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HomeMy WebLinkAboutGrant Lake Falls Creek Hydro Project Kenai Hydro App 6921 Howard Ave, Anchorage, Alaska 99504 Alaska Energy Authority AEA-09-004-Renewable Energy Grant Application 813 West Northern Lights Boulevard Anchorage, AK 99503 October 8, 2008 Subject: Round I Grant RFA, Kenai Hydro, LLC Dear Alaska Energy Authority, Alaska Wind Energy, LLC, dba Wind Energy Alaska, is a partnership of Cook Inlet Region Inc and a major renewable energy developer, enXco Development Corp. Wind Energy Alaska has partnered with Homer Electric to form Kenai Hydro, LLC. Wind Energy Alaska is the manager of Kenai Hydro under the terms of that entity’s governing documents, and therefore is submitting this application on its behalf. Kenai Hydro appreciates the opportunity to present the enclosed AEA-09-004-Renewable Energy grant application for partial funding for the study of the Grant Lake low impact hydro electric generation project on the Kenai Peninsula. Hydro projects require a rigorous set of studies and grant funds help with the upfront costs associated with this work. The project represents an important opportunity for the community to reduce electric costs over the long term while diversifying the energy mix for Alaskans on the Kenai Peninsula. Thank you for this opportunity. Please feel free to contact me with questions. Best Regards Steve Gilbert Manager, Alaskan Projects enXco Development Corp (907) 333-0810 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 1 of 18 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 18 9/3/2008 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Kenai Hydro, LLC Type of Entity: Independent Power Producer (A Joint Venture among Homer Electric Association, Inc. (HEA), enXco, and Cook Inlet Region, Inc (CIRI)) Mailing Address 2525 C Street, Suite 500, Anchorage, AK 99503 Physical Address Same Telephone 907-333-0810 Fax None Email SteveG@enxco.com 1.1 APPLICANT POINT OF CONTACT Name Steve Gilbert Title Manager Mailing Address 6921 Howard Avenue, Anchorage, AK 99504 Telephone 907-333-0810 Fax None Email SteveG@enxco.com 1.2 APPLICANT MINIMUM REQUIREMENTS Please check as appropriate. If you do not to meet the minimum applicant requirements, your application will be rejected. 1.2.1 As an Applicant, we are: (put an X in the appropriate box) An electric utility holding a certificate of public convenience and necessity under AS 42.05, or X An independent power producer, or A local government, or A governmental entity (which includes tribal councils and housing authorities); Yes 1.2.2. Attached to this application is formal approval and endorsement for its project by its board of directors, executive management, or other governing authority. If a collaborative grouping, a formal approval from each participant’s governing authority is necessary. (Indicate Yes or No in the box ) Yes 1.2.3. As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement. Yes 1.2.4. If awarded the grant, we can comply with all terms and conditions of the attached grant form. (Any exceptions should be clearly noted and submitted with the application.) Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 3 of 18 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. The proposed project is a 5 to 7-MW hydroelectric facility that would utilize the water resources of Grant Lake/Creek and possibly Falls Creek near Moose Pass, Alaska. The project’s Reconnaissance Phase (“Phase 1”) was initiated in August 2008 with a site visit. The Engineer’s (HDR Alaska, Inc.) initial site assessment recommends advancing the project to further resource assessment and feasibility studies. A copy of HDR Alaska’s initial site assessment is attached for review in the Section 7 appendices. This application seeks funding to assist in furthering the “Phase 2” Resource Assessment, Feasibility Analysis and Conceptual Design(s). The funds from this application would support work associated with Phase 2 as explained herein, and FERC Preliminary Permit requirements leading up to, and including, the preparation and filing of a FERC license. Should the project remain viable and grant funding remain available beyond the FERC license application, the project would seek future grant funds in support of Final Design, Licensing and Construction. 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 5 to 7-MW Grant Lake/Falls Creek hydro project is located near Moose Pass, Alaska (see map in HDR’s attached site assessment). Kenai Hydro seeks to develop the project in compliance with current low impact hydro guidelines and practices. The scope of this project will also involve looking at the feasibility of a design that includes diverting flows from Falls Creek into Grant Lake. Kenai Hydro has secured a Preliminary Permit for this project, issued by FERC on October 7, 2008. A copy of the Preliminary Permit is attached in the Section 7 appendices. Power from the project would be available to customers of Homer Electric Association and other areas served by the existing Railbelt transmission grid. Kenai Hydro, LLC is a partnership among Homer Electric Association (HEA), enXco and Cook Inlet Region, Inc. (CIRI) that was formed for the purpose of evaluating and developing this site as a low impact hydroelectric facility. Additional information on this project may be found in the attached initial site assessment reported by HDR Alaska, Inc. 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. It is estimated that approximately $1,020,000 in funds are needed to complete a Phase 2 study of the Grant Lake project that would culminate in a FERC license application. Kenai Hydro would anticipate AEA to provide 80% of this amount, or $816,000. Phase 1 Reconnaissance studies are in progress and are expected to be completed by January Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 4 of 18 9/3/2008 2009. The grant funds from this Phase 2 application would not be utilized unless there is a successful outcome from the Phase 1 studies. The Phase 1 effort is partially funded by Alaska Energy Authority (AEA) under an earlier grant award. This grant provided for up to $50,000 in matching funds. Stakeholder consultations and preliminary identification of necessary studies and permitting will be accomplished in Phase 1. Phase 2 will build on the foundation of work completed in Phase 1 and carry out studies to answer concerns and issues raised by stakeholders in Phase 1. Phase 2 funds will initially be drawn from a combination of existing and future grant funding as well as internal financing. As long as the project continues to remain economically and environmentally viable, the companies that constitute Kenai Hydro, LLC are committed to providing the 20% matching funds in cash, as well as the in-kind match for the cost of management and administrative staffing. PROJECT COST SUMMARY The preliminary total cost estimate for the project through construction is $26,924,120. This estimate includes a $22,750,000 capital cost (based on a 7-MW project at an estimated $3,250/kW) and an estimated $4,174,120 for development costs. Description Preliminary Cost Estimate % of Construction Cost Phase 1 Reconnaissance 105,000$ 0.5% Phase 2 Resource Assess/Feasibility Analysis/Concept Design 1,569,120$ 6.9% Phase 3 FERC Licensing & Final Design 2,500,000$ 11.0% Phase 4 Construction & Commissioning 22,750,000$ Total Preliminary Cost Estimate 26,924,120$ 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 power from the proposed project would reduce consumption of non-renewable carbon- based energy sources, thereby helping to improve air quality in Kenai Peninsula Borough. The renewable energy will also serve to incrementally stabilize the long term price of power to consumers. The project is an important step toward diversifying HEA’s future generation portfolio. In 2008 dollars, it is estimated that nearly $41,000,000 can be saved in avoided fuel cost over a 50-year period. This represents a tremendous value to the rate payers of Alaska and a generation asset will continue to produce clean, renewable power for Alaskans over the next century. 2.5 PROJECT COST AND BENEFIT SUMARY Include a summary of your project’s total costs and benefits below. 2.5.1 Total Project Cost (Including estimates through construction.) $26,924,120 2.5.2 Grant Funds Requested in this application. $816,000 2.5.3 Other Funds to be provided (Project match) $204,000 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $1,020,000 2.5.5 Estimated Benefit (Savings) $41,000,000 2.5.6 Public Benefit (If you can calculate the benefit in terms of $ TBD (To Be Determined) Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 5 of 18 9/3/2008 dollars please provide that number here and explain how you calculated that number in your application.) 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. Mr. Steve Gilbert (enXco) will oversee the development of this project with the assistance of Mr. Brad Zubeck (HEA). Their brief professional biographies are attached in Section 7, Attachment A as requested. These individuals have the guidance, support and staffing of their parent organizations for managing this project from its current state through design, construction and operation. Where needed, Kenai Hydro, LLC will contract with qualified firms and consultants to conduct the engineering, studies and detailed design associated with the project. 3.2 Project Schedule Include a schedule for the proposed work that will be funded by this grant. (You may include a chart or table attachment with a summary of dates below.) Please refer to the Gantt chart attached with this grant application showing the proposed schedule for Phase 2 activities. A summary of the dates is provided below: PHASE 2 – Schedule Summary Task Name Start Finish Task 6 – Field Studies 1/1/2009 12/31/2010 2009 Field Studies ~3/2/2009 ~10/30/2009 Milestone # 3: At conclusion of 2009 Study Season ~11/1/2009 ~12/31/2009 2010 Field Studies ~5/3/2010 ~9/30/2010 Task 7 – Engineering, Design & Management 1/1/2009 12/31/2010 2009-2010 Engineering & Management 1/1/2009 12/31/2010 2009 Study Oversight ~3/2/2009 ~10/30/2009 2010 Study Oversight ~5/3/2010 ~9/30/2010 Task 8 – FERC License Application ~8/3/2009 12/31/2010 FERC License Manager & Activities ~8/3/2009 12/31/2010 Milestone # 4: Final Decision to Make FERC License Application ~11/1/2010 12/31/2010 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 6 of 18 9/3/2008 In the attached schedule, two milestones are proposed. The first, labeled Milestone # 3, is intended to be a project evaluation and decision based upon the findings of the 2009 season’s studies. If the project continues to look economically and environmentally feasible, Kenai Hydro will proceed with plans for implementing follow-up studies and engineering work for the 2010 season. As shown in the schedule, the Milestone # 3 decision would be made near the end of the 2009 calendar year. The second milestone, labeled Milestone # 4 in the attached schedule, is meant to be a comprehensive revisiting and confirmation of all the work accomplished in Phases 1 and 2, and based on the outcome of the Phase 1 and 2 analyses, as well as the status of negotiation of parallel project agreements, Kenai Hydro will decide whether or not to proceed with filing of a FERC license application. The Milestone # 4 decision would be made over the last couple of months in the 2010 calendar year. 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. Mr. Steve Gilbert (enXco) and Mr. Brad Zubeck (HEA) will be responsible for management and direct oversight of the project development. These individuals have the guidance, support and staffing of their parent organizations for managing this project from its current state through design, construction and operation. Kenai Hydro, LLC is a partnership among Homer Electric Association (HEA), enXco and Cook Inlet Region, Inc. (CIRI) that was formed for the purpose of evaluating and developing this site as a low impact hydroelectric facility. Where needed, Kenai Hydro, LLC will contract with qualified firms and consultants to conduct the engineering, studies, permitting, process management and facilitation associated with the project. Based on their recent FERC relicensing performance with the Cooper Lake hydro facility, Long View Associates (LVA) was hired to prepare FERC preliminary permit applications. The preliminary permit for this project is secured and was issued by FERC October 7, 2008. LVA is likely to be used again in various capacities on this project, such as permitting or FERC license application management. Kenai Hydro interviewed prospective engineering firms and decided upon HDR Alaska, Inc. (HDR) to provide engineering and consulting services for the feasibility phase of this project. HDR is currently under contract to provide these services on a Task Order basis. HDR is a nation-wide engineering firm with a full-service office located in Anchorage, Alaska. HDR Alaska, Inc. has a long history in this State and offers a full spectrum of engineering, planning, and environmental services. Résumés of HDR’s key personnel are provided in Section 7 appendices. An organizational chart is provided below representing the general tasks and planned assignments. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 7 of 18 9/3/2008 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. The project manager will issue reports on a mutually agreeable schedule throughout the life of the grant. These reports can be customized to meet AEA reporting requirements. Our expectation is that these reports could be kept to a one page summary document on a quarterly basis. Significant events, such as milestone decisions, will be detailed in the reports, possibly in the form of attachments. The project would also expect to process requests for reimbursement on a monthly basis. 3.6 Project Risk Discuss potential problems and how you would address them. The following is a list of potential risks and the steps that Kenai Hydro is taking to mitigate them: 1. Missing a critical seasonal window to conduct field studies or data collection. Kenai Hydro has engaged the services of HDR Alaska, Inc. to plan and schedule the field studies well in advance of the next season. HDR has significant experience with Alaskan hydro projects and is familiar with the unique challenges and seasonal constraints that exist in our region. We will be conducting stakeholder and agency meetings during the fall 2008 in order to document and address important stakeholder concerns and issues. The study plan for next season will be designed to address these important issues. We are confident that HDR will be prepared to conduct any needed studies in a timely manner. Kenai Hydro, LLC (HEA, enXco, CIRI) Steve Gilbert, Manager Brad Zubeck, Project Engr Feasibility Study HDR Alaska, Inc. Todd Bethard, Bob Butera, Paul McClarnon, Mark Dalton FERC Process FERC Licensing Manager To Be Determined Stakeholder Meetings HDR Alaska, Long View Associates, Subcontractors as needed Support Staff Accounting, Finance, Technical Resources from KHL Partners: HEA, enXco & CIRI Land Use & Leases HDR Alaska, Subcontractors as needed Permitting HDR Alaska, Subcontractors as needed Environmental & Field Studies HDR Alaska, Subcontractors as needed Engineering Design HDR Alaska, Subcontractors as needed Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 8 of 18 9/3/2008 2. An important stakeholder issue is overlooked during the preliminary permit phase and it becomes a significant project impediment during the FERC license application. As noted in the response above, Kenai Hydro will consult with potential stakeholder entities (i.e., agencies, NGOs, Native Corporations, and communities) as part of Phase 1 to ensure that all significant concerns are identified and planned for in the field studies in anticipation of the licensing process for the Grant Lake / Grant Creek project. By working through and finalizing issues and studies during the Phase 1 and the preliminary permitting stage, we hope to avoid any latent concerns and move into a FERC licensing application with the full support stakeholders. The studies conducted as part of Phase 2 will be focused on addressing the issues and concerns of stakeholders identified in Phase 1. 3. Risk of not being able to successfully negotiate satisfactory future project agreement such as power purchase price, interconnection and transmission agreements. Such agreements will be the subject of discussion amongst the Kenai Hydro partners on an ongoing basis. It is the intent of the partnership that these agreements be executed in advance of a FERC license application. The cost of developing these agreements will not be borne by the grant funding. 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. Energy Potential Quantifying the energy available from Grant Lake will be part of the work performed with the funds requested by this grant. Initial estimates are that between 5-7MW gross capacity, or 20-28 GWh annually, can be delivered based on the current hydrology data available. The addition of flows from Falls Creek will add to this potential capacity, but the benefit-cost analysis will be determined during the course of the Phase 2 studies. Pros & Cons Hydropower is renewable, long-lived, efficient, dispatchable and environmentally responsible energy that emits no greenhouse gases, wastes or air pollution. It uses readily available existing technologies, is low maintenance and displaces consumption of fossil fuels. It provides long-term stability in the price of power to consumers. Disadvantages of hydropower include high initial cost, relatively long time required to permit/license, potential impact on habitats and water quality. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 9 of 18 9/3/2008 By contrast, the most expedient alternative solution to our local energy needs is to construct natural gas-fired generation. Relative to hydropower, these units are inexpensive to procure and install, require a much shorter time to permit, and have a relatively small footprint. On the negative side, gas-fired units emit greenhouse gases, are not sustainable, are subject to market- driven fuel pricing and availability, are shorter lived, and cost more to operate and maintain than hydropower units. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. The proposed project is intended to provide one piece of the future energy needs of Homer Electric Association. HEA currently purchases most of its energy from Chugach Electric Associate (CEA). This contractual purchase of power will continue until 2014, at which time its contract with CEA expires and HEA plans to independently provide for its own generation requirements. The following is a current list of HEA’s generation assets: Unit Description Size Date Installed Fuel Type Nikiski Plant 39.0 MW ~2000 Natural Gas, Simple Cycle Bradley Lake* ~11.0 MW ~1992 Hydro Totals 50.0 MW -- -- * This is HEA’s share of Bradley Lake’s 120 MW capacity. HEA’s average load is approximately 60-MW, with its peak load near 85-MW. For HEA to be independent beyond 2014, it needs to construct enough new generation capacity to provide for the difference in its current load and that anticipated in years to come, plus spinning reserve. In short, HEA needs to double its current generation capacity. 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. As noted in the section above, HEA is challenged with developing new generation assets to meet the needs of it customers beyond 2014. This requires that HEA nearly double its current generation capacity. Approximately eighty (80%) percent of the existing generating capacity relies on natural gas as the fuel source. HEA seeks to diversify its generation portfolio beyond 2014 and reduce its reliance on natural gas. Part of this diversification is to develop renewable generation resources to fulfill future needs. The proposed project represents approximately ten (10%) percent of HEA’s future generation need. It would be a significant step toward both providing for HEA’s future generation capacity as well as adding renewable energy to its portfolio. Adding hydroelectric facilities with storage to HEA’s generation portfolio will facilitate the further Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 10 of 18 9/3/2008 development of other renewable generation resources such as wind. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The primary market for the energy from this project is the customers of HEA. The secondary market is other Railbelt utilities. A potential market also exists for selling Renewable Energy Credits to utilities at large looking for means to offset fossil-fuel generation to comply with various Renewable Energy Standards or Policies. This project will have the following positive impacts on the existing energy system and its customers: 1. Provide approximately 10% of HEA’s immediate generation needs from clean, renewable hydropower. 2. Incrementally stabilize the long-term price of power. 3. Offset and reduce greenhouse gas emissions. 4. Provide stored, dispatchable energy required to develop utility-scale wind generation. 5. Improve consumer confidence in its utility leadership and management. 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 Based on the initial field reconnaissance and a cursory review of the 1984 Ebasco study, two alternative project layouts are proposed for further evaluation (a copy of Ebasco’s Final Report is attached on the enclosed CD-ROM). Further development of the concept layouts will be completed under Phase 1 reconnaissance studies that should be complete by January 2009. HDR’s preliminary assessment of the project is attached and an augmented excerpt from their report is provided in the paragraphs below. The first alternative consists of an intake near the saddle on Grant Lake; a penstock following the saddle to Trail Lake; a power house within a cove on Trail Lake and a tailrace to Trail Lake. Powerhouse access would be via a bridge across Lower Trail Lake, where the transmission line would also be routed. Intake access would be along the saddle. The project would obtain storage from lake drawdown. Due to the elevation of the saddle the intake would likely be a horizontal tunnel with a lake tap. Water to maintain stream flow in Grant Creek would be provided via a low level outlet. Additional project water would be diverted from the Falls Creek basin. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 11 of 18 9/3/2008 The second alternative is based on the preferred alternative originally selected by the Ebasco study. This consists of an lake tap on Grant Lake; a tunnel to Trail Lake; a power house within a cove on Trail Lake and a tailrace to Trail Lake. Access would be via a bridge across the narrows of Lower Trail Lake, where the transmission line would also be routed. The project would obtain storage from lake draw down. The Ebasco study considered dewatering Grant Creek and providing mitigation for the fishery. Whether this is possible needs to be investigated further. The actual design used to tap the lake may take several different forms using a combination of one or more of the following: siphon-intake, tunnel, above-grade and below-grade penstock. In 1984, the Ebasco study determined that diversion of Falls Creek to Grant Lake would not be economic. This diversion may be economic today and may be essential to project viability depending upon the instream flow required. The Ebasco study also looked at a range of 6- to 8-MW installed capacities and settled on a 7- MW installation with an estimated benefit-cost ratio of 1.20 (see Table 16-4, Volume 1, 1984 Ebasco Study). The proposed Phase 2 studies will also seek to optimize the installed capacity, building on the existing analysis, verifying and confirming appropriate assumptions. Phase 2 funds will facilitate engineering and field studies to further refine these design alternatives and economic analysis. Under the Phase 2 work, a final design concept will be selected and developed. This design will then be included in a FERC license application. 4.3.2 Land Ownership Identify potential land ownership issues, including whether site owners have agreed to the project or how you intend to approach land ownership and access issues. The legal description and ownership of lands (ADNR 2006) within the proposed project boundary are provided in the table below. All land is referenced to the Seward Meridian. Un-shaded rows pertain to the Grant Lake outlet and Grant Creek. Shaded rows include Grant Lake in its entirety and potential transmission areas. Township Range Section Ownership 5N 1W 36 Private 5N 1E 27 USDA Forest Service 5N 1E 28 USDA Forest Service 5N 1E 29 USDA Forest Service 5N 1E 30 State patented land 5N 1E 31 State patented land 5N 1E 32 State patented land 5N 1E 33 USDA Forest Service 5N 1E 34 USDA Forest Service 5N 1E 35 USDA Forest Service 5N 1E 36 USDA Forest Service 4N 1E 1 USDA Forest Service 4N 1E 2 USDA Forest Service 4N 1E 3 USDA Forest Service 4N 1E 5 USDA Forest Service 4N 1E 6 State patented land 4N 1E 7 State patented land 4N 1W 1 Private 4N 1W 12 Private Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 12 of 18 9/3/2008 4.3.3 Permits Provide the following information is it may relate to permitting and how you intend to address outstanding permit issues. • List of applicable permits • Anticipated permitting timeline • Identify and discussion of potential barriers A comprehensive listing of permits will be developed during Phase 1 work currently in progress. Phase 2 efforts should include preliminary applications for these permits in support of a FERC license application. This work will be accomplished during 2009- 2010. A preliminary list of permits is provided below: • USDA Forest Service, Special Use Application (SUA) • Alaska Railroad Corp., Access Road & Transmission Line ROW Crossing of Tracks • Transmission Line Right-of-Way, lease or purchase agreements • ADNR, Water Rights 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 Nearly all of the issues listed in 4.3.4 above will be addressed during the Phase 2 studies that would be funded by this grant request. Most of these issues were addressed within the context of the 1984 Ebasco study for Grant Lake and this project will seek to build on the work contained in this document. Many of these issues will be reviewed and addressed during the Phase 1 work in progress during consultations with the various Stakeholder groups and agencies. 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 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 13 of 18 9/3/2008 • Identification of other funding sources • Projected capital cost of proposed renewable energy system • Projected development cost of proposed renewable energy system Phase 1 Reconnaissance The cost of the reconnaissance phase is fairly well identified and is based on cost estimates provided by consultants currently under contract for this work. There are still some unknowns related to certain engineering elements, such as aerial surveys and winter study work. Phase 1 is currently scheduled to be complete by early 2009 and should cost approximately $105,000. Phase 2 Resource Assessment, Feasibility Analysis and Concept Design This grant application is for funds to support Phase 2 studies and work. The cost estimate for this Phase is our best estimate based on Phase 1 consultant costs and an initial understanding of the scope of work to be accomplished under the FERC preliminary permit. The duration of the FERC preliminary permit is initially limited to 3-years and it is the goal of Kenai Hydro to complete the necessary work before the expiration of the FERC preliminary permit period. The costs requested in this application cover studies and work for a two (2) year period, during the 2009 and 2010 seasons. The Phase 2 cost estimate includes only anticipated consultant fees and does not specifically include estimates of equipment, supplies, travel, per diem, or other direct costs… although the charges from the consultants may request or include some or all of these items. It is estimated that approximately $1,020,000 in funds are needed to complete a Phase 2 study of the Grant Lake project that would culminate in a FERC license application. Kenai Hydro requests as part of this application that AEA provide 80% of this amount, or $816,000. Phase 2 funds will initially be drawn from a combination of existing and future grant funding as well as internal financing. Kenai Hydro, LLC is committed to providing the 20% matching funds in cash, as well as the in-kind match for the cost of management and administrative staffing. A 1.5 Full Time Equivalent (FTE) is projected for the management and administration of Phase 2. The estimated value of the 1.5-FTE is $549,120 over the two (2) year period of the Phase 2 request and will be an in-kind match by Kenai Hydro, LLC. Phase 3 FERC Licensing & Final Design The extent of costs associated with the final engineering design work and FERC Licensing are not well known at this time, but are estimated at approximately eleven (11%) percent of the projected cost of construction, roughly $2.5-million. This work would be the actual final engineering effort to prepare plans and specifications for construction in accordance with any FERC license requirements, as well as any follow-up studies or continuing data acquisition. Phase 4 Construction and Commissioning The cost of construction and commissioning is conservatively estimated at $3,250/kW or $22,750,000 for a nominal 7.0-MW plant. Recent costs of construction for similarly sized plants in remote locations in Alaska have come in at approximately $3,000/kW. It is our hope that this project might ultimately beat the $3,250/kW cost and improve on this preliminary estimate. For now, this remains our best estimate and target budget. By the end of Phase 2, we hope to have a better handle on the final design concept that will help refine the projected construction cost. Other Funding Sources As other potential sources of funding become available, Kenai Hydro will pursue them as long as the project continues to pass successive project milestones and economic and environmental reviews. No specific alternate sources of funding are known at this time. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 14 of 18 9/3/2008 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 This grant application is for feasibility studies only and not for actual construction or operation of a facility. No O&M funds are requested as part of this application. 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 Power from the project is intended to be sold to Homer Electric Association (HEA) for the use and benefit of its customers. HEA is a partner in Kenai Hydro, LLC and the power purchase price will be the subject of future negotiation amongst the vested parties. It is likely that the acceptable rate-of-return will be kept to single-digit margins. 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Download the form, complete it, and submit it as an attachment. Document any conditions or sources your numbers are based on here. See the attached Cost Worksheet completed for the proposed Grant Lake project. Renewable Energy Source USGS stream gage 15256000, Grant Creek near Moose Pass, was located on Grant Creek approximately 1/3 mile upstream from the mouth and has of an 11-year period of record from 1947 to 1958. This stream gage has a drainage basin of 44.2 square miles and the average annual flow for the period of record was 193-cfs. See the attached benefit-cost analysis in the form of an excel spreadsheet. This simple analysis shows a benefit-cost ration of 1.09, whereas earlier, more thorough studies showed a ratio of 1.20 for the 7-MW project (see Table 16-4 of the Ebasco study). 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. Two of the three business entities that comprise Kenai Hydro, LLC have experience in operation and maintenance of power generation facilities. Operation of the proposed facility would be a natural extension of either HEA or enXco’s core business. HEA currently operates and maintains the 120MW Bradley Lake hydroelectric plant and enXco is a nation-wide company that founded its business on the operation and maintenance of wind generating facilities throughout the United States. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 15 of 18 9/3/2008 Once a decision is made to apply for a FERC license, a new business model will be created and adopted through the vehicle of a Project Development Agreement (PDA). The PDA will include terms for the construction as well as the future operation and maintenance of the facility. This agreement will include, at least by reference, a Power Sales Agreement (PSA) between the facility and HEA. 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 1984 Ebasco study concluded that the Grant Lake project was economically feasible with the outcome of the economic analysis being particularly dependent on the assumptions made for the price of gas and the rate of escalation of that gas. The same remains true today when running a benefit-cost analysis. The Ebasco study concluded that the 7-MW project had a benefit-cost ratio of 1.20 (Table 16-4 of the Ebasco’s report). The Kenai Hydro economic analysis, based on more recent assumptions, estimates a ratio of 1.09. The economics and assumptions will be refined as better cost information is developed during the course of the Phase 2 studies. Better understanding of future gas pricing and markets may also be developed during Phase 2. The economic model will be updated and confirmed as part of each of the decision making, milestone activities. 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 Potential Fuel Displacement In 2008 dollars, it is estimated that nearly $41,000,000 can be saved in avoided fuel cost over a 50-year period. This represents a tremendous value to the rate payers of Alaska and a generation asset will continue to produce clean, renewable power for Alaskans over the next century. Anticipated Annual Revenue The annual revenue is unknown at this time and will be the subject of future negotiations outside the scope of this grant request. Potential Additional Annual Incentives The potential tax credits are purely speculative at this time and will be dependent on the form of the business entity that takes the project into licensing, construction and operation. This has yet to be determined. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 16 of 18 9/3/2008 Potential Additional Annual Revenue Streams It may be possible to sell Renewable Energy Credits, or “green tags”, from the energy produced by this project. However, it is too early and speculative to estimate what this revenue stream might be. The renewable energy will also serve to incrementally stabilize the long term price of power to consumers and thereby, attract business to the area. Non-Economic Public Benefit The power from the proposed project would reduce consumption of non-renewable carbon- based energy sources, thereby helping to improve air quality in Kenai Peninsula Borough. The project is also an important step toward diversifying HEA’s future generation portfolio. 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 Provide a narrative summary regarding funding sources and your financial commitment to the project. Overview The Grant Lake hydro project has been the subject of several studies conducted during the past century. The most recent and significant of these studies was published by Ebasco in 1984. Electronic copies of Ebasco’s complete report are provided along with this grant application on CD-ROM. Ebasco’s effort was funded by the State of Alaska through AEA’s predecessor, Alaska Power Authority. This extensive study ultimately recommended that the State file a license application with FERC and proceed with further development of the Grant Lake project to displace gas-fired generation. It is our position that this recommendation is even more relevant and valid in today’s environment and Railbelt’s heavy dependence on gas-fired generation. It is likely that the current project can build on the work of the 1984 Ebasco study and thereby, minimize the scope and cost of new studies that will be required. Phase 2 is broken into the following three general Tasks: • Task 6 – Field Studies • Task 7 – Engineering, Design & Management of Studies • Task 8 – FERC License Preparation & Application. The Task numbering starts at “6” because Phase 2 builds on the work of Phase 1, which included Tasks 1 to 5. Tasks 6 through 8 are meant to be performed concurrently. Task 6 – Field Studies The budget proposed for Task 6 is limited to the following scope of studies: fisheries, wildlife, cultural resources and recreational use. The fisheries budget entails rebuilding of the Grant Lake USGS gaging station, review and analysis of historical data, and some flow measurement and analysis. Wildlife study is limited to a literature review and summary of existing research and data. Cultural studies may include consultation with various groups, entities or persons to collect and summarize existing information. Recreational studies could include quantifying the Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 17 of 18 9/3/2008 use of the site and related resources and facilities. All other potential studies, such as a geotechnical investigation, etc. have not been included or contemplated by this budget. Task 7 – Engineering, Design & Management This budget is intended to cover the cost of engineering, planning, oversight, and surveying required to refine concept layouts and studies. Task 8 – FERC License Preparation & Application This budget is for a FERC licensing manager and costs or expenses related to developing the FERC license application, including the Notice of Intent (NOI) and Pre-Application Document (PAD). Budget funds here might also include planning for further studies and data acquisition. The total cost of Phase 2 including all State and Local Matching Cash and In-Kind funds is $1,569,120. Please refer to this application’s Budget Form for the discussion that follows related to the source of funds. State Funds This application requests $1,020,000 to complete the activities associated with the Phase 2 Feasibility Analysis/Concept Design of the proposed project. This is to cover all costs other than the Direct Labor and Benefits of Kenai Hydro, LLC management and administrative staff. The State would be expected to provide 80% of the $1,020,000 for Phase 2, or approximately $816,000. Local Match Funds (Cash) Kenai Hydro, LCC plans to honor a 20% match in cash, or $204,000 of the $1,020,000 estimated for Phase 2. Local Match Funds (In-Kind) Kenai Hydro, LLC intends to bear the cost of the project management and administrative staffing. The estimated value of these personnel is $549,120 for the two year period proposed for the Phase 2 work. This is based on an estimated 1.5 Full Time Equivalents (FTE) at an annual average burdened rate of $183,040/FTE (i.e., $88/hr). Nature & Source of Funds Funds will initially be drawn from a combination of existing and future grant funding as well as internal financing. Alaska Energy Authority (AEA) has already committed to providing up to $50,000 in matching funds to this project. This has helped to initiate the reconnaissance phase of the project. It has passed the initial engineering assessment, and now further reconnaissance and feasibility work needs to be done. As long as the project continues to remain economically and environmentally viable, the companies that constitute Kenai Hydro, LLC are committed to providing the 20% matching funds, plus the financial commitment of the managing and administrative staffing. 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 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 18 of 18 9/3/2008 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 Steve Gilbert Signature Title Manager, Kenai Hydro LLC Date October 8, 2008 SECTION 7 – ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMITTED WITH THIS APPLICATION: A. Resumes of Applicant’s Project Manager, key staff, partners, consultants, and suppliers per application form Section 3.1 and 3.4 - Kenai Hydro LLC Key Personnel - HDR Alaska, Inc. Key Personnel B. Cost Worksheet per application form Section 4.4.4 C. Grant Budget Form per application form Section 6. D. Governing Body Resolution per RFA Section 1.4 - HEA Certificate of General Manager - WEA Letter of Support & Authorization E. HDR Initial Site Assessment Report – Grant Lake F. Proposed Project Schedule per Section 3.2 G. Kenai Hydro LLC Benefit-Cost Analysis Spreadsheet H. Table 16-4, Determination of Optimum Installed Capacity for Alternative D, excerpted from 1984 Ebasco Grant Lake Hydroelectric Project Detailed Feasibility Analysis I. FERC Order Issuing the Preliminary Permit to Kenai Hydro LLC for Grant Lake J. Grant Lake Hydroelectric Project, Detailed Feasibility Analysis, Final Report, Ebasco Services Inc., January 1984 ( three separate files on enclosed CD-ROM) Kenai Hydro, LLC KEY PERSONNEL Steve Gilbert, Manager Steve Gilbert is Manager of Alaskan Projects for enXco, a major U.S. wind project developer. enXco and CIRI are joint owners of Wind Energy Alaska. He came to his current post after 17 years with Chugach Electric where he served as Manager, Energy Projects Development. During his years at Chugach he managed three of Chugach’s four power plants, including hydro, served as lead electrical engineer for the 1 MW fuel cell and micro turbine projects and the investigation of renewable energy for Chugach including Fire Island. After completing training in electrical power engineering Steve started his career in 1980 in start up of large coal and nuclear power plants. He provided consulting and technical services to client companies across the U.S. Steve has managed numerous multi-million dollar power projects. Steve was Alaska’s electrical engineer of the year in 2000 and for the 12 western states in 2001. Brad Zubeck, Project Engineer • Mr. Zubeck came to Homer Electric Association following a successful career as an owner and officer of an Alaskan heavy highway and utility general contracting company. He brings over 20-years of experience in cost estimating and managing construction of multi-million dollar general civil projects. • Much of Mr. Zubeck’s experience is in construction of municipal utility piping & mechanical systems along with related structures and facilities. His hydro experience includes on-site consulting services for construction of HDPE penstock for a 2-MW hydro project in Ecuador. • Since joining HEA in 2006, he has managed a variety of small to large projects, including the following: - Healy Clean Coal Plant (HCCP) Development and Restart Engineering Phases - Renewable Energy Resource Development for Wind and Hydro • Mr. Zubeck holds a BS and an MS in Civil Engineering, both from Oregon State University. HDR Alaska, Inc. Key Personnel Résumés  Renewable Energy Fund   Application Cost Worksheet Please note that some fields might not be applicable for all technologies or all project phases. Level of information detail varies according to phase requirements. 1. Renewable Energy Source The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. Annual average resource availability. The water resource is well documented in the form of USGS stream gaging data available on Grant Creek and Fall Creek, as well as in the referenced 1984 Ebasco study. Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel) 2. Existing Energy Generation a) Basic configuration (if system is part of the Railbelt 1 grid, leave this section blank) i. Number of generators/boilers/other Left Blank – System is on Railbelt Grid ii. Rated capacity of generators/boilers/other iii. Generator/boilers/other type iv. Age of generators/boilers/other v. Efficiency of generators/boilers/other b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank) i. Annual O&M cost for labor Left Blank – System is on Railbelt Grid ii. Annual O&M cost for non-labor c) Annual electricity production and fuel usage (fill in as applicable) (if system is part of the Railbelt grid, leave this section blank) i. Electricity [kWh] Left Blank – System is on Railbelt Grid ii. Fuel usage Diesel [gal] Other iii. Peak Load iv. Average Load v. Minimum Load vi. Efficiency vii. Future trends                                                              1 The Railbelt grid connects all customers of Chugach Electric Association, Homer Electric Association, Golden  Valley Electric Association, the City of Seward Electric Department, Matanuska Electric Association and Anchorage  Municipal Light and Power.  RFA AEA 09-004 Application Cost Worksheet revised 9/26/08 Page 1  Renewable Energy Fund   d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] Left Blank – System is on Railbelt Grid ii. Electricity [kWh] iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other   3. Proposed System Design a) Installed capacity Nominally 7.0-MW b) Annual renewable electricity generation i. Diesel [gal or MMBtu] ii. Electricity [kWh] ~ 28.2 GWh iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other 4. Project Cost a) Total capital cost of new system $22,750,000 b) Development cost $4,174,120 c) Annual O&M cost of new system ~$250,000 d) Annual fuel cost $0 5. Project Benefits a) Amount of fuel displaced for i. Electricity ii. Heat iii. Transportation b) Price of displaced fuel ~ $3.16-million/year in 2016 dollars (when the project would be on-line producing power). c) Other economic benefits d) Amount of Alaska public benefits RFA AEA 09-004 Application Cost Worksheet revised 9/26/08 Page 2  Renewable Energy Fund   RFA AEA 09-004 Application Cost Worksheet revised 9/26/08 Page 3 6. Power Purchase/Sales Price a) Price for power purchase/sale This will be the subject of future negotiation. 7. Project Analysis a) Basic Economic Analysis Project benefit/cost ratio > 1.0, (range between 1.09 to 1.20) this ratio is sensitive to the price of natural gas and projections of future pricing. Payback To Be Determined Alaska Energy Authority ‐ Renewable Energy FundBUDGET INFORMATIONBUDGET SUMMARY: GRANT LAKE HYDRO PROJECTMilestone or Task Federal Funds State FundsLocal Match Funds (Cash)Local Match Funds (In‐Kind)Other FundsTOTALSPHASE 2 ‐ RESOURCE ASSESSMENT, FEASIBILITY ANALYSIS & CONCEPTUAL DESIGN (Funds requested in this grant application)Task 6 ‐ Field Studies$432,000.00 $108,000.00 $274,560.00 $814,560.00Studies including fisheries, wildlife, cultural resources and recreational. resulting from Stakeholder Consultations determined in Phase 1. Does not include budget for other studies, such as Geotechnical, etc.Milestone # 3: Project Report and Decision based on the results of the field studies at the conclusion of Task 6.Task 7 ‐ Engineering, Design & Management$240,000.00 $60,000.00 $137,280.00 $437,280.00Planning, Oversight, Engineering, Surveying and Refinement of Preliminary Designs, Studies and other activitiesTask 8 ‐ FERC License Preparation & Application$144,000.00 $36,000.00 $137,280.00 $317,280.00FERC Licensing manager and management, Notice of Intent and PAD, Summary of Studies, Planning & Prep of follow‐up studies & data acquisitionMilestone #4: Decision to file FERC License Application following 2010 studies and follow‐up work.TOTALS$0.00 $816,000.00 $204,000.00 $549,120.00 $0.00 $1,569,120.00Milestone # or Task #BUDGET CATAGORIES:Task 6 Task 7 Task 8 4 5 6 TOTALSDirect Labor and Benefits $274,560.00 $137,280.00 $137,280.00 $549,120.00Travel, Meals, or Per Diem$0.00Equipment$0.00Supplies$0.00Contractual Services $540,000.00 $300,000.00 $180,000.00 $1,020,000.00Construction Services$0.00Other Direct Costs$0.00TOTAL DIRECT CHARGES $814,560.00 $437,280.00 $317,280.00 $0.00 $0.00 $0.00 $1,569,120.00RFA AEA09-004 Budget Form Corporate Office Central Peninsula Service Center 3977 Lake Street 280 Airport Way Homer, Alaska 99603-7680 Kenai, Alaska 99611-5280 Phone (907) 235-8551 Phone (907) 283-5831 FAX (907) 235-3313 FAX (907) 283-7122 CERTIFICATE OF GENERAL MANAGER OF HOMER ELECTRIC ASSOCIATION, INC. IN SUPPORT OF KENAI HYDRO, LLC GRANT APPLICATION I am the General Manager of Homer Electric Association, Inc. (the "Cooperative"). I am authorized by the Board of Directors of the Cooperative pursuant to Board Policy 203, and by formal action of the Board of Directors of the Cooperative at a special meeting held on April 18, 2008 to certify as follows: 1. Homer Electric Association, Inc. is an equity partner in Kenai Hydro, LLC. 2. The Board of Directors of the Cooperative has authorized the application for project funding and agrees to honor the match amounts contained in the application to which this certificate is attached. 3. The Board of Directors of the Cooperative has authorized Mr. Steve Gilbert to act as Manager of Kenai Hydro, LLC and to represent the Cooperative for the purposes of the application. 4. The Cooperative is in good standing with respect to any existing credit and federal tax obligations. Dated at Kenai, Alaska, this 7th Day of October, 2008. ____________________________________ Bradley P. Janorschke General Manager Wind':~•..... Energy~iA 6921 Howard Ave,Anchorage,Alaska 99504 October 8,2008 Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage,AK 99503 Subject:Round I Grant RFA,Kenai Hydro,LLC Dear Alaska Energy Authority, Alaska Wind Energy,LLC,dba Wind Energy Alaska,is a partnership of Cook Inlet Region, Inc.and a major renewable energy developer,enXco Development Corp.Wind Energy Alaska has partnered with Homer Electric to form Kenai Hydro,LLC.Wind Energy Alaska is the manager of Kenai Hydro under the terms of that entity's governing documents,and therefore has the requisite authority to submit an application on its behalf.Kenai Hydro appreciates the opportunity to present the enclosed application for partial funding for the study of the Grant Lake low impact hydroelectric generation project on the Kenai Peninsula.The project represents an important opportunity for the community to reduce electric costs over the long term while diversifying the energy mix for Alaskans.The project also represents an opportunity to generate electricity from a renewable resource close to the rural Kenai Peninsula communities that it will ultimately serve. The management of Wind Energy Alaska is prepared to match the amounts indicated in the grant under its partnership with Homer Electric.For purposes of this application,Mr. Steve Gilbert is manager and point of contact.Wind Energy Alaska is in compliance with applicable local,state and federal law including credit and federal tax obligations. Sincerely, ~c;p- Senior Vice President,Land and Legal Affairs Cook Inlet Region,Inc. Scott Nelson Vice President,Development enXco Development Corp Memo To: Kenai Hydro LLC From: HDR Project: Grant Lake CC: Date: 9/15/08 Job No: Trip Report: Grant Lake Trip Date: 8/26-27/08 Present: Todd Bethard (HDR), Bob Butera (HDR), Paul McLarnon (HDR), Brad Zubeck (HEA) General Description: Grant Lake is located at an elevation of 700 feet and is located one mile east of the community of Moose Pass (Figure 1). The lake is approximately 6 miles long and approximately 2000 feet in average width. The lake is in a dogleg shape with the lower portion trending north south and the upper portion trending east west. The drainage area of Grant Lake is 44 square miles. The lake drains westward via Grant Creek, Trail Lake and Trail Creek to Kenai Lake. At the west end of the lake there is a low ridge between Grant Lake and Trail Lake. A saddle is located approximately in the middle of this low ridge. Trail Lake is at elevation 470 feet giving a potential elevation difference between the two lakes of 230 feet. Grant Creek flows from Grant Lake to Trail Lake. Grant Creek is approximately 1 mile long and descends through a series of canyons for about 2/3 of its length. The USGS performed a study of Grant Creek as a potential hydroelectric power site in 1952. This study focused on the geologic conditions in the area for the purpose of dam site and power tunnel construction. The report concluded that a dam at the lake outlet would be founded on bedrock; that a tunnel to the west to a powerhouse on Trail Lakes could be constructed in competent rock; or alternatively a tunnel could be constructed horizontally at the 700-foot level through the ridge that separates the two lakes and then a conduit could continue to the powerhouse. The saddle in the ridge was noted as about 50 feet above the lake level. USGS stream gage 15256000, Grant Creek near Moose Pass, was located on Grant Creek approximately 1/3 mile upstream from the mouth and has of an 11-year period of record from 1947 to 1958. This stream gage has a drainage basin of 44.2 square miles and the average annual flow for the period of record was 193 cfs. A Grant Lake Hydroelectric Project Detailed Feasibility Analysis was completed in 1984 by Ebasco Services Incorporated for the Alaska Energy Authority. This study evaluated six alternative development scenarios for generating power from the Grant Lake Basin. The originally selected alternative was for a lake tap on Grant Lake and a tunnel to a powerhouse on Trail Lakes. This alternative also included diversion and conveyance of flow from Falls Creek to HDR Engineering, Inc Trip Report Grant Lake with photos HDR Alaska Inc 2525 C st., Suite 305 Anchorage, AK 99503-2632 Phone: 907-644-2000 Fax: 907-644-2022 www.hdrinc.com Page 1 of 6 Grant Lake. Further refinement of the project concluded that it was not economic to include the Falls Creek diversion in the Grant Lake Project. Grant Lake has been documented to contain a small population slimy sculpin and a dense population of stickleback. Neither of the fish species would pose any significant detriment to a hydroelectric project. Previous studies have documented the absence of anadromous fish and resident salmonids such as lake trout or arctic char in Grant Lake. As such, Grant Lake does not directly support a viable sport fishery. Grant Creek is approximately 1 mile long ¾ of which is mapped as an anadromous stream by the Alaska Department of Fish and Game. Grant Creek also supports some resident fish species such as rainbow trout and Dolly Varden, which likely occupy the stream in greater numbers during the summer when salmon are present. Field Reconnaissance A site visit was conducted on Tuesday, August 26 by Todd Bethard, P.E. (HDR), Bob Butera, P.E. (HDR), Paul McLarnon (HDR) and Brad Zubeck (HEA). A floatplane was used to overview the Grant Lake drainage basin. We landed on the west end of the lake for a ground reconnaissance of the saddle area and the outlet. Later that day a reconnaissance of Grant Creek was conducted by boat and foot. The boat was needed to cross Trail Lake and a trail along the south bank was used to follow the creek upstream from the mouth. This trail paralleled the creek and was badly over grown. We hiked the trail to the former USGS gaging station site. The hydraulic control section of the creek appeared to still be stable and the historic rating curves for this site may be usable as a basis of preliminary streamflow data if a gage were to be reinstalled at this site. The cable car across the river was still in place (a cable car is required for streamflow measurements at this site because the creek is too large to wade and too small to boat) and the gage house is still standing. Both structures would need to be rehabilitated. One potential alternative was reviewed for a project layout. This was an intake at the saddle area with a powerhouse at Trail Lake. A second potential alternative would be a lake tap as was proposed in the Ebasco report. Discussion during the field reconnaissance yielded the following ideas concerning the project. • The optimum penstock route appears to be at the saddle midway along the north-South leg of Grant Lake. There is a significant (50’+/-) rise from the lake to the high point of this saddle. • A bedrock sill was noted at the lake outlet that would be ideal for placement of a concrete structure should it be required in the preferred alternative. • The terrain downstream of the lake outlet was too rough for a penstock. • Power house sites at Trail Lakes looked feasible and could be tucked into coves to minimize visual impact. • The powerhouse/intake access road would require a bridge across Trail Lakes. The logical location for this bridge is at the narrows where there are bedrock abutments on both sides, but depending on powerhouse location, a longer bridge may be preferable to additional access road. • Access route would require crossing of the ARRC tracks. Setback distance of tracks to highway may present problems for vehicle queuing. • The operation of the project will require that water be released from the lake to maintain instream flow in support of fish populations in Grant Creek. The amount of water HDR Engineering, Inc Trip Report Grant Lake with photos HDR Alaska Inc 2525 C st., Suite 305 Anchorage, AK 99503-2632 Phone: 907-644-2000 Fax: 907-644-2022 www.hdrinc.com Page 2 of 6 required will be based on the results of an instream flow analysis and negotiations with resource agencies. • No fish other than Sticklebacks were observed in the lake. • Chinook and sockeye salmon were observed in Grant Creek in relatively small numbers and Chinook salmon were seen in the creek as far up stream as the gaging station. Observations were not made further upstream than the gaging station. Grant Creek likely supports larger salmon returns during spring seasonal runs of Chinook and sockeye salmon in May and June, which tend to spawn in tributaries in greater numbers, as opposed to fall salmon runs which tend spawn in greater numbers in the mainstem areas of the Kenai River. • Grant Lake is forested to the edge of water. Lowering the lake level rather than raising (other than a few feet) will require less clearing and be less of an impact on surrounding habitat and recreational aesthetics. • Instream flow for Grant Creek may require a low level outlet. The lake was fairly shallow to about 100 feet out. Should a low water outlet be required, this may need to be dredged into a channel, depending on how the project is operated. • Diversion of water from Falls Creek to the Grant Creek basin may be a preferable way to use this water, rather than a stand alone project on Falls Creek. A potential use of a portion of the Falls Creek water would be to address instream flow requirements in Grant Creek. This was not considered in the Ebasco study which determined the diversion of water from Falls Creek uneconomic. • The Ebasco Grant Lake report shows an intake at the 1400 foot elevation. This intake site noted in the Ebasco report was not visited due to time constraints. A separate site visit is planned to hike up the trail to identify the proposed intake site and assess the ability to route the penstock out of the incised canyon. If this is determined in the field investigation to indeed be the most advantageous site for the intake, then power generation with the diversion water may be worth further investigation. Otherwise, an intake could be located further downstream in the basin. • The 11 years of existing streamflow data will be adequate for power studies. If additional streamflow data is necessary for other reasons such as environmental baseline work, reestablishment of the historic gaging site at Grant Creek is the appropriate location for future streamflow data collection. • Fisheries investigations would need to be conducted to accurately determine the fish species abundance and establish appropriate instream flow needs. Based on this field reconnaissance and a cursory review of the Ebasco study, two alternative project layouts are proposed for further evaluation. A reconnaissance study is the next step to determine project viability. The first alternative consists of an intake near the saddle on Grant Lake; a penstock following the saddle to Trail Lake; a power house within a cove on Trail Lake and a tailrace to Trail Lake. Powerhouse access would be via a bridge across Lower Trail Lake, where the transmission line would also be routed. Intake access would be along the saddle. The project would obtain storage from lake drawdown. Due to the elevation of the saddle the intake would likely be a horizontal tunnel with a lake tap. Water to maintain stream flow in Grant Creek would be provided via a low level outlet. Additional project water would be diverted from the Falls Creek basin. The second alternative is based on the preferred alternative originally selected by the Ebasco study. This consists of an lake tap on Grant Lake; a tunnel to Trail Lake; a power house within a cove on Trail Lake and a tailrace to Trail Lake. Access would be via a bridge across the narrows HDR Engineering, Inc Trip Report Grant Lake with photos HDR Alaska Inc 2525 C st., Suite 305 Anchorage, AK 99503-2632 Phone: 907-644-2000 Fax: 907-644-2022 www.hdrinc.com Page 3 of 6 of Lower Trail Lake, where the transmission line would also be routed. The project would obtain storage from lake draw down. The Ebasco study considered dewatering Grant Creek and providing mitigation for the fishery. Whether this is possible needs to be investigated further. The Ebasco study also determined that diversion of Falls Creek to Grant Lake would not be economic. This diversion may be economic today and may be essential to project viability depending upon the instream flow required. Photographs of the site visit were kept. Several general shots with notations are included in this report. HDR Engineering, Inc Trip Report Grant Lake with photos HDR Alaska Inc 2525 C st., Suite 305 Anchorage, AK 99503-2632 Phone: 907-644-2000 Fax: 907-644-2022 www.hdrinc.com Page 4 of 6 Falls Creek Valley Natural outlet Possible intake site South leg Grant Lake Grant lake looking south towards natural outlet. Proposed intake is nearest bay on right. East leg Grant Lake Possible location for dredging of lake Grant Lake channel which may need dredging to increase usable project storage. HDR Engineering, Inc Trip Report Grant Lake with photos HDR Alaska Inc 2525 C st., Suite 305 Anchorage, AK 99503-2632 Phone: 907-644-2000 Fax: 907-644-2022 www.hdrinc.com Page 5 of 6 Potential intake site Potential power conduit route South leg Grant Lake Area that may require dredging for low level outlet Natural outlet Grant Lake looking north with natural outlet in foreground. Potential intake site third bay on left hand side of lake. HDR Engineering, Inc Trip Report Grant Lake with photos HDR Alaska Inc 2525 C st., Suite 305 Anchorage, AK 99503-2632 Phone: 907-644-2000 Fax: 907-644-2022 www.hdrinc.com Page 6 of 6 IDTask NameStartFinish1PHASE 2 - RESOURCE ASSESSMENT, FEASIBILITY ANALYSIS & CONCEThu 1/1/09Fri 12/31/102TASK 6 - Field StudiesMon 3/2/09Thu 9/30/1032009 Studies: Fisheries,Biological, Cultural, RecreationalMon 3/2/09Fri 10/30/094Milestone # 3: Project Report and decision based on 1st year results of Thu 12/31/09Thu 12/31/0952010 Studies: Fisheries,Biological, Cultural, RecreationalMon 5/3/10Thu 9/30/106TASK 7 - Engineering, Conceptual Design & Study ManagementThu 1/1/09Fri 12/31/1072009-10 Engineering: Fine-Tune Phase 1 Work & Designs based on StuThu 1/1/09Fri 12/31/1082009 Season Oversight of Studies, Permitting, Land Use, etc.Mon 3/2/09Fri 10/30/0992010 Season Oversight of Studies, Permitting, Land Use, etc.Mon 5/3/10Thu 9/30/1010TASK 8 - FERC License ApplicationMon 8/3/09Fri 12/31/1011FERC License Manager Activities: NOI, PAD, Study SummariesMon 8/3/09Fri 12/31/1012Milestone # 4: FERC License ApplicationMon 11/1/10Fri 12/31/1012/31JFMAMJJASONDJFMAMJJASONDHalf 1, 2009Half 2, 2009Half 1, 2010Half 2, 201020092010GRANT LAKE, PHASE 2 - RESOURCE ASSESSMENT, FEASIBILITY ANALYSIS & CONCEPTUAL DESIGNPage 1 GRANT LAKE/CREEK HYDRO BENEFIT-COST ANALYSISASSUMPTIONS7.0 MW, Power Capacity 6% /Year, Discount Rate 9.6Mcf per MWh for LM2500 Gas-fired Plant50% CAPACITY FACTOR 3% /Year, Cost Escalation for O&M & Gas beyond 2033 294,336Mcf, Gas Required for Equivalent Hydro Energy3.5 aMW, Net Capacity 5% /Year, Power Price Escalation8760 Hours Per Year 10% /Year, Cost of Capital100% Availability Multiplier 10.00$ /MWh, Estimated O&M Cost30660000 kWh, Estimated Annual Power Production3,250.00$ /kW Estimated Construction CostDATE YEAR #DESIGN & PERMITTING COSTCONSTRUCTION COSTPay PeriodCost of Capital (Interest on Loan) O&M COSTPresent Worth (PW) of Design & Permitting CostsPW of Construction CostPW of Cost of CapitalPW of O&M CostPW of All CostsProjected Price of Gas ($/Mcf)Annual Avoided CostPresent Worth of Annual Avoided CostNet Present Worth = PW Avoided Costs - PW All CostsBenefit:Cost RatioPRESENT WORTH (2008) TOTALS($1,178,144) ($14,273,631) ($17,405,720) ($4,841,645)($37,699,140) ($41,074,666) ($3,375,526)1.092008 1 $170,000 $0 $0($160,377)2009 2 $265,000 $0 $0($235,849)2010 3 $65,000 $0 $0($54,575)2011 4 $250,000 $0 $0($198,023)2012 5 $250,000 $0 $0($186,815)2013 6 $250,000 $0 $0($176,240)2014 7 $250,000 $0 $0($166,264)10.55$ 2015 8 $0 $22,750,000 1 $2,275,000 $0($14,273,631) ($1,427,363)10.73$ $3,158,2252016 9 $0 $0 2 $2,261,170 $306,600($1,338,383) ($181,476)10.74$ $3,161,169($1,871,091)2017 10 $0 $0 3 $2,245,956 $315,798($1,254,130) ($176,340)10.68$ $3,143,508($1,755,319)2018 11 $0 $0 4 $2,229,222 $325,272($1,174,326) ($171,349)10.49$ $3,087,585($1,626,501)2019 12 $0 $0 5 $2,210,814 $335,030($1,098,707) ($166,500)10.33$ $3,040,491($1,511,031)2020 13 $0 $0 6 $2,190,565 $345,081($1,027,022) ($161,787)10.06$ $2,961,020($1,388,242)2021 14 $0 $0 7 $2,168,291 $355,433($959,037) ($157,209)10.22$ $3,008,114($1,330,492)2022 15 $0 $0 8 $2,143,790 $366,096($894,529) ($152,759)10.45$ $3,075,811($1,283,429)2023 16 $0 $0 9 $2,116,838 $377,079($833,286) ($148,436)10.66$ $3,137,622($1,235,113)2024 17 $0 $0 10 $2,087,192 $388,392($775,109) ($144,235)10.89$ $3,205,319($1,190,341)2025 18 $0 $0 11 $2,054,581 $400,043($719,810) ($140,153)11.29$ $3,323,053($1,164,211)2026 19 $0 $0 12 $2,018,709 $412,045($667,209) ($136,186)11.68$ $3,437,844($1,136,252)2027 20 $0 $0 13 $1,979,249 $424,406($617,139) ($132,332)12.00$ $3,532,032($1,101,304)2028 21 $0 $0 14 $1,935,844 $437,138($569,439) ($128,587)12.34$ $3,632,106($1,068,404)2029 22 $0 $0 15 $1,888,098 $450,252($523,957) ($124,947)12.68$ $3,732,180($1,035,699)2030 23 $0 $0 16 $1,835,577 $463,760($480,549) ($121,411)13.04$ $3,838,141($1,004,815)2031 24 $0 $0 17 $1,777,805 $477,673($439,080) ($117,975)13.40$ $3,944,102($974,109)2032 25 $0 $0 18 $1,714,255 $492,003($399,419) ($114,636)13.78$ $4,055,950($945,031)2033 26 $0 $0 19 $1,644,350 $506,763($361,445) ($111,392)14.16$ $4,167,798($916,124)2034 27 $0 $0 20 $1,567,455 $521,966($325,040) ($108,239)14.58$ $4,292,832($890,196)2035 28 $0 $0 21 $1,482,870 $537,625($290,094) ($105,176)15.02$ $4,421,617($865,001)2036 29 $0 $0 22 $1,389,827 $553,754($256,502) ($102,199)15.47$ $4,554,265($840,520)2037 30 $0 $0 23 $1,287,479 $570,366($224,163) ($99,307)15.94$ $4,690,893($816,732)2038 31 $0 $0 24 $1,174,897 $587,477($192,983) ($96,496)16.42$ $4,831,620($793,617)2039 32 $0 $0 25 $1,051,056 $605,102($162,869) ($93,765)16.91$ $4,976,568($771,156)2040 33 $0 $0 26 $914,832 $623,255($133,736) ($91,111)17.42$ $5,125,866($749,331)2041 34 $0 $0 27 $764,985 $641,952($105,500) ($88,533)17.94$ $5,279,642($728,123)2042 35 $0 $0 28 $600,153 $661,211($78,083) ($86,027)18.48$ $5,438,031($707,516)2043 36 $0 $0 29 $418,838 $681,047($51,408) ($83,592)19.03$ $5,601,172($687,492)2044 37 $0 $0 30 $219,391 $701,479($25,404) ($81,226)19.60$ $5,769,207($668,035)2045 38 $0 $0 31 $722,523($78,928)20.19$ $5,942,283($649,128)2046 39 $0 $0 32 $744,199($76,694)20.79$ $6,120,552($630,757)2047 40 $0 $0 33 $766,525($74,523)21.42$ $6,304,168($612,905)2048 41 $0 $0 34 $789,520($72,414)22.06$ $6,493,293($595,559)2049 42 $0 $0 35 $813,206($70,365)22.72$ $6,688,092($578,703)2050 43 $0 $0 36 $837,602($68,373)23.40$ $6,888,735($562,325)2051 44 $0 $0 37 $862,730($66,438)24.11$ $7,095,397($546,410)2052 45 $0 $0 38 $888,612($64,558)24.83$ $7,308,259($530,946)2053 46 $0 $0 39 $915,270($62,731)25.57$ $7,527,506($515,919)2054 47 $0 $0 40 $942,729($60,955)26.34$ $7,753,332($501,317)2055 48 $0 $0 41 $971,010($59,230)27.13$ $7,985,931($487,129)2056 49 $0 $0 42 $1,000,141($57,554)27.95$ $8,225,509($473,342)2057 50 $0 $0 43 $1,030,145($55,925)28.78$ $8,472,275($459,946)2058 51 $0 $0 44 $1,061,049($54,342)29.65$ $8,726,443($446,929)2059 52 $0 $0 45 $1,092,881($52,804)30.54$ $8,988,236($434,280)2060 53 $0 $0 46 $1,125,667($51,310)31.45$ $9,257,883($421,989)2061 54 $0 $0 47 $1,159,437($49,858)32.40$ $9,535,620($410,046)2062 55 $0 $0 48 $1,194,220($48,446)33.37$ $9,821,688($398,441)2063 56 $0 $0 49 $1,230,047($47,075)34.37$ $10,116,339($387,164)2064 57 $0 $0 50 $1,266,948($45,743)35.40$ $10,419,829($376,206)COSTSPower Production & Construction Financial Avoided CostsSAVINGSAEA Grant RFA, Round 1 Application, October 8, 2008 TABLE 16-4 DETERMINATION OF OPTIMUM INSTALLED CAPACITY FOR ALTERNATIVE D1/ FERC ACCOUNT DESCRIPTION INSTALLED CAPACITY 6MW 7MW BMW ($1 000 )(SloOO)($1000 ) 1/All costs fnJanuary 1983 dollars. 2/Based on 3.SS interest and a SO year lffe. !/Transmission losses to seward are 1.8S for energy and 0.8S for capacity.!/Based on value of displaced combined cycle combustion turbine variable costs (see section 4.3.3).!/Based on value displaced combfned cycle combustion turbine capftal and fixed costs.!/Ratio of present worth of benefits to present worth of costs. I I ··r· I I 1 I I ~ I I I I I I 000 2435 2724 2968 7312 7352 7389 2733 3001 3295 1300 1428 1569 .·-·-···-··~-645-.-----645---··.·-645 _- 1498 1498 1498 .15923 16648 .17J64 TRANSMISSION PLANT STRUCTURES AND IMPROVEMENTS 5 5 5 STATION EQUIPMENT 469 469 469 WOOD POLES AND FIXTURES 46 46 46 OVERHEAD CONDUCTORS AND DEVICES 73 73 73 TOTAL TRANSMISSION PLANT 593 593 593 tcrtA(OIRECT COSTS 16516 17241 17957 INDIRECT COSTS TEMPORARY CONSTRUCTION·FACILITIES 200 200 250 LABOR EXPENSE 150 150 195 MOBILIZATION/DEMOBILIZATION 826 862 898 TOTAL INDIRECT CONSTRUCTION COSTS 1176 1212 1343 .SUBTOTAL 17692 18453 19300 CONTINGENCY 2654 2768 2895 SUBTOTAL INCLUDING CONTINGENCY 20346 21221 22195 ENGINEERING &OWNER ADMINISTRATION 2847 2971 3107 TOTAL PROJECT COSTS (IN JANUARY,1983 DOLLARS)23194 24192 25302 DEBT SERVICE 989 1031 1079 o &M 302 302 302 TOTAL ANNUAL COST ~1291 1333 1381 PRESENT WORTH OF COS~/26386 27256 28222 AVERAGE ANNUAL ENERGY AFTER LOSSES (GWH)1!24.82 24.94 24.81 PRESENT WO~TH OF ENERGY BENEFIT!/21396 21498 21379 DEPENDABLE CAPACITY AFTER LOSSES (MW~5.70 6.55 7.02 PRESENT WORTH OF CAPACITY BENEFIT!/9719 11156 11967 PRESENT WORTH OF BENEFITS 31115 32654 33346 BENEFIT COST RATIa!/1.18 1.20 1.18 PRODUCTION PLANT LAND AND LAND RIGHTS STRUCTURES AND IMPROVEMENTS RESERVOIRS,DAMS AND WATERWAYS WATER WHEELS,TURBINES AND GENERATORS ACCESSORY ELECTRICAL EQUIPMENT .···HISCEl;f;ANEOUS-POWER-Pl:ANT··EQUIMNT·· .ROADS ,J!AJLROADS.AROB.RlQGE:S TOTAL PRODUCTION PLANT TRANSMISSION PLANT 61 64 69 60 352 353 355 356 331 332 333 334 ··············-335 .....3.36. UNITED STATES OF AMERICA 125 FERC ¶62,018 FEDERAL ENERGY REGULATORY COMMISSION Kenai Hydro,LLC Project No.13212-000 ORDER ISSUING PRELIMINARY PERMIT (Issued October 07,2008) On April 28,2008,Kenai Hydro,LLC filed an application,pursuant to section 4(f)of the Federal Power Act (FPA),1 to study the feasibility of the Grant Lake Project.The project would be located on Grant Lake and Creek in Kenai Peninsula Borough,Alaska,and would occupy federal lands managed by the Chugach National Forest. The proposed project would consist of:(1)an earth filled,concrete faced gravity dam 10 feet high and 200 feet wide;(2)a reservoir with an approximate surface elevation of 800 feet MSL,an approximate surface area of 1,888 acres,and a storage capacity of 37,760 acre feet;(3)a 5 foot diameter,1 mile long penstock constructed of high density polyethylene or steel;(4)a powerhouse containing one turbine generator unit with a total installed capacity of about 5 MW;(5)a 1-2 mile long,115 kV transmission line and;(6)appurtenant facilities. The annual production would be 17.5 GWh,which would be sold to a local utility. Background The Commission issued public notice of the application on July 21,2008.The U.S. Department of the Interior and the U.S.Department of Agriculture (USDA)filed motions to intervene to be parties in the proceeding.2 The USDA also filed comments. USDA commented on resource issues that need to be evaluated by the permittee during the course of the preliminary permit.These issues include fish and wildlife,recreation, and visual resources.The USDA also states the permittee will need to obtain a Special Use Authorization in order to perform work related to the permit on National Forest lands. Discussion 1 16 U.S.C.§797(f)(2000). 2 Timely,unopposed motions to intervene are granted by operation of Rule 214 of the Commission’s Regulations.Id.§385.214(a)(3)(2008). 20081007-3019 FERC PDF (Unofficial) 10/07/2008 Project No.13212-000 2 The purpose of a preliminary permit is to maintain priority of application for a license during the term of the permit while the permittee conducts investigations and secures data necessary,after consultation with the appropriate resource agencies,to determine the feasibility of the proposed project and prepares an acceptable development application.The permit confers no authority on the permittee to undertake construction of the proposed project or any part thereof,3 or to occupy or use lands or other property of the United States or of any other entity or individual. If,during the course of the permittee’s investigation into the feasibility of the proposal, the permittee decides to prepare a development application,it must first prepare a Notice of Intent (NOI)and Pre-Application Document (PAD)pursuant to Sections 5.5 and 5.6 of the Commission’s Regulations.Pursuant to Part 5 of the Commission’s regulations,18 C.F.R. Part 5,the permittee must use the Integrated Licensing Process unless the Commission grants a request to use an alternative process (Alternative or Traditional Licensing Process). Pursuant to Section 5.3,such a request must accompany the NOI and PAD and set forth specific information justifying the request.4 Should the permittee file a development application,notice of the application will be published,and interested persons and agencies will have an opportunity to intervene and to present their views concerning the project and the effects of its construction and operation. A preliminary permit is not transferable.The named permittee is the only party entitled to the priority of application for license afforded by this preliminary permit.In order to invoke permit-based priority in any subsequent licensing competition,the named permittee must file an application for license as the sole applicant,thereby evidencing its intent to be the sole licensee and to hold all proprietary rights necessary to construct,operate, and maintain the proposed project.Should any other parties intend to hold during the term of any license issued any of these proprietary rights necessary for project purposes,they must be included as joint applicants in any application for license filed.In such an instance,where parties other than the permittee are added as joint applicants for license,the joint application will not be eligible for any permit-based priority.See City of Fayetteville,16 FERC 61,209 (1981). The Director orders: 3 Issuance of this preliminary permit is thus not a major federal action significantly affecting the quality of the human environment. 4See Commission Order 2002,issued July 23,2003. 20081007-3019 FERC PDF (Unofficial) 10/07/2008 Project No.13212-000 3 (A)A preliminary permit is issued for the this project to Kenai Hydro,LLC,for a period effective the first day of the month in which this permit is issued,and ending either 36 months from the effective date or on the date that a development application submitted by the permittee has been accepted for filing,whichever occurs first. (B)This preliminary permit is subject to the terms and conditions of Part I of the Federal Power Act and related regulations.The permit is also subject to Articles 1 through 4, set forth in the attached standard form P-1. (C)This order is issued under authority delegated to the Director and constitutes final agency action.Requests for rehearing by the Commission may be filed within 30 days from the date of issuance of this order,pursuant to 18 C.F.R.385.713. William Guey-Lee Chief,Engineering and Jurisdiction Branch Division of Hydropower Administration and Compliance 20081007-3019 FERC PDF (Unofficial) 10/07/2008 Form P-1 (Revised February 2007) FEDERAL ENERGY REGULATORY COMMISSION TERMS AND CONDITIONS OF PRELIMINARY PERMIT Article 1.The purpose of the permit is to maintain priority of application for a license during the term of the permit while the permittee conducts investigations and secures data necessary to determine the feasibility of the proposed project and,if said project is found to be feasible,prepares an acceptable application for license.In the course of whatever field studies the permittee undertakes,the permittee shall at all time exercise appropriate measures to prevent irreparable damage to the environment of the proposed project.All test sites shall be restored as closely as possible to their original condition and to the satisfaction of the Commission's authorized representative or,where federal lands are affected,to the satisfaction of the agency administering such lands. Article 2.The permit is not transferable and may,after notice and opportunity for hearing,be canceled by order of the Commission upon failure of the permittee to prosecute diligently the activities for which a permit is issued,or for any other good cause shown. Article 3.The priority granted under the permit shall be lost if the permit is canceled pursuant to Article 2 of this permit,or if the permittee fails,on or before the expiration date of the permit,to file with the Commission an application for license for the proposed project in conformity with the Commission's rules and regulations then in effect. Article 4.At the close of each six-month period from the effective date of this permit, the permittee shall file four copies of a progress report with the Secretary,Federal Energy Regulatory Commission,888 First Street,N.E.,Washington,D.C.20426;and shall serve a copy on the interveners in this proceeding.The report shall describe,for that report period, the nature and timing of what the permittee has done under the pre-filing requirements of 18 CFR §§4.38 and 5 and other applicable regulations;and,where studies require access to and use of land not owned by the permittee,the status of the permittee's efforts to obtain permission therefor. 20081007-3019 FERC PDF (Unofficial) 10/07/2008 Document Content(s) 19694789.DOC..........................................................1-4 20081007-3019 FERC PDF (Unofficial) 10/07/2008