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HomeMy WebLinkAboutRural Arctic Ready Energy Solutions App Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 2 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Alaska Green Energy, LLC in collaboration with University of Alaska, Anchorage Type of Entity: Alaska Green Energy, LLC is an Independent Power Producer (AGE) University of Alaska Anchorage is a Governmental Entity (UAA) Mailing Address Alaska Green Energy, LLC 1150 S. Colony Way Palmer, Alaska 99645 Physical Address 634 S. Bailey, Suite 201 Palmer, Alaska 99645 Telephone 907-746-7496 Fax 907-746-4978 Email rgross@akgreenenergy.com 1.1 APPLICANT POINT OF CONTACT Name: Robert Gross, P.E. Title: Vice President Operations Alaska Green Energy, LLC Mailing Address 1150 S. Colony Way Palmer, Alaska 99645 Telephone 907-746-7496 Fax 907-746-4978 Email rgross@akgreenenergy.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 X 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 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc 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. Project Title: Rural Arctic Ready Energy Solutions Working Title: Arctic Ready CHP/CBM Prototype Development and Rural Community Assessment Program (PROJECT) Project Type: This project will include all phases of development from Reconnaissance through Construction and Operations. Construction and completion of the Kircher CBM Well to power the prototype Arctic Ready CHP at Colony Schools will be emphasized. AGE is FERC certified to operate CHP facilities at the Colony Schools. FERC # QF08-789-000 Energy Resource: Coal Bed Methane (CBM) will be used to power a prototype of an Arctic Ready Combined Heat and Power (CHP) unit designed to provide an alternative source of energy in Villages that have potential CBM resources. Project Goal: To demonstrate how the PROJECT will significantly reduce energy costs in rural Alaskan villages that have potential CBM resources by providing a significantly less expensive and much more sustainable energy source. 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. AGE’s management and engineering team in collaboration with the UAA School of Engineering is proposing this PROJECT that when proven will provide rural communities with CBM resources an inexpensive energy source that will provide sustainable heat and power 24/7 365 days a year. This PROJECT will develop an Arctic Ready Combined Heat and Power Unit powered by CBM gas that will have direct application to rural communities with viable CBM resources. The PROJECT has three parallel components with appropriate milestones. · Component 1 will construct and complete Fowler Oil and Gas’s (FOG) Kircher CBM Well located at the corner of Trunk and Bogard Roads, Palmer, Alaska (see Exhibit A). . This well is located near the Colony Middle/High School Complex (Colony Schools). FOG’s Kircher Well is permitted, bonded and construction can be initiated as soon as grant funding is available. · Component 2 will pipe CBM gas from the Kircher well to a prototype skid mounted Arctic Ready Combined Heat and Power Unit at the Colony Schools. AGE will be the IPP that will own and operate this CHP system. · Component 3 will assess the CBM resources at 7 communities located through out rural Alaska. The seven communities will be selected from the 38 villages identified by the State of Alaska as having potential CBM resources (see Exhibit B). AGE has completed the initial reconnaissance assessment of these communities with the results summarized in Exhibit C These 38 communities are within the boundaries of 7 of the 13 Regional Native Corporations. AGE recommends selecting one community from within each Native Corporation boundary to ensure that the test projects will cover a broad geographic area. The final selection of the seven communities will be a public process with input from a proposed Project Assessment Team made up of AGE and our sub-consultants, USGS, BLM, DNR-DGGS, local power producers such as AVEC and Regional Corporations. All PROJECT Components are related but can stand alone if required. For example, if the Kircher Well does not produce CBM, then the Colony Schools Prototype CHP can be operated using available natural gas. Confirming FOG’s CBM technology will address the critical environmental and social concerns associated with CBM well spacing and produced water management that have plagued Lower 48 CBM developments. FOG’s process uses directional/horizontal drilling that allows well spacing on one well per Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 4 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc 640 acres compared to one vertical well per 10 acres used in standard CBM development. FOG’s technology uses in-ground dewatering compared to above ground management and disposal of produced water. FOG’s technology will revolutionize CBM development within the state and nationally. Most importantly, FOG’s process will result in a sustainable technology that can be easily managed and operated in rural Alaska communities with minimum social and environmental impacts. 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. Project Overview Milestone or Task (Stage)Federal Funds State Funds Local Match Funds (Cash) Local Match Funds (In-Kind)Other Funds TOTALS 1. CBM Prototype-Kircher Well $0 $6,620,161 $1,422,600 $0 $0 $8,042,761 2. CHP CBM Prototype-Colony H.S.$0 $2,281,250 $0 $0 $0 $2,281,250 3. Rural Community CHP CBM Assessment $0 $10,500,000 $0 $0 $0 $10,500,000 Totals $0 $19,401,411 $1,422,600 $0 $0 $20,824,011 FOG will repay the State the $6,620,161 to complete and construct the Kircher Well, if commercially viable CBM is produced, over a 20 year term at a favorable interest rate similar to an AIDEA loan. Component 1. Kircher Well Completion: AGE Funding Request: $6,620,000 The reconnaissance through final design and permitting phases are 100% complete. The construction phase has completed the initial site preparation with the construction of the access road and drill pad. A total of $1,422,000 in private matching funds has been expended to date to complete these phases and to initiate construction. Component 2. Colony Schools CHP: AGE Funding request: $2,281,000 The initial reconnaissance phase and 20% level of feasibility and conceptual design has been completed by AGE, and our sub-consultants Van Boerum and Frank Associates, in coordination with Mat Su School District and Mat Su Borough staff. Upon funding, all pre-construction phases will be completed this winter with construction anticipated to begin in the summer of 2009. AGE is not asking for AEA funds for operations and maintenance. Component 3. Rural Community Assessments: AGE Funding Request: Total grant request $10,500,000 or approximately $1,700,000 per assessment. Each village assessment is estimated to cost $1,700,000 to complete the reconnaissance and Resource Assessment/Feasibility Analysis phases. AGE and its sub-consultants will use these funds to a conduct a geological analysis, core and test the CBM content of the coal located at the seven selected villages, to determine if viable quantities of CBM gas are available to power the PROJECT. An economic analysis will also be conducted to confirm the project’s feasibility, and a report of the findings and recommendations for each village will be produced. Results will be shared with the community, the local power producer, Regional Native Corporation and the state to determine the best means of utilizing this resource whether through a modification of the community’s existing system or through using the Prototype Arctic Ready CHP/CBM system. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 5 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc 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. Financial Benefit Chart Entity Cents / kWh Annual Energy Cost Cents / kWh Annual Energy Cost Dollars % Colony Schools Proj Sept 2008-Aug 2009 $ 0.12 $ 475,905 $ 0.09 $ 353,203 $ 122,702 26% Rural Community Fuel Delivery-Water Proj Sept 2008-Aug 2009 $ 0.47 $ 680,918 $ 0.11 $ 404,712 $ 276,206 41% Rural Community Fuel Delivery-Air Proj Sept 2008-Aug 2009 $ 0.77 $ 1,077,624 $ 0.13 $ 515,088 $ 562,536 52% Savings Proposed Energy SystemExisting Energy System Component 1. Kircher Well Completion Benefits: · Confirming Fowler’s CBM technology will have tremendous benefits to rural Alaska, rail-belt Alaska, and the rest of the nation, as all are watching to determine if directional/horizontal drilling and in-ground disposal of water are viable thus providing a more environmentally sensitive and socially acceptable method of producing CBM gas. · This process with its limited physical footprint allows larger property owners such as farmers to keep their property under cultivation as opposed to having to subdivide and sell. This ensures green and open space in developing communities. · Will create a viable CBM industry in rural Alaska that complies with local and state regulations and will mitigate the downward trend in Cook Inlet natural gas production. Component 2. Colony Schools CHP Benefits: · The Matanuska Susitna Borough and School District will experience energy cost savings which in turn has the added benefit of providing more funds for school programs. · Provide students educational opportunities in alternative and renewable energy resources. · Reduce the Colony Schools carbon footprint by 60% making the schools eligible for a Green Star rating from Environmental Protection Energy. Component 3. Rural Community Assessment Benefits · This Component will provide significant financial benefits in fuel cost savings to residents and the rural communities that have viable CBM resources. A lower and stable cost fuel source, CBM, will replace the ever increasing cost of diesel fuel. Diesel will be relegated to the role of a back up fuel to the CBM. · Significant reduction in State costs through a reduction of various subsidies. · Using locally found CBM resources will greatly reduce the need to purchase, transport and store diesel fuel, thus eliminating the high costs and potential environmental hazards and uncertainty related to the transportation, transferring and storage of bulk diesel fuel. · CBM can make use of the communities’ existing power production and distribution infrastructure with minimum modifications. · CBM will be sustainable and available 24/7 365 days a week. · The long term savings are significant and will help ensure the cultural integrity of the village by greatly decreasing the costs to individuals to heat and power their homes making it more viable for individuals and families to remain living in the village. · It will significantly reduce the carbon footprint of these communities by using the 80% efficient CHP system and cleaner burning CBM gas as opposed to diesel fuel. · It will provide short term construction jobs and long term O&M job opportunities in the villages. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 6 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc All Components: UAA Benefits · The entire program will provide on the ground educational and research opportunities for UAA students and staff. · Internship opportunities. 2.4 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.) $20,824,011 2.5.2 Grant Funds Requested in this application. $19,401,411 2.5.3 Other Funds to be provided (Project match) $ 1,422,600 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $20,824,011 2.5.5 Estimated Benefit (Savings) Refer to Section 2.4’s Project Benefit Chart for Typical Savings 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.) Refer to Section 2.4 Narrative Section 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: Bob Gross, AGE’s Vice President of Operations will manage this project. Bob has extensive experience as a project manager for large oil field, public and defense infrastructure and commercial master planning and development projects. Bob will be responsible for all aspects of the project management including being the point of contact with AEA. Bob’s resume and references are attached in Appendix A. 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.) See attached project schedule and milestones for each project Component. Exhibit D. 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. See attached project schedule and project milestones for each project Component. Exhibit D. 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. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 7 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc AGE’s extremely talented management team will be sub-contracting and collaborating with equally talented UAA staff and students, FOG, other sub-consultants and service providers to make the PROJECT happen to the benefit of rural Alaska. The following is a brief narrative explaining these relationships as well as equipment and services that will be used to make the project happen. Component 1. Kircher Well Completion. AGE will provide management to this Component while our sub-consultant partner Fowler Oil and Gas will develop and operate the Kircher well. FOG will use Kansas Geological Surveys as their seismic contractor. Scientific Drilling will perform the coring, testing and ultimately the directional/horizontal drilling. Baker Hughes/Centrilift will install the down-hole pumps and establish the in-ground dewatering system. UAA will provide staff and students in support of this project phases. Component 2. Colony Schools CHP. AGE will provide both management and engineering services for the CHP design. Van Boerum and Frank Associates, with their 25 years experience in design, constructing and providing operation support of CHP systems will do the detail design and manufacture the Prototype Arctic Ready CHP. FOG will provide CBM or available Cook Inlet natural gas to serve as a fuel source for the CHP. The construction of the CHP will be bid competitively with solicitations going to GE Jenbacher, Cummins, CAT, Waukesha and others. UAA will provide support in this project Component. Component 3. Rural Community Assessments: AGE will manage this project Component with the engineering team consisting of AGE and UAA. The Project Assessment Team made up AGE staff, Alaska Earth Science personnel, AEA representatives, USGS geologists and DNR DGGS geologists will recommend the final seven communities. The engineering team will assess and recommend means to convert the existing power generating systems to CBM gas and develop specifications for a CHP unit that will meet the unique power and heat requirements of the individual village. AGE or their sub-consultants will perform the geologic assessment, the coring, testing and seismic work and prepare the final reports for each community. UAA will also assist with the feasibility analysis of each village to determine the viability of the PROJECT. The final report will be provided to the community, Regional Corporations and Project Assessment Team to determine the best implementation program. Key resumes, company profiles and references are provided in Appendix A. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. Bob Gross will be AGE’s prime point of contact for AEA and will be available by cell phone and e-mail as presented in Section 1.1 of this grant application. Monthly status reports and quarterly financial reports will be provided per the requirements identified in the Sample Grant Agreement. AGE will meet or exceed all project and financial reporting requirements for this grant. Additionally, Alaska Green Energy will utilize a web-based project management system to track and communicate with large groups of people on our specific projects. This system is state-of- the-art and ensures that everyone involved in the project has clear guidelines on task completion and responsibility. Effectively, this will allow AGE and AEA staffs to collaborate and share data, irrespective of their geographic location. This system will also dynamically create GANTT charts for each project and have discussion forums associated with various milestone requirements dictated for each project when it is undertaken. As it is web-based, loss of data and security are both assured by our webmaster. We will issue a username and password to our AEA designated point-of-contact who will then be able to monitor and make communications about the project, information, files, forums etc. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 8 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc 3.6 Project Risk Discuss potential problems and how you would address them. Component 1. Kircher Well Completion Risk: There is low risk associated with this project Component. The risk associated with this Component is if CBM is not found in producible commercial quantities. If there is no CBM found during the coring and testing milestone, the project ends. If commercial producible quantities of CBM are found, then the state will be reimbursed over time for their entire funding outlay of this Component thus mitigating the state’s risk in its entirety. Also, CBM development in the Matanuska Susitna Borough and elsewhere in Alaska and the nation is very controversial. FOG’s technical proposal met the very stringent MSB CBM Development requirements and was issued a MSB Conditional Use Permit as well as all other appropriate local, state and federal permits. This project is being followed very closely by local and state regulators, the industry and Lower 48 state and local governments to see if the project is successful. Success will jump start a foundering industry in Alaska. The risk at not following through will all the commitments and having something go wrong will likely taint the future outlook of CBM development in Alaska and elsewhere. AGE will ensure that this CBM development is done right. Component 2. Colony Schools CHP Risk. The risk is minimal if commercial quantities of CBM are not found. In this case, This project Component will move forward using the existing natural gas supplier. The savings to the Matanuska Susitna Borough and School District will be lower since there will not be a reduction in price of gas, but savings will still occur due the 80% efficiency of the CHP system. The key is that the testing of the Arctic Ready Prototype CHP will move forward with either CBM or natural gas. Component 3. Rural Community Assessments Risk: The risks related to the Village Assessments are minimal and are related to not finding commercially producible quantities of CBM to serve as a replacement fuel for diesel. 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. State and federal reports indicate that the United States has 50% of the world’s coal reserves. Alaska has 50% of the coal reserves in the United States or 25% of the world’s reserves. These Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 9 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc same reports estimate that there is over 1,000 trillion cubic feet of CBM resources in Alaska. These reports point to CBM as the energy solution in rural Alaska communities with CBM resources. State and federal agencies, universities and several Regional Native Corporations have collaborated to identify 38 rural communities that have potential Coal Bed Methane resources. Our Rural Community Assessment program will conduct the necessary geological assessment as well as core and test to determine if the amount of CBM resources in seven to be selected villages is viable. Once an individual village assessment is completed, AGE will share the information with AEA, the community and local power supplier. Unlike wind or micro-hydro projects, if CBM is proven viable it will be available to the rural communities 24/7 365 days a year. FOG’s directional/horizontal drilling technology allows one well to be drilled per 640 acres significantly limiting environmental and land use impacts. In- ground dewatering is the key element of FOG’s technology since it eliminates costly and potentially harmful above ground management and disposal of produced water. FOG’s process makes the operation and management of the CBM well or wells straightforward in rural communities and for the local power providers. Training and operations assistance will be available to the local power provider after the wells are operational if required. 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. Colony High School, Colony Middle School and the shared potable water well system are inter- tied to the railbelt grid as customers of the Matanuska Electric Association. Heating to both buildings is accomplished with natural gas fired hot water boilers. Natural gas is provided by ENSTAR. Colony High School’s heat system was recently upgraded with two 4184 MBH Burnham Commercial Boilers. Colony Middle School is heated with two Cleaver Brooks 6695 MBH boilers date stamped 1986. The rural Alaska communities with potential for coal bed methane gas under consideration for this PROJECT typically have diesel-fired electrical generation equipment and fuel-oil heating systems. Several of these villages have recently upgraded generation equipment, added wind energy generators, and utilized waste heat. Recently upgraded systems could easily be modified to use CBM at a low cost. Exhibit C provides additional detail existing energy systems in these villages. 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. Colony schools use natural gas through ENSTAR for heat and obtain electricity from MEA’s grid. Most rural communities being considered in this proposal use diesel fuel to provide heat and power. See Exhibit C for details. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 10 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc Component 1 and 2: Kircher Well Completion and Colony Schools CHP : The Mat Su Borough is currently served by Cook Inlet Natural Gas through ENSTAR. The cost of natural gas has increased by 72% in the Mat Su Borough over the last five years with another 20% increase expected later this year. The Mat Su Borough receives electricity from MEA. This project will decrease electric and power costs at the Colony Schools by 26% annually for the 20 year life of the project. Component 3. Rural Community Assessments: The 38 rural communities under consideration are dependent on diesel fuel deliveries either by air or barge. AGE has completed an initial assessment of the 38 rural communities identified by the State of Alaska as having CBM resources. Exhibit C provides a summary of this information. AGE estimates that rural communities receive fuel via barge will see a 41% reduction in energy costs and a 52% savings in energy costs will be seen by communities that receive airborne fuel deliveries. Eliminating or greatly reducing a communities reliance on diesel fuel and replacing it with inexpensive, stable and sustainable CBM fuel will significantly reduce the energy costs to residents and virtually eliminate state subsidies these rural communities under the Power Cost Equalization Program. 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 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 11 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc The premise of AGE’s system design is to utilize CBM gas as a fuel source in order to cost- effectively generate electricity and heat with a fuel source potentially available to many rural communities through out Alaska. Use of CHP technology can increase power generation efficiencies from 30% to as high 90%. AGE is proposing to design/select the most appropriate gas-fired engine for a combined heat and power station suitable for Colony Middle School/High School Complex, designed to serve as a prototype “Arctic-Ready” system, which could be readily adapted to rural Alaska. Preliminary system designs have been prepared by GE/Jenbacher and Cummings to assess project feasibility. CAT and Waukesha systems will be also be included in the detailed feasibility study design. The optimum design capacity of the CHP system for the Colony Schools is approximately 350 KW, providing the base demand for both schools and the well system and more then enough heat capacity the schools. Peak electrical demands may occasionally exceed the CHP systems capacity and would be satisfied with grid power provided by MEA. Engines being evaluated are continuous duty, resulting in nearly 100% capacity factor minus normal maintenance. The existing electric distribution and hot water heat systems would remain functionally intact to provide backup heat and power when necessary. Annual power production CHP system will be approximately 3.07 Million KW-Hrs and 10,500 MMBtu’s of heat potential. The most substantial potential barrier to the economic operation of this system is the ability to obtain the CBM gas as a low cost alternative natural gas. CHP system integration with the Colony School’s existing electrical and heat systems will be achieved by direct connects to the existing systems at minimal cost. The CHP system fueled with CBM will be designed to be readily transferable to rural communities with producible CBM gas. Existing power producing infrastructure varies widely in capability and efficiency. The CHP system would be appropriate for many of the communities with CBM gas potential, while others may only require conversion of existing generators from diesel use to gas-fired. 4.3.2 Land Ownership Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 12 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc 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. Component 1 Kircher Well Completion: Fowler Oil and Gas has secured all necessary approvals, permits and rights of entry for Kircher well. The Kircher family own both the surface and subsurface estate and has a signed lease agreement with FOG that allows access and development of the well as well as royalty payments. FOG’s project is bonded. Component 2 Colony Schools CHP: AGE has initial letters of support from both the Matanuska Susitna Borough and the Matanuska Susitna Borough School District. AGE will be presenting this proposal to the MSB School Board on October 22, 2008 and anticipates receiving a resolution of support. This will be provided as supplemental information. The Borough as the property owner has committed to issue the appropriate rights of entry and land lease for the area needed to house the Arctic Ready Prototype CHP unit. All necessary permits will be secured from the Borough or State of Alaska for construction of the pipeline within their right-of-way. Component 3 Village Assessments: AGE will work with the seven identified communities, Regional Corporations, local power producers and private property owners to secure the necessary approvals to conduct the coring and testing programs. This work will be initiated upon notification of grant award. 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 Permits have been applied for and granted to drill and complete Component 1: Kircher Well. These permits as well as additional permits anticipated for the Colony High/Middle School Complex and the Rural Community Assessment are as follows: Kircher Well Approved Permits Issuer Permit # Description Federal Energy Regulatory Commission (FERC) QF-08-789- 000 Qualifying Facility Certification – Colony School Federal Energy Regulatory Commission (FERC) QF-08-790- 000 Qualifying Facility Certification – Girdwood School Alaska Oil & Gas Conservation Commission 208-0410 CBM Drill Permit Alaska Oil & Gas Conservation Commission RLB0011407 $100,000 Surety Bond Matanuska-Susitna Borough CUP2007- 0031 Conditional use permit for development of a single CBM well operation on 840 acres. Matanuska-Susitna Borough RLB0011617 $50,000 Surety Bond U.S. Army, Corps of Engineers POA-2007- 1591-8 Wetlands Determination Alaska Department of Transportation ATC-18826 Driveway Permit Alaska Department of Environmental Conservation M-W-20 Title V Air Quality Construction and Final Permit Alaska Department of Wastewater Discharge – UIC, Plan approval Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 13 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc Environmental Conservation Alaska Department of Environmental Conservation Exemption for ODPCP, Negative determination Alaska Department of Natural Resources 3130-4R Fowler Oil Historic Property Impact , No impact Alaska Department of Natural Resources TWUP- A2007- 114 Alaska Coastal Management Program Alaska DOT Issued Right of Way Alaska State Historic Preservation Office Kircher No 1 Determination that no historical adverse affects Anticipated Permits Issuer Issue Date Description Alaska State Fire Marshall Spring 2009 Alaska Department of Environmental Conservation Spring 2009 Title V Air Quality Construction and Final Permit Alaska Department of Environmental Conservation Spring 2009 Wastewater Discharge – UIC, Plan approval Matanuska-Susitna Borough Spring 2009 Mandatory Land Use Permit Matanuska-Susitna Borough Spring 2009 Core area conditional use permit Alaska Department of Environmental Conservation Spring 2009 Contingency Plan Alaska Department of Environmental Conservation Spring 2009 NPDES Stormwater Permit - Construction Alaska Department of Environmental Conservation Spring 2009 Oil Discharge & Contingency plan determination Alaska Department of Environmental Conservation Spring 2009 Temporary Camps Alaska DOT Spring 2009 Right of Way Alaska Department of Natural Resources Spring 2009 Alaska Coastal Management Program Alaska Department of Natural Resources Spring 2009 Div of Mining, Land, & Water Tundra Travel Alaska Department of Natural Resources Div of Oil and Gas Spring 2009 Plan of Operations Alaska Department of Natural Resources Div of Oil and Gas Spring 2009 Geophysical Exploration Permit * AGE sees no barriers to obtaining these permits by the identified dates. 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 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 14 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc · Aviation considerations · Visual, aesthetics impacts · Identify and discuss other potential barriers Threatened or Endangered species, habitat issues, wetlands and other protected areas, and archaeological and historical resources are addressed in the State permitting process listed above. Land development constraints have and will be further identified through the local permitting process. Telecommunications interference will not be an issue. Aviation considerations may temporarily result due to locations of drilling rigs. Proper approvals will be obtained from the FAA and NOTAM’s will be issued. Visual aesthetics impacts from this work will be mitigated on a case-by-case basis following the local permitting and approval processes. The important environmental solutions provided by AGE and FOG’s technology is that the well spacing is one well per 640 acres. Lower 48 CBM industrial practices have significant impacts due the well spacing of 1 well per 10 or 20 acres and supporting spider webs of roads needed to service these multiple wells. FOG’s in-ground dewatering eliminates the environmental and costly management of produced water which is often contaminated. 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 for the Colony Schools CHP System will be approximately $0.05/kwh. Operating and Maintenance costs for a typical rural village served by water is estimated at $0.07/kwh and $0.09/kwh. AGE is not requesting AEA grant funds for O & M costs. 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 The Mat/Su Borough School District will be the primary purchaser of power produced from the CHP System. The potential power purchase price will be approximately $0.09/kwh Excess electricity may be sold to MEA. The potential power purchase price for rural communities with waterborne fuel delivery will be approximately $0.11 /kwh and $0.14 /kwh for rural communities served by airborne fuel delivery. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 15 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. The costs of rural CBM development are based on actual figures from FOG’s reconnaissance and final design of the Kircher well and state and federal reports. Costs of the CHP and energy savings are based on manufacturer supplied information and industry standards. 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. AGE proposes to institute a sustainability fund that will be funded to assure that capital is available for major system repairs and replacement at the end of the equipment lifecycle for the Kircher Well and Colony High/Middle School Complex CHP System. Forecasted revenues will cover all routine operations and maintenance costs and require no further grant supplement. 4.4.6 Analysis and Recommendations Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. The fact that CBM gas may solve the energy crises in 38 rural Alaskan Communities is both exciting and challenging. It is exciting because the social and economic benefits to the rural communities and their residents of having a local sustainable energy source available 24/7 365 days a year is staggering. Reducing energy costs by up to 50% by using CBM help ensures the community’s economic viability and helps ensure the cultural integrity and rural lifestyles of its residents. An immediate benefit to the state is a significant reduction is various fuel subsidies to these communities. Environmentally, reducing the number of diesel fuel deliveries via water or air eliminates the chances of spillage in the transfer, storage and distribution of the fuel during transportation. The high cost of transporting fuel via air or barge is greatly reduced or eliminated. The challenge to securing these benefits is being able to provide the CBM gas in a sustainable, easily managed and maintained, and environmentally and socially sensitive manner. AGE’s proposal provides a responsible program to demonstrate that CBM can provide rural communities with a sustainable, manageable and environmentally sensitive energy source with minimal social and land use impacts. The key to this program is to demonstrate that FOG’s CBM technology is viable in rural applications. AGE’s program to complete a CBM well on the road system providing fuel to a near by CHP at the Colony Schools provides the most cost effective means to demonstrate the rural application of these technologies. Confirming viable CBM resources in rural communities through the community assessment program positions the community and state to make immediate decisions about developing CBM resources. The final report will recommend the best means to convert the CBM resource into heat and power: either through retrofit of the existing power plant or installing a new CHP. In the final analysis, AGE’s proposal will take CBM development in rural Alaska from the talking Component to implementation resulting in tremendous economic and social benefits to rural Alaskans and their communities Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 16 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc 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. Potential Annual Fuel displacement savings for the Colony High/Middle School CHP System is estimated at over $2.4 Million over the 20 year life cycle of the equipment, assuming the CBM gas is available for this entire period. Extrapolated to typical rural community costs, annual savings of $250,000 to $550,000 would result in savings of $5 Million to $11 Million over a 20 year life cycle. 2. Anticipated Gross Annual Revenue for AGE from the Colony High/Middle School Complex has been estimated at $275,000 to $315,000 and net profits of 10 to 12 percent of the total. Extrapolation of these estimates to a rural community will require additional analysis based on the specific location, and infrastructure currently in place. 3. Potential Additional Annual Incentives (i.e. Tax Credits) · Component 1. Kircher Well Completion: Not Applicable. · Component 2. Colony Schools Arctic Ready CHP: Not Applicable. · Component 3. Rural Community Assessments: Not Applicable. 4. Potential Additional Annual Revenue Streams · Component 1. Kircher Well Completion: Not Applicable. · Component 2. Colony Schools Arctic Ready CHP: Not Applicable. · Component 3. Rural Community Assessments: Not Applicable. 5. Non-Economic Public Benefits Section 2.4 Project Benefits details non-economic benefits for each Component of this PROJECT. In summary, each project Component has significant long-term public benefits over the minimum 20 year life of the project. · Component 1. Kircher Well Completion. Proving FOG’s technology will create a new industry throughout Alaska. In rural Alaska this technology will allow communities to tap a heretofore difficult resource to manage allowing them to break away from diesel fuel. In south-central Alaska, FOG’s environmentally sensitive CBM development will begin to mitigate the downward trend of Cook Inlet Natural Gas Production and should stabilize or lower the cost of natural gas. Nationally, states are watching with extreme interest if the requirements of the MSB CBM Ordinance can be met with FOG’s less invasive technology to better control and mitigate the negative environmental, social and land use impacts and conflicts caused by current CBM development practices in the Lower 48. Finally, large Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 17 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc property owners in the MSB may be able to afford to keep their property undeveloped or under cultivation thus encouraging open space and farm land retention. · Component 2. Colony Schools CHP. Reducing energy costs at these schools will provide the opportunity to fund other critical school programs or facilities needs. An savings exceeding $100,000 equates over $2,000,000 in savings over 20 years. Renewable energy educational opportunities for borough students will develop an understanding of and help develop advocacy for renewable energy solutions by the next generation of Alaskans. · Component 3. Rural Community Assessments. Successful development of CBM gas in these rural Alaskan communities will help guarantee their future existence and maintain the cultural integrity and lifestyles of their residents. Otherwise the exodus of rural residents from these communities to urban centers will continue and these rural communities and lifestyles will die out. 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 primary source of funds for the PROJECT is through AEA Renewable Energy Fund Grant Program. A total of $1,422,600 has already been expended to make the Kircher Well construction ready. The unique feature of this PROJECT is the commitment to repay the State the $6.6 million needed to complete the Kircher Well. Our total cost to the AEA Renewable Energy Fund Grant program would be closer to $14,000,000. Please refer to Tab 7C Grant Budget for details. 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 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 18 of 18 2008-Oct-08 Z:\AEA Grant 2008\Artic Ready CHP CBM\AR AEA Grant Application-final.doc - 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 Robert Gross Signature Title Vice President, Operations, Alaska Green Energy Date 10-8-2008