
The plant depends upon a consistence supply of feedstock. We will have long term contracts in
place for feedstock supply, from a variety of sources. We will have storage capacity for wet
feedstock as well as dried ready to use feedstock. We will construct a storage facility for dried
feedstock. The combination of the wet and dry storage will help mitigate any possible
interruptions in feedstock availability.
4.4.6 Analysis and Recommendations
Provide information about the economic analysis and the proposed project. Discuss your
recommendation for additional project development work.
Economic analysis for this project is based upon certain assumptions. These assumptions range
from the availability and price of feedstock to the sales price of the products. With any project
committed to obtaining and converting raw material into value added products, there will be
variability in the price, consistency and availability of the raw material. This is true in this case as
well. However, Diesel Brewing has taken a conservative approach in its analysis in order to
ensure that under the most stringent of conditions, the company is still viable. This is reflected in
the fact that Diesel Brewing is committing to cost share the plant with at least 20% matching
funds.
Some of these assumptions include:
The price of doing business is higher in Alaska then it is in the lower 48. This is primarily
due to Alaska’s remoteness from the lower 48 and everything, such as concrete, must
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be barged to the site. Because of this, construction costs are higher, for example. Also,
this dictates salaries to be higher in order to compensate workers for the added cost of
living. These factors are built into the cost analysis.
Product sales are subject to negotiation with the retail suppliers. During the first phase of
this project, good faith negotiations with retail suppliers will be pursued in order to obtain
equitable pricing for all parties. Of paramount interest to Diesel Brewing of Ketchikan is
to be able to pass on savings to the consumer, alleviating some of the high costs of
living driven by a slump in the economy. Because there is little transportation costs
associated with the liquid products, these savings, in the very least, should be passed
on to the consumer. Currently this equates to a minimum of 26 cents per gallon
(reference the private communication that Mark and Kevin had here). Through
good faith negotiations with the retailers, Diesel Brewing hopes to be able to increase
that savings to the consumer. Meanwhile, it is Diesel Brewings understanding that
electricity sales to the KPUD may be problematic because of the structure of the KPUD.
Diesel Brewing intends to negotiate with the KPUD to make available any excess
electricity on an as needed basis at substantial discount to the KPUD. Diesel Brewing
can do this because the power generation of the plant is a by-product of the plant, and
therefore it is cost effective to generate. These savings should also be passed on to the
consumer if such a mechanism exists within the KPUD.
Diesel Brewing has made the assumption that the granting of permits for the plant will
not be too difficult. Because the plant is using low grade or waste biomass from the
wood products industry, there is no net positive carbon foot print associated with the
facility or its products. The use of biomass derived energy is considered carbon neutral.
It is Diesel Brewings experience that under such conditions air permits are relatively
simple to obtain. Experience within the State of Oregon has shown this to be true.
However, Diesel Brewing is fully prepared to undergo all necessary evaluations in order
for the appropriate permits to be granted prior to construction. Meanwhile, Diesel
Brewing anticipates that construction permits will take an average amount of time.
Detailed plans must be evaluated by the appropriate local and state engineers in order
for a permit to be issued. Detailed plans will be submitted within the first phase of the
project and ample time given to the county engineers to evaluate them. Diesel Brewing
will strive to incorporate any suggestions/recommendations the county engineers have,
as long as they do not affect safety or the environmental aspects of the plant. A strong
symbiotic relationship with the county is of importance to Diesel Brewing, and we strive
to ensure that all interested parties have their input towards a successful project.
Diesel Brewing has made the assumption that Ketchikan has a work force pool for
construction and operation of the plant. It is Diesel Brewings intention to higher as
much local labor as possible, both during the construction process as well as the long
term operation of the plant. Should there not be a pool of qualified candidates for the
construction or operations portion, Diesel Brewing will have to pay for workers from
outside the area/state. This will increase the labor costs substantially. Diesel Brewing
feels confident that Ketchikan has the appropriate work force pool and does not
anticipate any problems with this. Phase I of the project will identify such a work force
pool and, if one doesn’t exist within the community, amended budget figures will be
submitted to the Authority. It may turn out that Diesel Brewing will have to absorb some
of these higher costs up front and they are ready to do so in order to complete the
project.
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AEA 09-004 Grant Application Page 32 of 40 9/3/2008
The economic impact of these assumptions is incorporated in the attached spreadsheets.
For example, as per published salary requirements, salaries paid to Alaska workers
are10%-25% higher than those in the lower 48. This salary increase is reflected in the
spreadsheets.
Some of the costs of permits are considered incidental while others could be substantial.
The costs for permitting are included under the ‘engineering’ portion of the expenditures
spreadsheet.
As indicated, Diesel Brewing will enter good faith negotiations for the sale of its products to
the local retailers. Diesel Brewing has made an assumption of what its sales price will be
and has performed a pro-forma analysis based upon those assumptions. However, Diesel
Brewing recognizes that until such time as a sales agreement is in place, they have no way
of knowing what the profit/losses will be. Diesel Brewing has figured this contingency in
through various conservative estimates on the sales prices and price range, and through the
estimation of a capacity factor (which really is an economic safety factor). Once complete,
there is no reason that the plant shouldn’t run 24/7/365, however, unplanned down times
will most assuredly occur. Diesel Brewing has tried to anticipate this and incorporate these
factors into the financial plan as best as possible.
Recommendations for additional project development:
The technology employed by Diesel Brewing is robust in nature to the feedstock used. For
example, municipal solid waste (MSW) is a high carbon content feedstock that could be
used to generate like quantities of liquid fuels and electricity, the difference being that MSW
derived SynGas would require additional cleaning. For example, plastics within the MSW
may contain chlorine. This chlorine is both a corrosive to the plant infrastructure and a
poison to the catalysts. Therefore, a standard method of chlorine removal would need to be
incorporated. Diesel Brewing has investigated this possibility and would recommend this as
additional project development after the successful completion of this project. Plant sizing
and costs for an MSW derived facility would be commensurate with the existing project,
especially since some of the infrastructure would already be in place. Such a plant would
serve several important functions including reducing the MSW volume that needs to be
transported and/or land filled; the generation of an additional 1-2 million gallons of liquid
fuels; an additional 5-10MWe of power; savings to the community in land fill or waste
transportation costs; and environmental considerations for waste disposal. Permitting,
under this case, is a much more stringent process, however, and would need to be
addressed in an additional phase of the project.
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AEA 09-004 Grant Application Page 33 of 40 9/3/2008
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
Community Benefits
Diesel Brewing will actively invest in the city of Ketchikan. One of the largest benefits to the
community will be the production of liquid fuels and electricity which will create energy
redundancy, added capacity and energy independence for Ketchikan. Diesel Brewing will also
stimulate the local economy through the creation of jobs, tax revenues and symbiotic business
relationships with vendors, suppliers and community organizations. Diesel Brewing is also
environmentally friendly by producing clean burning liquid fuels from renewable resources.
The Diesel Brewing facility is expandable. Once the 100 ton a day plant is operational, an
additional 100 ton a day unit can be retrofitted, essentially doubling the clean energy resources
and jobs b benefits to the Ketchikan community.
Liquid Fuels
Diesel Brewing will be manufacturing approximately one million gallons of synthetic diesel
annually. This high grade synthetic fuel will have a cetane value of 70 along with an ultra low
sulfur certification. Both characteristics allow the fuel to be sold for direct consumption in
standard diesel engine applications or through existing fuel distribution facilities. Because the
transportation and production costs are kept low, Ketchikan’s industries will benefit with
competitively-priced synthetic diesel fuel.
The biomass gasification plant will generate fuel by-products other than diesel. Roughly 660,000
gallons of Kerosene and other petroleum based liquid fuels will be manufactured every year.
Based on a 20 year lifespan of the facility, Diesel Brewing will produce in excess of 31,200,000
gallons of liquid renewable fuels. At an average wholesale cost of $4.00 per gallon, Diesel
Brewing would generate $124,800,000 in liquid fuel sales.
Electricity
The generation of between 5 and 10 MW of electricity every month will benefit the city of
Ketchikan. Through the gasification heating process, steam is generated internally within the
plant facility. Diesel Brewing will recover this energy by converting it to electricity through the use
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AEA 09-004 Grant Application Page 34 of 40 9/3/2008
of a steam turbine. Diesel Brewing will utilize what electricity it needs for operations and resell
the excess capacity to the residents of Ketchikan by connecting to existing power transmission
and distribution grids.
Assuming, power purchase agreements can be negotiated with the Ketchikan Public Utilities
(KPU), Diesel Brewing Ketchikan would generate a range of between 400,000,000 –
1,600,000,000 Kwh of electricity over the life of the project. At a wholesale price of $.07 cents
per Kwh, the gross revenues for electricity contracts would range from $28,000,000 to
$112,000,000.
Economic Benefits
The operations of a commercial scale diesel manufacturing plant require people. Approximately
25 jobs, ranging from entry level laborers to highly technical engineers, financial accounting
personnel and plant management, will be required to operate this facility. Approximately 20% of
those positions would become available immediately during the build out phase, the remaining
80% due when the plant is commissioned. Diesel Brewing will pay prevailing wages for the
Ketchikan community. Diesel Brewing will also offer generous benefit packages including health
care, profit sharing, paid vacation and retirement investment options.
The city of Ketchikan and the State of Alaska will benefit from a number of added tax revenues.
Diesel Brewing will pay corporate taxes necessary for operating a successful business. Its
products and services will be taxed at the production and consumption levels and its employees
will pay the appropriate employment taxes. Additional tax revenues will contribute to a stronger
community and local economy.
Community Involvement
Diesel Brewing will demonstrate its commitment to the Ketchikan community by actively
participating in activities that benefit the local community and its citizens. Diesel Brewing will
make contributions and donations to worthy causes such as fund raising events, charitable
organizations and youth programs. Individuals of Diesel Brewing will donate their time in the
assistance of others for the benefit of the community. Supporting children’s education, sports
and music programs are vital to the well being of any community. Diesel Brewing will sponsor
local youth sports teams and make cash contributions to local charitable fund raising events
benefiting children. Diesel Brewing will participate as an active member to local business
organizations such as the Ketchikan Chamber of Commerce, Economic Development
Corporations and other business groups.
Environmental Benefits
Diesel Brewing is devoted to the generation of cleaner transportation fuels derived from green
renewable resources. These fuels are clean burning and environmentally friendly which means
that when burned, they will emit substantially fewer harmful pollutants into the air including
carbon dioxide, carbon monoxide and sulfur particulates.
Renewable Energy Fund
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AEA 09-004 Grant Application Page 35 of 40 9/3/2008
As a major part of the site assessment process for where Diesel Brewing plants are considered,
the availability of wood byproducts is critical. Diesel Brewing seeks out forest product residuals
that are currently under utilized or not used at all. The process of converting forest waste to
liquid fuels and electricity is a carbon neutral process. The environmental benefits of not having
to burn timber waste products or dispose of them but rather converting them to clean energy
sources is extremely beneficial to the environment.
Kevin and Paul
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 cost of the project is $25,625,000.00. No significant investments have been made in
the Ketchikan project prior to this Grant Application. We respectfully request Grant funding in
the amount of $20,500,000.00. We will provide an additional $5,125,000.00 in private funding to
make this project a reality.
See attached GrantBudget.XLS file for budget costs by task.
Renewable Energy Fund
Grant Application
AEA 09-004 Grant Application Page 36 of 40 9/3/2008
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 Jeff Raines
Signature
Title Chief Executive Officer
Date October 5, 2008