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HomeMy WebLinkAboutAPA345' r }, a tt' "• -~ :~a I ~ li u :LI '£:,;. _, C\ ---- --c ' ,': '.,. _.. ....... p t=!-• -.J. \ ' c ' 'J ' r--~---s:/.:..-. ._...__ __ ,..._.,..,.-~-·~~---..... --. -·~~ ......... -.~-~-~-~-----~...) j Ufl&fru{g& c l§!ID£@©@ -) Sus\tna Joint Venture Doc. Jment Number ! t i i i Please Return To -( DOCUMENT CONTROL I [ I l t l • 1 ' f I l 1: l r i l J l I l I '' . ~--.. --, ____ I /' /) ---~--------------_.,., .... ____ ~----.-...~----------, _, ---~-.._. _____________________ , ------------l 1 ' lr - ·-SU,SITNA H·roAOELECTRIC PROJECT TASK i1 i \ SUBT.«\SK 11.01-PROJECT OVEP.V2EVi 1 j -1 I I I t I 1 J • i I l I J j I --.1 f 1 L l n i' l ···· ·H~~:t:F:Wii2~---_J Susitna Joint Venture Document Number Please Return To Oel(!Ul\1~t~T CONTROL I I I T : I l f 4 I c;:, I L.:::.-~ ALASKA POWER AUTHORrrv-~~-: ___ 1 ..._.. :_; ' t7 •••••• \J " I. I 1 1 1 ) .~'.' J 1 J ·J .J l l l J J J J ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT PROJECT OVERVIEW MAtRCH 26J 1981 BY RECEIVED MAY 05 1983 HARlA-EBASCO Susitna Joint Venture ACRES AMERICAN INCORPORATED LIBERTY BANK BUILDING) MAIN AT COURT BUFFALO) NEW YORK 14202 ' ,. t ~/ l . ' s !\} '(J PREFACE The initial product of Subtask 11.01 was a major report which was issued in second draft form February 11, 1981, with- out Chapter 2, Summary. This Summary was issued under the title Project Overview, March 26, 1981 in lieu of the entire report. The second draft is appended to this report as Attachment 1, for record purposes. rl ALASKA POWER AUTHORITY \d f'~ ,I H SUSITNA HYDROELECTRIC PROJECT PROJECT OVERVIEW TABLE OF CONTENTS "'·~ fh Page UJ 1 -INTRODUCTION. • .. . . . . .. • . • • • • . . . . . . . . • . . . • . . • . . • . . . . . .. . . • . . .. . . . . .. . . . . • . . . 1 2-THE DECISION PROCESS .•.. ~ ........•••.... , ....•.•..•.....••.•....••...• 3 3-ALASKA POWER AUTHORITY ...•............• ~················~············· 3 4-HISTORY OF THE SUSITNA PROJECT ..••.... ~··w··················~········· 4 5 -ECONOMIC SCENARIOS AND PARAMETERS ........... ,.......................... 6 6 -MARKET AREA AND POWER DEMAND FORECASTS ... H • • • • • • .. • • • • • • • • • • • • • • • • • • • • • 7 7-SUSITNA BASIN STUDIES ..... ~································*·~········ 9 7.1-Hydrology ............... tto••••····························~······ 9 7.2 -Site Exploration and Geology....................................... 9 7.3-Seismic Considerations •.................•.......... ~··~·······~· 12 7.4 -Dam Site Selection .................................... · .............. 12 8 -GENERATION EXPANSION PLAN ........... 0 ... 0 •• H ••••••••••••• ;o ••• " •••••••• 14 9-SUSITNA HYDROELECTRIC DEVELOPMENT ..•.•.......... a .........•••.•..•.•.. 16 10-ENVIRONMENTAL PROGkAM .........•........ ~·············~~····~·········· 17 11-ANALYSIS OF SOCIOECONOMIC IMPACTSo ........ , ...•...•.......•..•.••••... 18 12-ECONOMIC FEASIBILITY AND NE: ECONOMIC BENEFITS ..•••...••.•.••.....•... 18 13-POWER AND ENERGY MARKETING •..........•.........•........•.•........ e •. 19 14 -PUBLIC PARTICIPATION PROGRAM.a ......................................... 19 15 -LICENSING AND PERMITTING PROCEDURES .......................... , . . . . . • . . 20 16 -FINANCIAL FEASIBILITY ANALYSIS ..••.........•.....•....... ~ ...•...••... 20 17-SECURITY OF PROJECT COST AND REVENUE STRUCTURES ..•...•..•.....•..•.•.. 21 18 -ORGAN! ZATION AND MANAGEMENT. • . . . . . • . . . • . . . . . • . . . . . . . • • . • • . • • • . . . • • . • . . 22 19 -IMPLICATIONS OF PROCEEDING .............•••..••.•..••...••......••...•. 22 . ~ Hi l.L 1 -INTRODUCTION PROJECT OVERVIEW SUSITNA HYDROELECTRIC PROJECT Acres American Incorporated (Acres) was conmissioned by the Alaska Power Authority (Power Authority) on December 19, 1979, to conduct a detailed feasibility study of the Susitna Hydroelectric Project, evaluate the environmental consequences of any proposed development, and prepare a license application to be filed with the Federal Energy Regulatory Corrrnission (FERC) in the event that the State of Alaska regards filing such an application as being in its best interests. If development ever takes place in the Susitna River Basin (see Figure 1 for a basin map annotated to show. potential dam sites), it is likely that extensive, costly and lengthy construction activity will occur there. Benefits of long- term and relatively low-cost electrical energy mar be possible. Yet, permanent alteration of the environmental setting in the Ba~in will be inevitable~ The basis for a decision to proceed with the Susitna Hydroelectric Project requires that a variety of scientific, engineering, financial and economic disciplines be brought together. Investigations and a~alysis in each of these areas must necessarily be thorough and, further, should be consistent with state-of-the-art techniques. Documentation of these activities tends to be voluminous as well as highly technical in nature, The: purpose of this Project Overview is to provide a review of all major aspects of the project and its objectives, determining in principle whether these can be met. In effect, it brings together complex issues and detailed technical results so that decision makers within the State of Alaska and interested members of the public tan assess results achieved to date and determine what the future course of action should be with respect to the Susitna Hydroelectric Project. Succeeding sections are arranged to present the framework within which the Susitna Study is conducted and the preliminary results achieved after the first full year of effort. Section 2 describes the decision process which requires two reports which the Power Authority must make to the Legislature. The nature and the role of the Power Authority are addressed in Section 3. After a brief history of the Susitna Project is presented at Section 4, Sections 5 through 13 consider technical, economic, environmental and marketing aspects. An introduction to the important public participation program follows at Section 14. Licensing and permitting is described in Section 15. Financial matters, including financial risks, are discussed in Sections 16 and 17~ Section 18 describes the organizational arrangements necessary for effective project implementation. A final section (19) reviews the implications of proceeding with the work after the first decision point on March 31, 1981. A detailed appendix to this overview has been prepared~ It contains a complete chapter to correspond to each of the sections appearing herein. Copies of the detailed appendix have been furnished to the Power Authority and to its external review panel. 1 ·' -~· ' ,::. -~ r::::::-~:. ,::: ~. ).. ' .,,,:;;o •• , __ ,,~J·"" , .,;,~--~-~-~ :;;: .. , ~ ...... ..;;:;,,~.;. ~~ . ......--~ ,_ • ' • ..._ ,L_ -.:.. _ ~ ~' .:. '.r,cr~. ~-.,_ ... _ ;o, .,. _._.~.,._,._~_1._,;....,2..,. ,..,;,:c;, •·••·-·· oc.:C,:c '•"'--;Jli:C•-"'-'•'~''-··-·.;.;-1"""-~''"'" -~-·~. ,,,.JI,'>f;,.~:,.,,,,;.,:.)t,;.:.,:.»!' •. , .• _,;~"':~::: _,_..:: J.;;,.,..,.~~..,...;..~:L~¥-.. ~~.'.;.: -~~~~· ::~""'!;,.,..JZ-;; _ ~~ • t:J..-"' _ , •. A OAM SITE SCALE IN MILES FIGURE .r~) (j ; J ) 'I ; f ,f ! ' J) q \ r .f \l,j l·: i ' J! : 1u In additiori to this project overview, a second major document bears upon the March 31, 1981, decision process. The Development Selection Report (some of which is encapsulated in Sections 7, 8 and 9 below) provides the detailed basis upon which a recommendation has been made by P1cres to APA regarding the proposed site on which the 1981 program will focuse 2 -THE DECISION PROCESS Two important decision points have been designated by HCSSB 294. This legislation requires that the Power Authority, by March 30, 1981, submit a preliminary report tc the Governor and to the State Legislature "reconmending whether work should continue on the project." A second decision point, also explicitly legislated, occurs in April 1982, when the Power Authority must submit a second report reconrnending whether work should continue on the Susitna Hydroelectric Project and other viable alter.1c.tives. It is important to note that neither of these decision points is intended to produce a commitment to construct a project. Indeed, construction of dams and other facilities in the river channel is not possible until or unless an FERC license is awarded. In addition to work being accomplished by the Acres team, several other ongoing activities bear upon the decision making process. A separate comprehensive study of alternative means of satisfying future Railbelt energy and load projections will be accomplished by an independent consulting firm under contract to the State of Alaska. The Susitna project will represent one of many possible alternat·> .. -=s considered in that effort. Other alternatives include, but are not necessarily limited to, thermal energy (particularly coal fired, since Alaska is richly endowed with significant undeveloped coal resources), wind, solar, non-Susitna hydropower, and tidal power (for which a preliminary assessment of potentials and constraints is now underway). In addition, the Power Authority has contracted with a major consulting firm specializing in electrical transmission to consider an intertie between Anchorage and Fairbanks. This latter project may be beneficial irrespective of whether the Susitna River Basin is ever developed, but the results of the study will necessarily be important to the analysis of transmission facilities required for a Susitna Project. · 3 -ALASKA POWER AUTHORITY The Power Authority was created in 1976, by action of the State Legislature, as an autonomous branch of the Alaska Department of Commerce and Economic Development. The basic mission of·this agency is to develop energy generation projects (excluding nuclear) in an economical manner. Governed by a Board of Directors, the Power Authority employs an Executive Director and a staff which carry out day-to-day activities. Directors of Engineering, Finance, and Public Participation assist the Executive Director in performing his functions. The 3 I 11 li tf 1: ·~ staff also includes a full-time Native Inspector, an Administrative Assistant, and Project Engineers and other supporting personnel. An organization chart is provi.ded as Figure 2 .. As of the end of 1980, the Power Authority was engaged in six reconndissance studies, four design projects, two license application submittals, five construction projects, and eleven feasibility studies (Susitna being the i argest). Procedures adopted by the Power Authority for the Susitna study include the formation of a Steering Committee to ensure that interested State and Federal Agencies are kept informed throughout the course of the work and to provide a vehicle whereby their concerns and recomnendations can be taken into account as the study progresses. Heavy emphasis is also placed on the opinions and concerns of the public, and an aggressive Public Participation Program is conducted. 4 -HISTORY OF THE SUSITNA PROJECT Because of its strategic location between Anchorage and Fairbanks 9 the Susitna River has long been regarded as worthy of consideration for development of its hydroelectric potential. Shortly after World War II, the U.S~ BUJreau of Reclamation (USBR) did an initial Territory-wide reconnaissance, noting tne vast hydroelectric potential in Alaska, and placing particular emphasis upon the perceived advantages of a Susitna Hydroelectric Project. The U.S. Department of Interior (of which USBR was a part) undertook geotechnical and other field investigations and, in 1961, proposed authorization of a two-dam system on the Susitna River. This report was later updated in 1974 by the Alaska Power Administration (also then a part of DO!) and the desirability of proceeding with the project was reaffirmed. The U.S. Army Corps of Engineers (COE) was also active in hydropower . investigations in Alaska in the 1950 1 s and 1960's. Focusing its initial attention on the Rampart Project on the Yukon River, the COE found by the early 1970's that the environmental consequences and limited market for Rampart power militated against its development. The 1973 energy crisis rekindled interest in hydropower development and the COE was commissioned by the U.S. Congress in 1974 to conduct a pre-feasibility study of the Susitna Project. The results of this effort were first referred to the Office of Management and Budget in 1976o Further geotechnical work followed and a new COE report was issued in 1979. The State of Alaska itself conmissioned an assessment of the Susitna Project by the Henry J. Kaiser Company in 1974. Although differences appeared in the various proposed development schemes, all of the foregoing organizations were unanimous in recommending that Susitna hydroelectric potential be developed. After the Power Authority was formed, the State of Alaska elected to proceed independently with a major feasibility study. A detailed Plan of Study was distributed widely in February 1980. Subsequent modifications, some of which 4 1 1 1 1 1 1 1 ] I I I I NATIVE INSPECTOR DIRECTOR OF FINANCE FINANCIAL STAFF . BOARD OF DIRECTORS EXECUTIVE DIRECTOR DIRECTOR OF ENG~NEERING ENGINEERING I ·STAFF ...__~-----" .. j ~ .... ·''"·~ DIRECTOR OF PUBLIC PARTiCIPATION PUBLIC PARTlCIPATlON STAFF ALASKA POWER A.UTHORITY ORGANIZATION ' -. ' ADMINISTRATIVE ASSISTANT OFFICE CLERICAL . FIGURE 2 ·~ l U . ·.1 .. • ·I 1 . A i were occasioned by statements of public concerns, were directed by the Power Authority itself as well as by the State Legislature. Salient features of the Plan as it now stands are these: The development of electrical energy demand forecasts has been accomplished independently by the Institute for Social and Economic Research (ISER), University of Alaska. -The study of alternatives, as noted earlier, is being accomplished separately from the Susitna Study. -The Public Participation Program is handled by the Power Authority itself rather than by Acres as originally proposed. -Major tasks have been designated to handle each facet of the work. These tasks include such activities as load forecasting, surveys and field support activities, hydrology, seismic studies, geotechnical investigations, design studies, environmental studies, transmission studies, development of cost estimates and schedules, licensing activities, finance and marketing studies, public participation and administration. Each task is further subdivided i_nto subtasks so that more than 150 separately defined study activities will be completed prior to submitting a license application to FERC in June 1982--if affirmative decisions are made at the March 1981 and April 1982 milestones. 5 -ECONOMIC SCENARIOS AND PARAMETERS The viability of a Susitna Hydroelectric Project depends to a great extent on the costs of generating electrical energy by alternative means. Thus, for example, if the cost cf natural gas from the Cook Inlet area rises more rapidly in future years than the general inflation rate, it is likely that utilities will turn to sources other than gas for future expansion of generating systems. Hydropower might then enjoy a more favorable position. Conversely, if certain fuel prices rise less rapidly than the general inflation rate, hydropower may not necessarily represent an economical choice for future system expansion. Other factors will also affect Susitna viability. For example, demographic variables, energy demand, unit labor costs, other commodity prices, overall price inflation, and interest and discount rates must be projected. An economic analysis was conducted so that, to the extent possible, logical and non-contradictory views of the world would emerge. No matter how carefully such an analysis is conducted, however, it is necessarily imprecise simply because it depends upon the prediction of an uncertain future. Thus a range of values bounding each selected parameter was selected as the basis for testing the sensitivity of a Susitna Project to possible deviations from most likely values. Forecasts of world energy balances indicate a worldwide shortfall in oil supplies within +an years. By 1990, the United States is expected to be importing 16 percent of its energy needs (an improvement .over the 22 percent level of 1978). It is likely that fossil fuel prices in the U.S. will continue 6 1 l l I I I I I I I I ~t' ; ' .....;. I " 1 t " i l l.~ ) ; . ~. : (.-~ ' ·t·.· . ' ) ~n. J U.) n; iL~ ll' w: ~; «;i l . ~ ' to esc a 1 ate at rates on the order of two to four percent above the overall inflation rate. Gas and oil price escalation will be at the upper end of this range., with coal escalation somewhat less. Fuel prices in Alaska will genera11y reflect market prices in the United States and abroad, less the cost of getting Alaskan fuels to the market. Insofar as prospects for economic growth in Alaska are concerned, three different economic scenarios were developed by ISER. The lowest assumes only modest population and employment growths at just over two percent. The highest forecasts these values at closer to four percent. If the volume of State government expenditures varies significantly from current levels, these ranges will be broadened~ Opportunity values and escalation rates in Alaska in dollars per million Btu (where a Btu is a unit of energy) were selected as follows: Natural Gas Coal Oil $/Million Btu Opportunity Value ( 1980 Dollars) $2.00 $1.15 $4.00 1980 -2005 Escalation in Excess of Normal Inflation 3.98% 2 .. 93% 3.58% Exclusive of inflation, a real interest and discount rate of three percent was adopted as most likely . 6 -MARKET AREA AND POWER DEMAND FORECASTS ' The forecasting methodology employed by ISER relied upon an end-use model rather than on the extrapolation of past trends as the basis for projecting future demand. As its name implies, an end-use model considers electricity consumption in terms of end use in various sectors of the economy. In the residential sector, for example, electricity consumption is largely attributed to space heating, refrigerators, water heaters, lights, cooking ranges, and certain other major appliances. Knowledge of the number, type, and expected changes in householdt can lead to assessment of future residential demand for electricity. The annual growth in total Railbelt Utility Sales ranged from 2.8 percent to 6.1 percent in the lowest and highest economic growth scenarios respectively. These values may be compared to an actual average annual rate of 15.2 percent for the period 1940 to 1978 and to 11.7 percent for the 1970's. Figure 3 illustrates alternate demand forecasts. Peak load forecasts were derived by applying historical load patterns by sector to the ISER demand forecasts. Peak loads are expected to increase at approximately the same percentage as total electrical energy demand for each of the selected ranges. 7 ,· "' :.~ ·, fj ;] ~· M J ·~: .. ·· '' " 18 17 16 Je 14 13 12 -:r ~· II ~ '0 -10 - CJ) 9 IJJ ..J <t co 8 >-..,_ 7 (.) -a: 6 t-u UJ _J 1.&.1 e 4 3 2 LEG EN> HES -GH s HI.GH ECONOMIC 8110WTH + HIGH GOVERNMENT EXPENDITURE HES-GM :r HI8H ECOWOMIC CMOWTH +MODERATE GOVERNMENT EXPENDITURE MES-GM: MODERATE ECONOWIC GROWTH + MODERATE GOVERNMENT EXPENDITURE LES-GM = LOW ECONOMIC GROWTH +MODERATE GOVERNMENT EXPENDITURE LES-GL = LOW .ECONOMIC GROWTH + LOW· GOVERNMENT EXPENDITURE -GM 0 ~------~--~--~~------~------------------------~ 1980 1sa~ 1990 1995 2000 2ooe 2010 YEAR ALTERNATIVE UTILITY SALES FORECASTS 8 FIGURE 3 41 ~-~ '] J '~I ] J 1 ~] ] J "'' j J J r·. I 'l . 14' 1 ] ] ) I J ] J) ] ~ J If more extreme measures are taken (probably through legislative action rather than voluntary efforts), some potential for further energy conservation and for load management could lead to a lower forecast than the lowest noted above. An extreme low forecast was selected for sensitivity tests in later analysis. 7 -SUSITNA BASIN STUDIES During the past year, a massive field data collection· effort got underway. Operating primarily out of a base camp constructed at the Watana site, investigative teams were engaged in environmental data collection, survey act·ivities, geotechnical exploration, geological mapping, seismological investigations and hydrological and climatological data collection. 7.1-Hydrology Gaging stations and weather monitoring stations were added to the network which had been installed and operated by State and Federal agencies in prior years. Information collected at new' stations has been useful in correlating data obtained there with longer term records at older stations. The Susitna River exhibits two distinct seasons of flow. High spring and sui11Tler flows (produced by snow and glacial melt and heavy rainfall) contribute about 90 percent of the annual total between May and October. The winter f~low is re·latively low <md most of the smaller tributaries do not sustain flow during the coldest mornths. Figure 4 i 11 ustrates flow data at Gold Creek. Based on data collected to date, initial determinations have been made of probable maximum floods (the theoretical maximum which could be produced given the physical nature of the Susitna Basin) and design floods (1 in 10,000 year events) which must be safely passed by dams that might be constructed on the Susitna. In addition, of course, hydrological data was used to estimate probable average and firm energy outputs from potential developmentso It is worth noting that less than 20 percent of the total Susitna River flow into Cook Inlet is contributed by the Susitna and its tributaries above Gold Creek. S·ignificant contributions downstream occ:ur from the Chulitna, Talkeetna, and Yentna Rivers. Figure 5 displays percentage composition of total flow by major tributary. Ice formation, both in potential reservoirs and downstream of possible dams, continues to be studied, for it must be dealt with during construction and its impacts during operation must be determined. 7.2-Site Exploration and Geology The Susitna Basin has a complex geology. Studies have been made of the region in general and detailed information was collected at particular dam sites and potential site!} (borrow areas) for materials with which to constru~t the project. Three core holes per site were drilled at Watana and Devil Canyon during 1980; 15 auger holes were placed to explore borrow 9 l .· .. ,•· 1 '· ; ,-l·i' ' t ~~ :rJ, .. (. t;;' ~~ J J I :·t if ~ ~ J i ~ J ' J l ! j j 3 0 0 0 ~ 0 z "' " LIJ ..J z ::;) ~------~~~~~~~~ 0 0 0 "" 0 v 0 0 0 ... 0 ., 10 0 0 0 ... 0 N 0 0 0 ... 0 0 l ] .-] ::l r~ '-.:-..-. ; J ~ ~11 :&v jj !~ J! CHULJTNA RIVER YENTNA RIVER 39o/o SUSITNA RIVER DEVIL WATANA CANYON SITE SITE 19°/o &.:~?o/o GOLD CREEK 50 °/o TALKEETNA RIVER ~ PMKS HIGHWlY BRIDGE GAGING STATION- 100 °/o SUSITNA GAaiNG STATO. COO.C INLET AVERAGE ANNUAL FLOW DISTRIBUTION WITHIN THE SUSfTNA RIVER BASIN 11 FIGURE 5 ' ... ·]·· .... · . t ;~ .. ll. ' ~~ 00 ~ jJ •ll ,jj (~~ i J 1 ] ; I \ .Jt areas; and approximately 28,000 feet of seismic lines were run. While geotechnical data gathered to date has generally confirmed the suitability of Watana and Devil Canyon sites for dam construction, a geotechnical program has been designed for 1981 further to define the nature of the sites and to answer questions about certain subsurface features which could influence the type and precise location of dams and other project features. 7.3 -Seismic Considerations The Upper Susitna River Basin is a seismically active area. Thus, a major seismic program was started in 1980. A microseismic network of 10 stations was installed and operated to collect microaarthquake data for the region~ Potential faults and lineaments were identified by air and ground reconnaissance, satellite imagery, airborne remote sensing and aerial photography. A detailed screening of all identified features resulted in the selection of 13 for further study in 1981 . On the basis of the current state of knowledge, the Denali Fault (65 km north of the sites) and the Benioff Zone (60 km underground below the sites) are regarded as the most likely severe seismic hazards. Figure 6 illustrates the seismic setting. Initial estimates of maximum credible earthquake& from these features suggest a magnitude of 8.5 on the Richter Scale. Dam design to safely withstand ground accelerations associated with such an event is within the state of the art. A study of Reservoir Induced Seismicity (RIS) was also initiated in 1980. RIS may be caused by the increased weight of water in a new reservoir or by lubrication and hydraulic action upon highly stressed rock. Based on evidence gathered to date, an RIS event will not exceed the maximum credible earthquake that could be associated with a fault. Thus, RIS is not likely to affect the determination of design earthquakes. 7 .. 4 .... Dam Site Selection A total of 12 dam sites wa·s considered in the site selection process (See Figure 1). By combination of two or more sites as a system, the total basin potential can be developed in a variety of ways. A detailed screening of individual sites and logical combinations of sites permitted elimination of those whose relative costs were high~or whose obvious environmental disadvantages were large. Preliminary layouts were developed for each of the most promising sites. Candidates selected for further analysis in generation planning and for more thorough environmental consideration included (1) the Watana and Devil Canyon dam sites (the combination found most suitable by the COE in the 1976 and 1979 studies); (2) High Devil Canyon (favored by Kaiser in 1974) and Vee; and (3) a combination of a Watana dam, a relatively low re-regulation dam midway between Watana and Devi 1 Canyon and a tunnel from the low dam with a downstream portal near Devil Canyon. Within these groups, further 12 l' 1 : ~u !: •.. ~•c.-,•; ' ' A LASKA RANGE DEVIL TALKEETNA TERR MOUNTAINS ----•GLENNALLEN --.............. ....... , ...... ...... CHUGACH MOUNTAINS MOUNTAINS SUSITNA PROJECT SEISMIC SETTING ~.,- ' . FIGURE 6 t .]·' .. ' . }i .. ' . ... ip,' ) ~ -.n.·, JJ t I~ tll '!) l 1.-II( ·:-~ ~ £ lr ~~ ~ ' J l i ' ']]···~ ....... ' ·; t1 J1 ·~; . . I . variations were studied in terms of alternative dam types and heights and possible schedule variations . 8 -GENERATION EXPANSION PLAN - The curr~nt generation system in the Railbelt is primarily based upon thermal power. Natural gas is used heavily in the Anchorage area, oil fired units predominate in Fairbanks, and several small coal-fired plant~ operate at Healy and in the Fairbanks area. Hydroelectric energy, primarily from the Eklutna project, also contributes a small portion of the current Railbelt electric generation. The present system will evolve in future years as demand increases and as old units reach the end of their useful· lives. Regardless of whether or not a Susitna Project is ever developed, new system additions will be needed. For planning purposes, it was assumed that the Bradley Lake Project (now being pursued by the COE) and certain thermal units now under construction will be on line by the early 1990 1 s. New capacity is necessary after 1992, but the amount and type to be added in any particular year will vary as a function of the demand and peak load forecasts. A generation planning exercise was conducted to determine how each of the potential Susitna developments might fit into future Railbelt generation systems. The General Electric Optimized Gener·ation Program (OGP) was the primary tool used for this purpose. In addition to Susitna and present and planned capacity, major alternatives including coal-fired plants, gas turbines, gas-fired combined-cycle plants, and the ten best non-Susitna hydroelectric sites were considered as candidates for future expansion. On an economic basis, it was determined that Watana/Oevi 1 Canyon, High Devi 1 Canyon/Vee, and Watana/Tunne 1 a 11 produced tot a 1 generation system present worth costs which were less than the least cost system without Susitna. Of the total sets considered, the Watana-Devil Canyon combination was favored economically. In the case of the most likely ISER forecast, the most appropriate time to bring an initial 400 MW Watana project on line was found to be 1993. Figure 7 provides a system energy comparison for the mid-load forecast for a base case thermal system and for a Watana/Devil Canyon development (Susitna 3AE). Although somewhat higher in cost and lower in tota1 energy production, the Wata~a-Tunnel combination was found to be a viable option in comparison to the best non-Susitna system. Some environmental advantages may be ascribable to the tunnel project, particularly since it offers an opportunity to preserve the Devil Canyon gorge essentially in its natural state. It is important to note, however, that the Watana dam project is a necessary first stage in the tunnel concept just as it is in the Watana-Devi 1 Canyon combination. Preliminary studies of tidal power potential have corrmenced. Tidal power development, if found feasible, would necessarily lag the earliest possible Susitna development simply because time-consuming detailed environmental and engineering investigations would have to be undertaken before a license application could be submitted to the FERC. Tidal power characteristics and 14 l r t .!,.. ,.....,, l l l ':l!' . f t ··11. . ' t !I} iji ~n ,i) ···E· : J -. t : 'f ;-. ' !! . ' ENERGY CGWH) ENERGY (GWH-) IOPOOr-------~------~------~--------r-------~------~------~ 4,000 0 ::::::·:·:·:·:·:·::::: H YDR 0 ·.·.·.· .. ·.··:·:·:·.·.· 1980 1990 1995 2000 2010 YEAR THERMAL 10,000 8,000 6,000 4,000 2,000 SUSITNA 3AE SYSTEM ENERGY COMPARISON MID LOAD FORECAST 16 FIGURE 7 ( [" J . ; '[.' r ''i . ' d costs will be available by mid-1981 as an input to the independently conducted Railbelt Alternatives Study. For generation planning purposes in the Susitna study, it has been assumed that tidal power generation is not available in 1993 when Watana could be brought on line economically. A series of sensitivity tests was run to determine how variations in key parameters would affect the choice of favored plans. These tests generally demonstrated that the Watana-Devil Canyon development is the most cost effective alternative among Susitna Basin plans through a reasonable range of fuel costs, fuel escalation rates, real interest rates, and the like. 9 -SUSITNA HYDROELECTRIC DEVELOPMENT Based on the generation planning studies and preliminary environmental analysis, the developments selected for primary study and design activities during 1981 are at Watana and Devil Canyon. Should continuing analysis of the tunnel, particularly i~ the environmental area, confirm clear advantages which in the opinion of the State of Alaska offset the higher costs and lower energy associated with that scheme, a shift to that plan can be accommodated because the Watana development is a common first stage for both plans. The conceptual design for Watana presently consists of a rockfill dam with maximum height of 870 feet and with upstream and downstream slopes sufficiently flat to withstand the maximum credible earthquake. The spillway arrangement must be such as to discharge design floods (1 in 10,000 year events) without damage. It must also permit safe discharge of the maximum probable flood. In addition, spillway design must be such that nitrogen entrainment downstream is kept within acceptable limits for fish survival. The conceptual design for Devil Canyon currently includes a thin-arch concrete dam appt .. oximately 650 feet high. Spillways at Devil Canjron must meet the same criteria as noted above for Watana. Alterna\tive arrangements fo1~ the major dams and spillway str 1Jctures remain to be studied further to optimize the design of each development. Intake struc\.ures at both dams will be designed with multi-level drav1-off arrangements to facilitate selection of desired downstream water quality. Underground powerhouses are currently planned at both dams, though surface facilities can be accommodated if geotechnica·t and economic investigations indicate that such facilities are preferable to underground caverns. As currently conceived, the initial installation at Watana will develop about 400 MW of power and the facility will be planned to permit installation of an additional 400 MW after downstream regulation is provided (either by a Devil Canyon reservoir or by construction of a somewhat smaller dam midway between Watana and Devil Canyon, as is required in the tunnel concept). Alternative access routes have been defined and public workshops were held in March, 1981, to solicit comments. One 0f the routes under consideration would 16 ( ~. f L r L I l • J. L.. t ~~;~ .n I t ' ~ '{lli f . i ' I .. ,} (f: \7 E ' [ <•'l L ;.r: .L t ,t . JJt. 1 offer controlled access since its terminus would be at the Alaska Railroad rather than at an existing highway. Current studies indicate that it is possible to complete the Watana dam by 1993 if both an FERC license to construct the dam and access roads are available by 1985. Alternatively, construction equipment may be brought into the site overland from the Denali highway in the winter of 1985 and access road work may parallel on-site construction with some cost penalty. The Devil Canyon dam can be brought on-line within about 6 1/2 years after the start of construction if access routes exist at that time. A transmission line study is currently underway. This work is being coordinated with the study team involved in the ongoing intertie study. As currently envisaged, transmissiGn facilities would parallel the Susitna River from the dam s i te.s to Go 1 d Creek, at which point 1 i nes wo u 1 d extend north and south to Fairbanks ~od Anchorage, respectively~ 10 -ENVIRONMENTAL PROGRAM A major environmental investigation program got underway in 1980. In addition to necessary exhaustive field data collection, effort was devoted in particular to two other major components: (1) addressing major environmental concerns including those expressed by government agencies (at Federal, State, and local level) and the general public, and (2) environmental participation in the design process with a view tow.ard avoiding or minimizing impacts by making design decisions which account for environmental concerns from the start. The environmental studies are divided into nine specific study components: -Fisheries -Wildlife -Land Use -Archaeological (Cultural Resources) -Recreation -Plant Ecology -Corridor Selection -Socioeconomic (See paragraph 11 below) -Management and Coordination At least one more year of data must be coll~~ted in each area before detailed impact statements can be prepared and proposals developed as appropriate for mitigative measures. Even so, no evidence has been discovered to date to indicate environmental impacts which are so severe as to conclusively rule out the possibility of developing the Susitna River for hydroelectric power production. 17 ~-·· l -. J' '~~~>' .' ·' .. ' l.~ :L Certain environmental impacts on fisheries experienced at other major hydroelectric projects will be absent from or less severe at the Susitna Project if it is ever constructed. These include: (a) No direct blockage of fish migration or escape will result from the dam itself. (b) No significant river diversions resulting in low flows in the diverted river will occur for the· Watana-Devil Canyon combination. (c) Regulation is being factored into design to eliminate significant daily fluctuations in flow. (d) Nitrogen entrainment will not be increased by numerous sequential reservoirs such as are found on the Columbia River. In addition, design studies will incorporate the latest available technology to reduce the occurrence of such phenomena. 11 -ANALYSIS OF SOCIOECONOMIC IMPACTS - A major socioeconomic study program wa.s launched in 1980 with the objectives of describing existing socioeconomic conditions, forecasting future conditions if .no Susitna Project is built, and df~termining which conditions are· most likely to be impacted by a Susitna development. Major efforts have been devoted to development of socioeconomic profiles during 1980. The 1981 work will focus upon preliminary assessments of impacts which implementation of the recommended development plan could cause. 12 -ECONOMIC FEASIBILITY AND NET ECONOMIC BENEFITS The analysis of the net economic benefits of the recorrrnended development plan is being developed within the framework of traditional methodology. The general procedure considers the total costs associated with the project (construction, operation, maintenance, transmission, etc.). Benefits are the avoided costs of providing the equivalent power and energy from the next best alternative generating source .. A preliminary life-cycie cost analysis has been conducted for the recommended development plan as well as for other alternatives surviving the initial site screening process. This economic analysis assumed a three percent discount rate in real terms (i.e., the cost of money is assumed to be three percent higher than actual inflation rates during the planning period). In 1980 dollars, the present value costs of the recommended hydroelectric development (operated in the Railbelt System during a 60 year period for economic analysis) were less than the costs of the best thermal gener~tion alternative. 18 '. r- 1 1 j''\ More precise values for life-cycle net benefits will be determined as cost -estimates are developed in detail for the optimized development plan in 1981. r" ~ ' -r-"' f! ';l .· d.~;J .l ,, I ~~I~: ·'. : !,J.! .. . tl 1 L ··J, ' ''""c~.' :1~ 13 -POWER AND ENERGY MARKETING Whereas it can be shown that the Susitna Hydroelectric Project would be economical in the long term~ it is nonetheless true that tne relatively high capital cost of a major hydroelectric power development can lead to difficulties in financing the project or in marketing power and energy during the first few years of operation. Preliminary financial studies have been conducted to determine the probable nature and extent of the problem of high front-end loading as well as to identify potential strategies for alleviating this. These studies will continue in 1981. Insofar as marketing is concerned, it must be assumed that the maximum price which Railbelt Utilites would pay at any given time for Susitna power and energy is equal to or less than the avoided cost of producing power and energy by the best available alternate means. In the initial year of operation deliveries from Susitna will replace power and energy generated by existing thermal power plant and the avoided cost will be related to fuel, operating and maintenance expense. Only when the existing capacity reaches the point of needing replacement or new demand emerges, with which this existing capacity cannot cope, will it be possible to edge the Susitna price of energy up to the full cost. The ongoing studies will deal with practical arrangements which can be made with the Railbelt Utilities to achieve equitable marketing terms under which Susitna energy can be introduced to meet a substantial portion of future system needs. 14 PUBLIC PARTICIPATION PROGRAM An aggressive public particip.ation program was initiated for the Susitna Hydroelectric Project. Conducted directly by the Power Authority, major objectives are: -To distribute information to the public, -To solicit information from the public, and To ensure that public input is fully considered in the decision-m~king process. 19 j j 1 ~ I I l } I ~~ I ; J._ l" f r t l l l I l l ! I !· l l ~ l Community meetings, workshops, an action system to ensure that response is provided to every coi'Mlent or question written by the public, newsletters and mailing lists are vehicles by which these objectives are satisfied. Of particular note is the fact that public comment and concern has directly influenced the course of the Susitna study. Such major changes from original .study plans as the corrmissioning of a separate and independent alternatives study, the addition of a sociocultural study and an increased level of study for alternative developments in the Susitna Basin were largely prompted by public concerns. The high level of activity in the Public Participation Program is expected to continue throughout the course of the study. 15 -LICENSING AND PERMITTING PROCEDURES Regulatory requirements at Federal, State and local levels tend to be voluminous, complex, and time-consuming for any major power development. For the first several years, satisfaction of regulatory requirements will be. the controlling factor on the schedule for final completion of a Susitna project. The most significant initial regulatory requirement is the necessity to obtain a license from the Feder,al Energy Regulatory Corrmission (FERC). Should project feasibility be established and a decision made to proceed with the work, current plans ca11 for submittal of an application in mid-1982 and for receipt of a license by 1985. A detailed a~alysis of licensing and permitting requirements was conducted early in the course of the work in 1980 and a blueprint was drawn up to ensure that critical regulatory schedules can be met. 16 -FINANCIAL FEASIBILITY ANALYSIS Financial analysis and risk assessment has been initiated but only carried forward to a limited extE~nt pending the selection of the preferred development plan and the availability of appropriate capital costs of construction. One purpose of the preliminary financial feasibility analysis has been to establish the "envelope 11 within which the staging, design and operating configurations of Susitna are amenable to market financing based upon reasonable assumptions concerning financial markets and the inclinations of investors over the next 20 to 30 years .. 20 ,, A computer model, developed earlier for financial analysis of major capital intensive projects, has been tailored specifically to meet the unique requirements of Susitna. Using this model, it is possible to analyze the effect on financial feasibility resulting from variations in input assumptions. These inputs include phasing of major project stages, scheduling of construction outlays, energy and power production during initial years, pricing and revenues, returns on investment, contingency provisions, debt requirements, taxes, ~d financial market conditions. There has been close correlation with work carried out on generation planning, employing the OGP-5 modeling capability (as described in Paragraph 8). Preliminary financial analysis indicates that viable options do exist for funding the project with various levels of involvement of the State of Alaska. Work during 1981/82 will focus on financial feasibility of the optimized development selection and will proceed in close collaboration with the financial consultants selected by the Power Authority at the end of 1980. 17 -SECURITY OF PROJECT COST AND REVENUE STRUCTURE Decision makers responsible for public policy and for action within the financial and credit markets, as well as those at regulatory agencies, must be confident that the probability of unforeseen events seriously distorting the objectives of the Power Authority and its planners is sufficiently remote that government and private investors should conmit substantial financial resources to the Susitna Project. A detailed risk analysis will be made of the various influences and possibilities, no matter how remote, that might impact the security of the project cost structure and its revenue flow. In particular, consideration will be given to risks, and to the formulation of contingency plans, applicable to: -Potential v~riations in capital costs Cost esc a 1 t{lt ion -Cost overruns -Delays -Events leading to noncompletion Serious outages during operation -Failure of revenue from power resources -Regulatory issues Arising from the study of project cost and revenue structure will be consideration of the need for completion and/or other guarantees and revenue assurance requirements. The aim will be to develop strategies and procedures which will minimize risk in each category and provide for an acceptable balance of residual exposure and benefit for the financing entities which might be involved in the Project. 21 , ... ., ... '~: '}:· ' ! ' 1 1 ... . ( ' ,.,. . 7 ·i ., I' ) 1 ,· ! .,."" ' '• l J' ' I . I J I 18 -ORGANIZATION AND MANAGEMENT .-.._ ProJect control structures, policies and procedures have been developed ~~d put in place to ensure that continuing project activities are in t:he best interests of the State.of Alaska and its populace. The Executive Director of the Power Authority serves as Project Manager for the State of A 1 ask a. He is assisted in turn by a project staff which includes Assistant Project Managers for Technical Output and Schedule and for Budget and Finance. A Project Engineer within the Power Authority devotes his full-time attention to monitoring and coordinating project work. Within the Acres organization, a Project Manager is responsible for direction of the activities of a large group of technical personnel. He is assisted by a Deput.Y Project Manager, a Technical Study Director, and a Resident Manager (in Anchor age) • External Review Panels have been established both at the Power Authority's level and at Acres' level to provide an independent check on the adequacy and accuracy of completed and proposed study activities. Major subcontractors assisting Acres in the performance of its work include: -R&M Consultants, Incorporated -Cook Inlet Region Incorporated in association with Holmes and Narver -Terrestrial Environmental Specialists -Woodward Clyde Consultants -Frank Moolin and Associates -Robert W. Retherford Associates -Other Alaskan firms providing transportation, supplies, and logistical support 19 -IMPLICATIONS OF PROCEEDING The Govet"nor of A 1 ask a and the State Legis 1 ature wi 11 receive a report on or before March 30, 1981, wherein the Power Author•ity must recommend whether work should continue on the Susitna Hydroelectric Project. The Power Authority has selected four particular issues for detailed consideration. Conclusive proof that any one of these issues presents an insurmountable barrier would lead to a recommendation by the Power Authority to terminate the study. Briefly summarized, the issues are as follows: -Are the forecasts too low to require any major g~neration additions over the next 30 years? -Are seismic risks so great that safe development canna+ occur? 22 .. . . 1 1 1 .I 'I 'I ..1 ' . .I I I f 1 ~J I 'I •• . {I} ,, J . .• f!.! : ' ~ j I' ; <:. -Are anticipated environmental losses unacceptable? -Is there a significantly lower-cost set of alternatives which will satisfy demand forecasts through the year 2010? No barriers have been discovered during the initial year of study which would lead to an affirmative answer to any of the listed questions. Even so, definitive answers have not yet been developed for a11 of the issues. Continuing the study would provide the State with an opportunity to make sound decisions in the future as to whether Susitna hydroelectric potential should ultimately be developed. Terminating study efforts at this time would result in avoiding the significant costs of further investigation and analysis on Sus itna • 23 c ~ .) J it) t j'. L, ./.~, <' ~~-1 ·. t;{ .: .; •. . ,. UJ :, ' ,. )...J«; ATTACHMENT 1 ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT SUBTASK 11.01 -PROJECT OVERVIEW SECOND DRAFT FEBRUARY 11) 1981 ACRES AMERICAN INCORPORATED 1000 Liberty Bank Building Main at Court Buffalo, New York 14202 Telephone (716) 853-7525 r~ ' \ I" . . . ' I""' ., ' ~ . l": t! J. 1 ~i ' : ,j, )-! ~ t ....,.,,, ALASKf~ POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT SUBTASK 11.01 -PROJECT OVERVIEW SECOND DRAFT TABLE OF CONTENTS 1 -INTRODUCTION Paqe 1.1 - 1.2 1.3 1.4 Purpose of Project Overview .... ·······c··············· Decisions Whether or Not to Proceed .................. . 1-1 1-3 1-3 1-4 Subsequent Issues of Project Overview ................ . Form and Content of Overvi ev.' ......................... . 2 -SUf~MARY ..................•...................................... 2-1 3 -ALASKA POV.!t:R AUTHORITY 3.1 -Outline of Legislation Creating the Authority ......... 3-1 3.2 -Organization .......................................... 3-2 3.3 -Existing and Planned Activities ........................ 3-5 3.4 -Procedures Adopted for the Study of the Potential for Hydroelectric Power Resources of the Susitn~ River. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-6 3.5 -Legislative Activity Related to the Susitna Hydroelectric Project ................................. 3-8 4 -HISTORY OF THE SUSITNA PROJECT 4.1 The Study Area .......................... ,. ............. . 4.2 Early Studies of Hydroelectric Potential ..... ~ ....... . 4.3 -Bureau of Reclamation Studies ...................... ! •• 4.4 U.S. Army Corps ef Engineers ......................... . 4.5 Kaiser Proposal for Developr.1ent ....... H •••••••••••••• 4.6 Interests of Alaska Power Authority ................... . 4. 7 -Selection of Consulting Engineers .................... . 4.8 Plan of Study 1980 -1982 ..................... ·····~ 5 -ECONOMIC SCENARIOS AND PARAMETERS 5. ·.~, IntY'oduction .......................................... . 5.~ Global Energy Economics .............•...... ~····· ..... 5e3 -U.S; Energy Supply and Demand ..•........ ~············· 5M4 -U.S. Energy Price Forecasts .....•........•............ 5.5 -Alaskan Prospects for Economic Growth •................ 5.6 Forecasts of Energy Prices in Alaska ...............•.. 5.7 -Non-Energy Cost Forecasts.···-·······~······ ..••..•... 5.8 -Discount and Interest Rates ....... a.······~··········· i 4-1 4-3 4-4 4-5 4-6 4-7 L!.-11 4-11 5-1 5-1 5-2 5-11 5-19 5-38 5-41 5-45 , ~' ;.]··, . ' "" . l.t.-·,. /'"' " ., - J;.:t , '. ., j .J I -~ i I I' tt;#'-!1 ., ,., ""'"' ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT SUBTASK 11.01 -PROJECT OVERVIEW SECOND DRAFT TABLE OF CONTENTS (cont 1 d) 6 -MARKET AREA AND POWER DEMAND FORECASTS Page 6.1 -Electl'icity Demand Profiles ...................•....... 6-1 6.2 -ISER Electricity Consumption Forecasts •............... 6-4 6.3 -oast Projections of Railbelt Electric Power Require- .nents .................................................. 6-16 6.4 -Peak Demand Forecasts ................................. 6-16 6~5 -Potential for Load Management and Energy Conservation. 6-23 7 -SUSITNA BASIN STUDIES 7.1 -Introduction .......................................... 7-1 7.2 -Technical Data ........................................ 7-6 7.3 -Salection of Dam Sites ................................ 7-17 7.4 -Tunnel Alternative to a Dam at Devil Canyon ........... 7-38 8 -GENERATION EXPANSION PLAN 8.1 -Introduction .......................................... 8-1 8.2 -Options Available to Meet Capacity Requirements ...•... 8-2 8.3 -Environmental Analys·is and Assessment of System Components ....................................... ·. . . . . . 8-14 8.4 -Distribution of Load and Generating Capacities ....•... 8-22 8.5 -Generating Plans With and Without Susitna ............. 8-25 8.6 -Conclusions ........................................... 8-33 9 -SUSITNA HYDROELECTRIC DEVELOPMENT 9.1 -Introduction ......... 4 •••••••••••••••••••••••••••••••• 9-1 9.2 -Recommended Development Plan ..................•....... 9-2 9.3 -Review of Transmission Development Plan ............... 9-18 9.4 -Logistics, Transportation and Construction Facility Requirements ...................................... ~ . . . 9-25 10 ~ ENV!RoNMtNTAL PROGRAM 10.1-Approach to Environmental Studies ..................... 10-1 10.2 -Specific Environmental Studies ...•.................... 10-3 11 -ANALYSIS OF SOCIOECONOMIC IMPACTS ..........•.................. 11-1 12 -ANALYSIS OF ECONOMIC FEASIBILITY AND NET ECON0~1IC BENEFITS 12.1 -Introduction ..... ~-. . . . . . . . . . . . . . . . . • . . . . . . . . . . . . . . . . . . 12-1 12.2 -~1ethodology ............... ~ ...............•..•.••..•... 12-1 12.3-Base Case Analysis .............. ··················~··· 12-2 ii I I· J ,) I I I I I .I ·I I I II il I I I} 'I} ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT SUBTASK 11.01 -PROJECT OVERVIEW SECOND DRAFT TABLE OF CONTENTS (cont'd) 13 -POWER AND ENERGY MARKETING Pag~ 13.1 Introduction ............•.•.•.... ~················e····· 13-1 13.2 -Cost of Service .....•....••...............•............ ~ 13-5 13.3 -Supply Contract Arrangements .......•............ e ••••••• 13-8 14 -PUBLIC PARTICIPATION PROGRAM 14.1 -Introduction .......•................ ~··········~········ 14.1 14.2 -The Program ................................ 0 •••••••••••• 14.1 14.3 -Public Concerns ..............................•.......... 14.12 14.4 -Major Changes that have Occurred from Public Concerns ... 14.18 15 -LICENSING AND PERMITTING PROCEDURES 15.1 -Introduction~··········································· 15-1 15.2 -Federal Energy Regulatory Commission (FERC) ... ~ ......... 15-1 15.3 -Other Federal Requirements ..•............. » ••••••••••••• 15-9 15.4 -State and Local Requirements ............................. 15-11 16 -FINANCIAL FEASIBILITY ANALYSIS 16.1 -Introduction .......................................•.... 16-1 16.2 -Alternative Financing Strategies ........................ 16-3 16.3 -Basic Structure of Fianacial Feasibility Analysis ... e ••• 16-11 16.4 -Special Features of Financial Analysis .................. 16-14 16.5 -Sensitivity Analysis ................................•... 16-27 16.6 -Conclusions from Financial Feasibility Analysis ......... 16-28 17 -SECURITY OF PROJECT COST AND REVENUE STRUCTURES 17.1 -Introduction ... c. ....................... "' •••••••••••••••••••• 17-'1 17.2 -Overall Risk Analysis as Contingency Return ............. 17-2 17.3 -Completion Guarantee •................................... 17-14 17.4 -Revenue Assurances Requirements ........................• 17-15 17.5 -Form of Power Contract and Interrelationship With Financial Plan .......•... ;.~···························· 17.16 18 -ORGANIZATION AND MANAGEMENT 18.1 -Role of Alaska Power Authority in Development of Susitna Hydroelectric Project •.........•..........•..... 18-1 18.2 -Project Management .......•......•.................•..•.. 18-3 18.3 -Management of Engineering and Construction ... 1 •••••••••• 18-5 18.4 -Policies and Procedures: Management Information Systems.o ... , ............................... .,. ............. 18-..5 18.5 External Boards of Review .............•.•..••.....•.•... 18-€ iii l t ' k< r l • !· ' l f l ! l· I j j l I· l' I I I 11 I J. I I I I il I I I ,, I I .IJ I I) IJ ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT SUBTASK 11.01 -PROJECT OVERVIEW SECOND DRAFT TABLE OF CONTENTS (c~nt 1 d) 18.6 -Quality Assurance ................................... . 18.7 -Public Participation and Information Program ........ . 18.8 -Labor Relations ........ ·····················t········ 18 ... 9-Security ........................................ " ..... . 18.10-Organization for Operating Phase .................... . 19 -I~1PLICATIONS OF PROCEEDING 19 .. 1 19.2 19.3 19.4 19.5 19.6 19.7 -Introduction .......................................... . -Seismic Risks ... -= ••••••••••••••••••••••••••••• ~ ••••••• En vi ronmenta 1 Considerations ........................ . -Alternatives ................... ···r--·· ..... ~ ......•••... ~='" • 1 M h . . 1nanc1a ec an1sms ................................. . -Conclusion ... ~··············e·· ... ··········,.·········· iv Page 18-6 18-6 18-7 18-7 18-8 19-1 19-1 19-3 19-4 19-4 19-5 19-6 I ;I·· ' ' I . I" I I I I ~· ·~· I I I I I '.ll, ~f ~~ §.If 1ti J) J} 1-1 1 -INTRODUCTION 1.1 -Purpose of Project Overview This report has been prepared by Acres Jlmerican Incorporated (Acres) on behalf of the Alaska Power Authority (APA). Acres was commissioned by APA on December 19, 1979, to conduct a detailed feasibility study of the Susitna Hydroelectric Project as the basis for meeting future power needs of the Railbelt Region of the State of Alaska, evaluating the environmental consequences of any proposed development, and filing a completed license application with the Federal Energy Regulatory Commission (FERC). The proposed project is large and the issues are many and complex. Indeed, development of the full hydroelectric potential of the Upper Susitna River Basin by the State of Alaska would represent the largest non-federal hydroelectric develoment in the United States. It follows that decisions as to whether, and how to proceed with the work must necessarily take into account the full range of exhaustive and diverse studies which have been conducted to the date at which such decisions :-:re made. The Susitna Plan of Study was originally proposed by Acres in September 1979, revised and reissued in February 1980 and further revised in September 1980. The POS describes a series of 13 tasks and 151 subtasks. ThR POS involves the preparation of a number of specific project reports and appropriate progress and Subtask Closeout Reports, to various levels of detail, during the course of the work. Although such extensive documentation is necessary to satisfy project objectives, the volume and technical complexity of individual reports do not lend themselves well to direct support of the decision making process. The purpose of the Project Overview is to provide a review of all major aspects of the project and its objectives, determining in principle whether these can be met. It is based entirely on primary source documents produced or acquired by the project study team. The initial phase of the Susitna Hydroelectric Proj~ct covers a 30-month period. This first edition of the Project Overview is based only upon the first 12 months or so of study effort so that results contained herein are necessarily preliminary in nature. It is not possible to state with certainty at this point whether the project is economically and technically feasible, nor can it yet be asserted that hydroelectric development of the Susitna R·iver Basin is environmentally acceptable. A further two updates of the Project Overview are currently contemplated through April 1982. These updates will serve to complete the assessment of the technical, economic and environmental feasibility of the project, and to recommend to APA whether or not it is in the best inter1=sts of the State to proceed with FERC licensing. 1-1 ' ' ' ; !· t I l· ~ r f t ~ ' j: t f j.: j· j I l l I l l r f 1 l 1 l I ·. f " l I j I ! ! ! l ' :I I I I I I ' """" 1,1 ,I I I) I} 'I I 11 f) f) 1} PROJECT OVERVIEW APA REPORT TO GOVERNOR a LEGISLATURE DEVELOPMENT SELECTION REPORT REPORT ON COMMUNITY MEETINGS r!f!!'!!!!!!!!!~~::::::;ll S E R ENERGY RECOMMENDATIONS BY o·rHERS DEMAND FORECAST CONTINUE STUDY UNTIL NEXT NO DECISION TERMINATE· THE STUDY POINT (APRIL 1982) I~~JPUTS TO MARCH 1981 DECISION PROCESS 1-2 l j .\ ~ - * 1 ~ 'i -I 1 •l I • ~ j ·I ' ' a.'' !J 1 -' ' ~ J ~ ·m tJ ~ [l 1.2 -Decisions Whether or Not to Proceed The determinations of project feasibility and acceptability cannot reasonably be made until the initial phase of the study has been completed. It is nonetheless true that information may be developed at any point during the course of the work which represents so formidable an obstacle to ultimate determination of feasibil.ity as to cause the State of Alaska to terminate the work. To protect the interests of the State in this regard, two major decision points have been designated. Both are prescribed by HCSSB 294. This legislation requires that the APA, by March 30, 1981, prepare and submit to the Governor and to the State Legislature 11 a preliminary report recommending whether work should continue" on the project. The APA is also required to prepare and submit by April 1982 11 to the Governor and to the Legislature a preliminary re~:>art recorrmending w~ether work should continue on the Susitna River hydroelectric project, and other viable alternatives... This Project Overview is one of several key documents which will support these APA reports and the decision makil1g process. Figure 1.1 illustrates a number of ma._ior inputs which will be cons·idered in March, 1981. Reference is made to each of these inputs at various points within this Project Overview. It is i~portant to note that neither the first decision point nor the second (schE:dtlled for April 1982) is intended to produce a commitment to construct a projE~ct. In each case, only the question of whether work described in the PhasE~ I POS should be allowed to continue is at issue. Even in the most favorable circumstance, actual construction of dams ·and associated facilities cannot occur unless and until a license has been awarded by the FERC. The FERC Licensing process is discussed elsewhere in this Project Overview. Numerous other Federal and State agency permits are also necessary before construct ion of the project could conmence. Even if the project proves to be technically and economically feasible and environmentally acceptable, it is unlikely that such licenses and permits would be issued prior to 1985. 1.3 -Subsequent Issues of Project Overview If the work is a·llowed to proceed, further editions of the Project Overview will be published periodically. The complete set will thereby provide historical documentation of the evolution of the Project. To facilitate use of this and subsequent versions, the general form and structure of the Project Overview will remain constant. Even so, the emphasis placed on any single chapter or aspect of the work will change. In this regard, for example, little can be said at present of various construction aspects~ for those details must necessarily follow from development of project component designs which have not yet been undertaken. 1-3 ~ ( I f I 1'.; l ~ .. !' { l ,t· ... ·' ' ~- ~ ' ' . r: ( .. t . . . ' -. I I I 11 ·~ f) ·I} fj ., .. , I :.J In addition to the Susitna Hydroelectric Project Feasibility Study and other inputs shown on Figure 1.1, several ongoing efforts are expected to become important to future decisions, particularly for the April 1982 consideration: (a) The State of Alaska, through the Office of the Governor, has commissioned a comprehensive study of Railbelt Energy Alternatives to be accomplished by an independent consulting firm, and completed pjior to the second decision point. This ~,tudy will consider all reasonable:! alternatives, of which the Susitna Hydroelectric Project is one, and present findings as to the cost and implications of meeting likely future electrical energy demands ·in various ways. (b) The Alaska Power Authority has contracted with a major consulting firm specializing in electrical transmission to consider an intertie which would connect the Anchorage and Fairbanks transmission systems. The selected i ntert ie cor1ri dor may be the same as that which waul d be used to bring Susitna energy north and south and to the extent that it is economica1ly and technically feasible, design of an intertie is to be such that components will be compatible with a possible future Susitna development. (c) The Office of the Governor has selected Acres to conduct a separate studjr of Cook Inlet Tidal Power potentials and constraints. The results of this study will be used in the Railbelt Alternative Energy Study since huge tidal power potential is known to exist in Cook Inlet. Along with Susitna and a variety of conservation, renewable resource and conventional thermal generation approaches, tidal power is yet another possible solution to future generation needs. 1.4 -Form and Content of Overview A variety of diverse disciplines is required to conduct a study as extensive and complex as that outlined in the Susitna POS. Each such discipline must necessarily conduct detailed technical investigations and it is absolutely essential that the total effort be closely coorditfated, for each investigation can affect others. For purposes of decision making, it is necessary to place all the technical, commercial, economic, financial~ contractual, environmental and other aspects in proper perspective. This Project Overview is intended to serve that purpose. An attempt has been made to avoid highly. technical language as much as possible so that the expert who desires to review any single technical aspect in depth must refer to the primary source documents from which information containsd herein was derived. A complete summary of the Project Overview is contained in Chapter 2. A set of decision criteria has been selected by the Alaska Power Authority as appropriate for consideration by the Governor and the Legislature at the end of March, 1981. These criteria are presented and discussed in some detail in 1-4 Chapter 19, Implications of Proceeding with Study of the Susitna Hydroelectric Power Development& Figure 1.2 summarizes the five key questions to be considered. An affirmative answer to any one may be an indication that the program should be terminated or redirected. Summary titles for each chapter of the Project Overview are also shown in Figure 1.2, along with links between each question and the place within this report that preliminary answers may be foundQ It may be seen from Figure 1.2 that the question dealing with alternatives is connected with certain chapters only by dashed lines because the full answer will actually be provided by the Railbelt Alternative Energy Study upon its completion. Even so, it has been necessary to give some consideration to how various possible Susitna developments would fit into the future Railbelt generation system. While Chapter 8 of this Project Overview does shed some light on the probable costs of relying upon conventional thermal power facilities to satisfy future demand, it is in no sense a detailed alternative study. 1--5 a Tl Ll 'Ifi ;' tl .I I ,'_I~ J II !? ""' \ i ' i ...... I m ARE FORECASTS TOO LOW TO NEED ADDITIONAL GENERATION? ARE SEISMIC RISKS TOO GREAT? ISSUES SUSJTNA tfYDROELECTRic PROJECT PROJECT OVERVIEW 3-ALASKA POWER AUTHORITY 1 ARE ENVIRONMENTAL LOSSES UNACCEPTABLE? 5-ECONOMIC SCENARIOS 6-FORECASTS 7-SUSITNA BAStN STUDIES 8-GENERATION EXPANSION ARE NO FINANCIAL MECHANISMS AVAILABLE? 12-ECONOMIC FEASIBILITY AND NET BENEFITS 13-MARKETfNG 14-PU9LIC OPINION ADDRESSED AT FIRST DECISION POINT : I ""-"-"'"" ~""""·--------~----~----~-:-:-~-----" "" ---·--------~-":"-~~~-:-----" --~~-~\lt--'~1 -IPt ..... f~-,..,- RAILBELT ALTERNATIVES ENERGY STUDY ARE BETTER ALTERNATIVES AVAILABLE? FEASIBILITY FIGURE 1.2 I I I :1 ·I I I ·I· . .. I I \1 I ·I I ll I I I I CHAPTER 2 To be prepared as a summary upon completion of all remaininy chapters and after ~velopment selection has been made. 2-1 I l i • ! 1 • 1 l ~ I I IJ 11 I I II m I ll ll ll IJ 11 111 ·I] II ·ll ll 3-1 Chapter 3 -Alaska Power Authority 3.1 Outline of Legislation Creating the Authority The Alaska Power Authority (APA) was created by action of the Alaska Legislature in 1976. Alaska Statute 44.56, known as the Power Authority Act, defined the Alaska Power Authority as an autonomous branch of the Alaska Department of Commerce and Economic Development. APA was brought into existence with the assignment to develop the State's hydroelectric and fossil-fuel energy-generation projects in an economical manner. Within this constraint, the APA was given certain powers to carry out its task of developing power projects. The Authority may purchase or lease property; it may issue bonds or obtain other means of financing its projects; it may enter into contracts with various parties as it sees fit to achieve its project goals; it may exercise the right of eminent domain and condemn property as needed for construction of a power project. APA may a 1 so enter into contr·acts to se 11 any power generated by its projects. A number of legislative revisions have been made since 1976 to clarify and better define the Authority's basic mission. Alaska Statute 44.83, published in December 1980, incorporates prior changes and provides the current legal basis upon which APA operates. While the basic mission of APA remains that of producing economical energy, changes have been made which grant it the following powers: 1. To produce power with "wind power!l tidal, geothermal , ... or solar energy production and waste energy conversion facilities 11 in addition to the previously mentioned fossil and hydroelectric facilities. Nuclear energy is specifically omitted from the list of energy resources APA is empowered to investigate. 2. To ask the State's assistance in financing projects if APA is not able to sell sufficient bonds to cover the project costs. 3. To assist utilities financially in the State when the utilities• production costs exceed a level set annually by the legislature. 4. To establish a low-interest loan fund to provide state cooperative and municipal utilities a source of capital for construction of, or improvements to, generation f ac i 1 it i e s . I 1 a· J I ' ~ I I J I I I ~ I> I I I i 1 I I I I I I I I I ,j 5. To conduct !'reconnaissance" studies to identify energy ·tesources available to a particular region or community. 6 .. To conduct "feasibility and finance planning" studies. These studies investigate the details that would be involved in constructing and financing energy projects identified as available by the reconnaissance studies. 7. To ~onstruct generation facilities. Additional changes provided by the new statute assign the following new responsibilities to APA: 1. To produce an annual report describing its operations, income and expenditures for the preceding year 2. To assist the Department of Commerce and Economic Development in development of a long-range energy plan for the State of Alaska, to be updated each year 3. To produce reports and recommendations concerning the status of the Susitna Hydroelectric Project. 3.2 Organization 3-2 A Buard of Directors oversees the general activities and policies of the Authority .. The board originally had five members: The Comiflissioner of Commerce and economic development and four members-at-1 arge appointed by the Governor. Recent legislation has also made the Commissioner·s of the Alaska Department of Corrmunity and Regional Affairs, the Alaska Department of Natural Resources, the Alaska Department of Transportation and Public Facilities and the Alaska Department of Revenue ex-officio members of the board. The board's chairman is elected from among the four members-at -1 arge. These at-1 arge members serve four-year terms and are not paid for their work as board members. A staff, headed by the Executive Director, is available to the Board of Directors. An organizaton chart is shown in Figure 3-1. The Board of Directors approves APA's involvement in its projects. The board also presents APA's budgetary requirements to the State legislature and acts upon the Executive Director's recommendations regarding staffing levels. The Executive Director is employed by the Board of Directors to oversee the day-to-day operation of APA. In this capacity, he is empower-ed to sign contracts on behalf of the Board of Directors subject to their approval. APA regularly engages the assistance of consulting engineers, financial advisors and legal counsel. The Executive Director oversees the work done by these outside contractors. ( I, !' L I. I I I I I I ~ ,&.._) fl LJ rl . I LJ I I I R 11 .:, II ll ll ll m ~ ll 11 ll ll 11 'I! ll I] 3-3 The Director of Finance reports directly to the Executive Director and is responsible for the management of financial matters. Detailed budget preparation, internal accounting, contract administration, project financing and power purchases and sales are handled by the Director of Finance. The Director of Engineering also reports to the Executive Director. He is responsible for technical and planning matters related to projects and studies. The Director of Public Participation is responsible for collectinG ~;,Jblic opinion concerning APA 1 s activities, for disseminating such infonn~~tion to the public and for planning and organizing whatever public informational meetings are to be held. The Native Inspector oversees APA activities to ensure compliance with agreements entered into with Alaska Native organizations regarding access to lands held by such organizations, and advises the Executive Director on general Native concerns. The Administrative Assistant is responsible for office operations and office staff assignments. A special team has been organized to manage the Susitna Hydroelectric Project. Det ai 1 s at"e provided in Chapter 18. I a . I n I D ll ll D I) IJ IJ I] D (l iJ (j (] NATIVE INSPECTOR \ 1 \ DIRECTOR OF FINANCE Fi nanci a 1 Staff · .. - FIGURE 3.1 BOARD OF DIRECTORS EXECUTIVE DIRECTOR I I DIRECTOR OF DIRECTOR OF PUBLIC ENGINEERING PARTICIPATION Pub 11 c Engineering Participation Staff Staff 3-4 ADMIN! STRATI VE J ASSISTANT Office j Clerical Alaska Power Authority Organization •ll··· ' I] ll IJ I] D IJ IJ E IJ IJ u IJ ~ IJ 3-5 3.3 Existing and Planned Activities(1) APA has undertaken a large number of diversified energy-related projects. Its activities include administration of the following: the Power Project Loan Fund, the Power Production Cost Assistance Program and various planning and development programs. All of these activities are concerned with economical power production utilizing local resources wherever practical. Since APA was formed in 1978, nearly $34 million has been appropriated for the administration of the Power Project Loan Fund. Just over $27 million has been approved as loans to various utilities and municipalities for hydroelectric development projects. Loans amounting to just over $500,000 have been approved for diesel (oil-burning) power generation projects. In 1980, tn-2 Alaska legislature created a fund to assist those utilities whose production costs (fuel, operation and maintenance costs, etc.) rose above a certain preset level. This is the Power Production Cost Assistan(e Program, which is administered by the Authority. By the end of 1980, nine utilities serving over 60 corrrnunities had applied for assistance under the terms of this program. Activities in which APA is visible to the public are those in which it undertakes to bring an energy development scheme to fruition. These may include reconnaissance or feasibility studies, preliminary or detailed design, application for the appropriate operating permits and licenses ana actual construction and operation of these energy projects. In addition to hydroelectric and fossil fuel power generating projects, APA is presently undertaking two wind-energy studies, a woodwaste-fueled generating plant study~ two geothermal energy development studies and some waste~heat utilization demonstration projects. As of the end of 1980, APA was actively involved in a large number of projects which may ultimately produce energy in various areas of the State. These projects are tabulated as follows: Ongoing Power Authority Projects at Year's End, 1980 Reconnaissance Studies Feasibility Studies Design License Application Submittals Construction 6 11 4 2 ,.. 0 (1) Alaska Power Authority 1980 Year-End Status Report. ~ ' I I I ~ ~ ·~ I ' I I I I I I I I 3-6 3.4 Procedures Adopted for the Study of the Potential for Hydroelectric Power 1 Resources of the Susitna River In late 1979, APA entered into a $27.5-million contract with Acres Pmerican, Incorporated for a thirty-month study of the Susitna Hydroelectric Project as described in the Acres proposed Plan of Study. The contract between APA and Acres is of the 11 cost-pl us fixed-fee 11 type~ In this type of contract, the client pays only for work performed by the contractor plus a fixed amount which covers the contractor's profit and interest on his invested capital. APA, as the contracting agency for the Susitna Hydroelectric Study, is solely responsible for its execution. No other State agency has contractual control over the study. There is, r.owever, a means by which concerned State and Federal agencies can make their quest·1ons and concerns known to APA. In mid-1980, APA invited 13 government agencies to participate in the formation of the Susitna Hydro Steering Committee. The Committee's first meeting was held in mid-June. Organizations active in the Committee include: U.S. Fish and Wildlife Service National Marine Fisheries Service Bureau of Land Management U.S. Geological Survey U.S~ Heritage Conservation and Recreation Service U.S. Army Corps of Engineers Environmental Protection Agency Alaska Department of Natural Resources Alaska Department of Environmental Conservation Alaska Department of Fish and Game Arctic Environmental Information and Data Center (University of Alaska) This Committee is an autonomous group which provides a means for APA to discuss ongoing and planned activities related to the Susitna Project. Committee members are then given the opportunity to forward their comments to APA in an advisory, rather than in a regulatory, role. If the Susitna study progresses into the FERC license application stage, all of the committee members are potential intervenors. To minimize the delays that any intervention at a later date would necessitate, this committee gives the agencies the opportunity to express their concerns early enough so that they may be factored into the ongoing study process~ As originally contracted, Acres was required to perform an analysis of the energy alternatives available to the Railbelt area for the period 1980 to 2010. In early June, the Alaska legislature perceived the potential for a conflict of interest in havirg one consultant perform an analysis of the f~asibility of the Susitna Project as well as ·its a'1ternatives. The legislature then acted to remove the responsibility for conducting the alternatj~es studies and the associated power market studies from Acres • contract.~ J Simultaneously, (2) House Bill 1002 Am 5, Chapter 120 SLA 80. ., ••• 'I I I I I I I I m lJ IJ ! IU I j IU I l JIJ ( 1ry [ J I lu ! I u~ I ( I (·-·. l i l ) , u~. I 1 I lu ~ 3-7 the legislature appropriated $239,200 from the general fund to the Governor•s office 11 for a Railbelt Power Market and Supply Study which will serve as the principal study on power demand and alternative supplies in making the decision whether to construct the Susitna Hydroelectric Project ... APA commissioned a separate study by International Engineering Company (IECO) and Robert W. Retherford and Associates (RWRA) to investigate transmission facilities between the Project dam site and Anchorage and Fairbanks. This study was completed in 1979e On the basis of the study, APA engaged Commonwealth Associates to design an intertie from Willow in the south to Healy in the north. Commonwealth was further directed to conduct a cost/benefit study for revenue sharing and energy transfer. Results of the Commonwealth study wi11 be particularly pertinent to the Susitna study since commonality of transmission corridors and use of the intertie to partially accommodate Susitna power transfer is likely. Heavy emphasis is place!d on the opinions and concerns of the public as the study evolves. The Public Participation Office is responsible for organizing public meetings and workshops at appropriate times during the course of the study. During 1980, a series of four public meetings was held. The purpose of these meetings, held in Fairbanks, Talkeetna, Wassila and Anchorage, was to discuss and receive public comment upon the Acres Plan of Study, which serves as the basic guide to the conduct of the Susitna study. Two workshops, both in Anchorage, were held to discuss the findings of an electrical energy usage forecast which was produced by the University of Alaska•s Institute of Social and Economic Research. The workshops have been used to focus attention on a specific topic and are of a relatively technical nature, while the public meetings cover more topics and the discussion is kept simpler. At these meetings, careful notes are taken of discussions, and those attending are invited to submit informal comments. There is also the opportunity to ask questions of APA, Acres, or Acres• subcontractors. If an immediate answer is not possible, the Public Participation Office directs a written response to the person who raised the question. The Public Participation Office also provides the channel through which the public may access Acres and its subcontractors. Any comment or question on the Susitna Project received by APA is processed through the Public Participation Office and a record is kept on who raised the point, a summary of the question ( s), the date the question was received and the action to be taken. If the question or comment cannot be adequately answered by APA personnel, it is routed to Acres. The Public Participation Office maintains its records as a means to ensure a prompt response to all questions. Responses by Acres are routed back through the Pub1ic Participation Office to the person who originally asked the question. Chapter 14 provides a more detailed account of the Public Participation Program. '·' '~ ... f ' ~· !,' . G, < • .. r,:;. ,·' '',. ~ ,;: ~ ~' 4' • \'! 'o 1 . (JJ·~ ! ' l i l ·····I .• I ' ' f ., t 3-8 3.5 Legislative Activity Related to the Susitna Hydroelectric Project In the course of the present Susitna Project Study, several relevant laws have been en acted. The earliest of these ·was Sen ate B i 11 63, or Chapter 76 SLA 1979. This bill, signed into law in May 1979, appropriated $8,178,000 from the General Fund to the Governor's office to initiate a Susitna study. Further appropriations have been made since. In mi d-1980, two b·i ll;; bearing UP,on the Suitna Project were enacted. These are Senate Bill 294 (Chapter 169, SLA 80) and Senate Bill 438 (Chapter 83, SLA 80). Senate Bill 294, which amended the Power Authority Act, defined the objectives of the Susitna Project as follows: 11 H.to generate, transmit, and distribute electric power in a manner which will: (1} minimize market area electrical power costs (2) minimize adverse environmental and social impacts while enhancing environmental values to the extent possible; and ( 3) safeguard both life and property. 11 This bill requires that, by March 30, 1981, APA submit to the Governor and legislature a report containing the Authority's recommendations on whether or not work should continue on the Susitna Project. If work does continue on the Project after April 1981, another report will be prepared a year later giving the Authority's recommendation whether or not to further ~ontinue work on the project. If the second recommendation is to continue, this report must contain conceptual design details, construction cost estimates and schedules and data on proposed methods of financing. If this 1982 report is approved by the legislature, a license application for the Susitna Project will be filed with the Federal Energy Regulatory Commission. Senate B·i 11 483, which also amends the Power Authority Act, defines the procedure from reconnaissance and feasibility studies through financing of a power project. I I I I I I I I I I I I 11 n LJ I J J I I I J :I I I 4-1 4 -HISTORY OF THE SUSITNA PROJECT 4.1 -The Study Area ihe main stream of the Susitna River originates about 90 miles south of Fairbanks where melting glaciers contribute much of its summer flow. Meanderin~ for the first 50 miles in a southerly direction across a broad alluvial fan and plateau~ it turns westward and begins a 75 mile plunge between essentially continuous canyon walls before it changes course to the southwest and flows for another 125 miles in a broad lowland. For more than 30 years, the vast hydroelectric potential of this sometimes surging torrent has been recognized and studied. Strategically located in the heart of the South Central Railbelt, the Susitna could be harnessed to >reduce about twice as much electrical energy per year as is now being consumed in the Railbelt. Figure 4.1 locates the Upper Susitna Basin. •• ,. • i .. I • l I -I I I I I -~ J . - 1 I ~ • I ' ' ., I t I t I ;, .I ~ ,. F/6V~E 4-2 fsJao. 11 o roc ·----__ ({~ Wo ~ ~ ~~c 1-. L . /2t91L.I3t:LT /J;V/) SV.SITN/1 $MIN i-OCI9TIONS ~ --\---~.) . ~v~~ .. ..... . ........ -----·---·-· .... ----·---------~ ~-e--· -~~,~--~--~ ?' .. ---~ -.. 1~, ------·-----·------·------ ·---------------. -·----· ·------·--· --· ---·-- .... ~---··-4f-'·---··(---·---~--··----··~-----------,._ ---- . --.,-; -· --· -__ ,..,.. -··· ,._ .. -·-------'"'--........ _____ _ ·-""-··--·--· ----01·~--· '"!'-·-----·-----·-··-'li. . "' .. ·-·-~ ··--..,.--.. ., ..... ____ , ______ ..... -· ------------·--· . . ·-~~---· • -.~-.. -·-=--<!0 ·-.............. -·----·· ··~--.. . -... ---···-· -.... . "' .. --"'---. -·-·-.... ______ .,..,., ,. ..... __ ,.h'1·-· !I---~--·-..... __ --:"'-· ,..,.<·-·-.---- -~· ,. __ ,.., .. ·-··---Ott ..... _...,. r ..,... -· ---.. -··· -..--··'-'!"-'!.. } ;tJ , ... . .......... ""-~ ... -.. --· . t ·,·, I I I I I I I I I I I I I 4-3 The Susitna River system, with a drainage area of more than 19,000 square miles, is the sixth largest in Alaska. Major tributaries include the Yentna, Chulitna, Talkeetna, and Tyone Rivers. Because a substantial portion of the total streamflow is provided by summer glacial melt and heavy runoff from large saturated muskeg areas, the sediment 1 aden waters are turbid in sumner. Winter flows consist almost entirely of groundwater supply and are generally free of sediment. Freezeup starts in October in the upper reaches of the basin and by late November, ice covers have formed on all but the most rapidly flowing stretches of the River. The Susitna River and its tributaries are important components of Alaska's highly prolific fishery resource. Salmon, Dolly Varden, trout, grayling, and whitefi.sh are found within the Basin. Waterfowl habitat in the glacial outwash plain supports trumpeter swan and offers respite and sustenance for migratory fowl. Bear, mrose and caribou thrive there. In short, wildlife resources are plentiful. Extensive studies are necessary both to determine with some precision their total value, the impacts which any development may have upon them, and the nature of mitigative measures which might be taken to eliminate or offset negative environmental consequences of hydroelectic development. Chapter 10 addresses these environmental considerations. 4.2 -Early Studies of Hydroelectric Potential Shortly after World War II had ended, the U.S. Bureau of Reclamation conducted an ·initial investigation of hydroelectric potential in Alaska, reporting its results in 1948. Responding to a recommendation in 1949 by the nineteenth Alaska territorial legislature that Alaska be included in the Bureau of Reclamation program, the Secretary of Interior provided funds to update the 1948 work. The resulting report, issued in 1952, recognized the vast hydroelectric potential within the territory and placed particular emphasis on the advantages enjoyed by the Susitna River because of its proximity to Anchorage and Fairbanks as well as to the ·connecting Railbelt . . £\series of studies followed over the years. Dam sites were identified and geotechnical investigations were undertaken. By 1961, the Department of Interior proposed authorization of a two dam system. The definitive 1961 report ~~as subsequently updated by the Alaska Power Administration (at that time an agency of the Bureau of Reclamation) in 1974, at which time the desirability of proceeding with hydroelectr~c development was reaffirmed. The U.S. Army Corps of Engineers was also active in hydropowe( investigations in Alaska during the 1950's and 1960's, but focused its attention on a more ambitious dGvelopment at Rampart on the Yukon River, which v1as capable of generating five times as much electric energy as Susitna annually. The sheer size and the technological challenges associated with Rampart captured the imagination of supporters and effectively diverted ,ttention from the Susitna Basin for more than a decade. The Rampart report was finally shelved in the ! I I I a I I I 'I early 1970's both because of sttong environmental concerns and uncertainty of marketing prospects for so much energy, particularly ·:n light of abundant natural gas which had been discovered and developed in Cook Inlet. 4-4 The energy crisis occasioned by the Arab oil boycott in 1973 provided some further impetus for seeking development of renewable resources and federal funding was made available both to complete the Alaska Power Administration's update report on Susitna in 1974 and to launch a prefeasibility investiqation by the Corps of Engineers. The State of Alaska itself commissioned a reassessment of the Susitna Project by the Henry Jo Kaiser Company fn 1974. Whereas the gestation period for a possible Susitna Project has been long, and the number of individuals involved in its investigations is legion, Federal, State, and private organizations have been virtually unanimous over the years in recommending that. the project proceed. Salient features of the various reports presented to date appear in succeeding paragraphs. 4.3 -Bureau of Reclamation Studies The Bureau's 1952 report to the Congress on Alaska's overall hydroelectric potential was followed shortly by the first major study of the Susitna Basin in 1953.. Ten dam sites were identified above the railroad crossing at Gold Creek (see also Figure 4-2): 0 Gold Creek 0 Olson 0 De vi 1 Canyon 0 Det· i 1 Creek 0 Watana 0 Vee 0 Maclaren 0 Dena 1 i 0 Butte Creek 0 Tyone (on the Tyone River) Fifteen more sites were considered below Gold Creek, though attention has been focused over the years on the Upper Susitna Basin where the topography better lends itself to dam construction and where less impact on anadromous fisheries is expected. Field reconnaissance served to eliminate half the original Upper Basin 1 i st and further Bureau cons ide ration centered on 01 son, De vi 1 Canyon, Watana, Vee and Denali. All of the Bureau's studies since 1953 have regarded these sit1es as the most appropriate for further investigation. In 1961, a\ more d:~tailed feasibility study r,ecommended a five sto·g(: construction £1cheme to match the load gr~owth curve~ as it was then pr·ojected. DE:vi 1 Canyon was t.o be t\'le first <Jevelopment-·-a 635 feet high arch dam with an installed . . . ,. l... "* .• ~ • 't .. ' ". \-. ;.• " I I I I I I I I ~ I I - I I I I I I I •• I I I • I I I I I 1\l ;I capac·1ty of about 220 r~We The reservoir formed tJy the Devi 1 Canyon dam alone would not store enough water to permit higher capacities to be economically installed since long periods of relatively low flow occur in the winter months. The second stage would have increased storage capacity by add·ition of an earthfill dam at Denali in the upper reaches of the basin. Geotechnical investigations at Devil Canyon were more thorough than at Denali, where test pits were dug, but no drilling occurred. Little change from the basic five stage concept appeared in the 1974 report by the JUaska Power Adminstration, though this later effort offered a more soph;isticated design, provided new cost and schedule estimates, and addressed marketing, economics. and environmental considerations. 4.4 -U.S. Army Corps of Engineers 4-5 The most comprehensive study of the Upper Susitna Basin to that time was completed in 1975 by the Corps of Engineers. A total of 23 alternative developmE:nts were analyzed, ir1cluding those proposed by the Bureau of Reclamation as well as considt=ration of coal as the primary energy source for Railbelt electrical needs. The Corps of Engineers agreed that an arch dam at Devil Canyon was appropriate, but found that a high dam at the Watana site would form a large enough reservoir to permit continued high generati1on during low flow periods. The Corps recommended an earthfill dam at Watana with a height of 810 feet. In the longer term, development of the Denali site remained a future possibility which, if constructed, wou'ld increase the amount of firm energy available, even in very dry years • An ad -hoc task force was created by Governor Jay Hammond upon camp 1 et ion of the 1975 Corps Study and it recomm2nded endorsement of the Corps request for Congressional authorization, but pointed out that extensive further studies, particularly those dealing with environmental and socioeconomic questions, were necessary before any construction decision could be made. At the Federal 1 eve 1, concern was express.Ed at the Office of Management and Budget regarding the adequacy of geotechnical data at the Watana site as well as the valid·jty of the economics\) the apparent ambitiousness of the schedule, and the feasibility of an arch dam at Devil Canyon. Further investigation') were funded and the Corps produced an updated report in 1979. Devil Canyon and Watana wen~ reaffirmed as appropriate sites, but the nature of the proposed dam~ changed. A concrete gravity dam was analyzed as an alternative at Devil Canyon and the Watana dam Nas changed from earthfill to rockfill. Cost and schedule estimates were r-evised, bpt the Corps continued to find economic justification for the project. l ' 'f I I I , I I I I I I ~ 4-6 It is particularly important to note that the load forecasts used by the Corps in the 1976 and 1979 reports anticipated more rapid growth in electrical energy demand than has most recently been projected in 1980 by the University of Alaska•s Institute for Social and Economic Research (ISER). Size of dams, stages of construction, and scheduling of installed capacity are necessarily influenced by the projections of when and how much energy will be required. By the same token, the schedule for retirement of older generation facilities can lead to construciton of a large hydroelectric development early, even when load projections are moderate. The Corps study suggested tnat the benefit-to-cost ratio of the proposed Susitna development was relatively insensitive to decreases in projected load growth, provided that a prescribed retirement schedule for existing facilities was adhered to. Examination of the validity of the retirement schedule is necessarily an important element in selection of the most appropriate development. 4o5 -Kaiser Proposal for Development The Kaiser study, comnissioned by the Office of the Governor in 1974, proposed that the initial Susitna development consist of a single dam (referred to as High D.C. on Figure 4-2). No field investigations were made to confirm the technical feasibility of the High Devil Canyon location, for the funding level was insufficient for such efforts. Visual observations suggested the site was probably favorable. The Bureau of Reclamation had alwa-ys been uneasy about foundation conditic'1s at Denali, but had had to rely upon the Denali reservoir to provide storage during long periods of low flow. Kaiser chose to avoid the perceived uncertainty at Denali by proposing to build a rockfill dam at High Devi 1 Canyon which, at 810 feet, ~AJould create a 1 arge enough reservoir to overcome the storage problem. Although the selected sites were different, the Corps of Engineers reached a similar conclusion when it chose the high dam at Watana as the first to be constructed. Subsequent developments suggested by Ka~ser would include a downstream dam at the Olson Site and an upstream dam at Susitna III (see Figure 4-2), though the information developed for these additional dams was confined to estimating energy potential. As in the Corps study, future development of Denali remained a possibility if foundation conditions were found to be adequate and if the value of additional firm energy provided economic justification at some later date. Kaiser did not regard the development of an energy consumptive aluminum plnnt as necessary to economically justify its proposed project. ] 1 1 1 'I I I I I I i n 1J I I ;I I I I I 'I I I I I I I 'I I I I I 4-7 4.6 -Interests of Alaska Power Authority The Alaska Power Authority (APA) was established by the State to conduct feasibility studies and to finance and con~tru~t electrical power projects. Created in 1978, APA focused early attention on the Susitna Project because a unique piece of legislation had been passed at the federal level wherein a revolving fund would finance the conduct of a $24 million pre-construction study by the Corps of Engineers. The State would have been required to reimburse the Federal Government through the issue of bonds, but reimbursement was necessary only if feasibility was shown. Thus, Alaska had the choice of proceeding either through the use of private consultants or by agreeing to the federal revolving fund approa~h and concomitant Corps of Engineer work. The decision as to how to proceed was a difficult one, for the possibility of eliminating the risk of incurring wasted costs if feasibility was not shown had to be counted as favoring selection of the Corps of Engineers. On the other hand, engaging a private consulting fi~m offered the prospect of avoiding possible de:lays in federal appropratinns as well as ensuring that the State was in a better position to control its 'Jwn destiny. While continuing to support the proposed federal approach, APA also pursued the private consulting firm option. Statements of qualifications from firms with hydroelectric capability were solicited early in 1979 and, by midyear, three such firms were engaged to prepare detailed plans for conducting a feasibility study and preparing a license application. Harza Engineering Company, International Engineering Company, and Acres American Incorporated (Acres) made presentations to the Board of Directors of APA and to the public in September 1979. Acres was se 1 ected as the private consu 1 t i ng firm to undertake the work in the event that the State should later choose this route in preference to the Federal alternative. Reasons for the selection of Acres, as contained in the APA report on the first series of community meetings on the Susitna Project, were: ( 1) Acres American, Inc. posses!:ied thE~ gredtest experience with sub-Arctic construction and planned to retain the most experienced firm in Alaska for geotechnical work. (2) Acres American, Inc. planned to spend a !~reater portion of its budget in-state than other firms. (3) The Acres American, Inc. proposal contained the most objective and detailed studies of power market demand and power :tlternatives. (4) The Acres American, Inc. proposal provided for the most extensive and direct public participation process. l 1 ~ ' I -,J -·f ~ I ,, i j ;i -! ·~ lJ -l ! I j I r l I I I I ., I I I ·~ ff'" 4-8 ·!~ (a) Task 1, Power Studies Task Objectives To determine the need for power in the Alaska Railbelt Region, to develop forecasts for electric load growth in the area, to consider viable alternatives for meeting such load growth, to develop and rank a series of feasible, optimum expansion scenarios and finally to determine the environmental impacts of the selected optimum scenarios. (b) Task 2, Surveys and Site Facilities Task Objectives To pro vi de for safe, cost effective, and en vi ronmenta lly acceptab 1 e logistical support of all project f1eld activities; to conduct those surveys necessary to furnish data for use in other subtasks which must be performed prior to licensing; to resolve rea~ estate issues associated with the proposed project in sufficiEmt detail to pennit preparation of Exhibit F of the FERC license application; and to undertake initial studies of proposed reservoir areas and access roads. (c) Task 3, Hydrology ' I I I I I IJ ~ ]ask Objectives ~ To undertake and report on all hydrologic, hydraulic, ice, and climatic studies necessary to complete the feasibility design of the ~ Susitna project and to provide sufficient documentation for the FERC ~ license application, (d) Task 4, Seismic Studies Task Objectives To determine the earthquake ground motions which wi 11 pro vi de the seismic design cri tE.~ri a for the major structures associ a ted w.ith thl~ Susitna Hydroelectric Project,. to undertake prelim·inary evaluations of the seismic stabi'!ity of pr-oposed earth-rockfil.l and concrete dams, to asse·ss the potential for reservoir induced seismicity and landslidest and to identify so·ils which are susceptible to seismi- cally-induced failure along the proposed transmission line and access road r·outes. (e) Task 5, Geote1chnical Exl?.l!'lration Task Objectives To determine the surface and subsurface geology and geotechnical conditions for the feasibility studies of the proposed Susitna Hydroelectric Project, including the access roads and the transmission 1 i nes. ' c r·~ ' \ I i I • . I I ,I I ;I I I I I I I I I I I ."' I I I 'I (f) Task 6, Design Development Task Objectives To undertake planning studies, to evaluate, analyze and review all previous engineering studies related to hydroelectric development of the Upper Susitna River Basin and to develop preliminary engineering design and cost information for Watana and De vi 1 Canyon Dam sites with all associated intaKe, outlet works, spillways and power facilities to allow preparation of a project feasibility report. (g) Task 7, Environmental ·studies Task Objectives The environmental program is designed to evaluate primarily the Sus i tna Hydroe 1 ectri c Proje~ct and associ a ted faci 1 i ties, with respect to environmental impacts. To accomplish this, a comprehensive program of studies has been developed in the following disciplines: socioeconomics, archaeological and historical resources, geology, land use and recreation, water resources, fish ecology, wildlife ecology and plant ecology. Access roads, site facilities a~~~ transmission cot"ridors will also be studied for en vi ronmenta 1 compa ti bi 1 i ty. The overall objective of the environmental studies is to describe tne existing environmental conditions, evaluate alternatives in light of the existing conditions and, for the selected alternatives, predict future conditions \vith and without the proposed project so that changes (impacts) caust:d by the project may be assessed. (h) Task 8, Transmission Task Objectives To select the transmission route and produce conceptual designs and cost estimates for the FERC license application for the following project components: -Transmission line linking the project damsites to Fairbanks and Anchorage, with potential i~termediate stations to feed local communities -Substations, with particular reference to the two major terminals at Fairba11ks and Anchorage, together with a suitable design for intermediate load points -Dispatch centE~r artd communications system~ (i) Task 9, ~1struction ~~}.1 EstiiT!.l!.t~.!..J'nd Schlt9.!D.~, Task Objec.tive.s ...;..;;.;..;;...;..;......;:..._~:~--~, .. To deve 1 op comprehensive, contr~tctor-~type construction, cost es ti rna tes for each major t~ 'i ernent o'f th~l l"~~commended Sus i tna 4-9 . i -~ I /.. l I ! ! I 1 ' ~ I . i ., I \ ' I l I I I I ·I I t J ~ ... 4-10 I I • t Hydroelectric Project, detailed engineering and construction schedules I· and an associated analysis of potential contingency constraints and impacts. (j) Task 10, Licensing Task Objectives To provide for timely preparation and assembly of ali documentation necessary for application for license to the Federal Energy Regulatory Commission (FERC). (k) Task 11, Narketing and Financing Task Q~jecti ves To establish the feasibility of financing the project and to develop an approach which provides optimum financing cost to Alaska power Authority and the best overall benefit to the State of Alas~a. An essential element of this task will be to build confidence in the project. (1) Task 12, Public Participation Program Task Objectives To keep the public fully informed of plans, progress, and findings associated with conduct of the detailed feasibility study, and to provide a means whereby the public (including individuals, public and private organizations, and various government agencies) can influence the course of the work. (Jn} Task 13, Administration Task Objectives To develop for the Acres t.eam plans, policies and procedures that will set forth the basic scheme for accomplishing the POS. I I I I I I I I I I ll I II r.fJ ll I I I :1 I .:1 ,, ·~ I I I I I I I \I ...... i···· ,: ' ;I II 4-11 4.7 -Selection of Consulting Engineers Having narrowed its choice to Acres and the Corps of Engineers, APA conducted a Board meeting in November 1979 to make its final selection and recommendation to the Governor of Alaska. A presentation was made at that time by the Alaska District Engineer and public testimony was accepted. Senator Mike Gravel, who had played a key role in developing the revolving fund legislation, also spoke at the meeting. The Board chose to proceed on the matter by recommending that Acres be engaged to conduct the study. Governor Jay Hammond approved the APA recommendation and an agreement was signed by APA and Acres in December 1979. 4.8 -Plan of Study 1980 -1982 The Plan of Study (POS) stated that the work would be undertaken by accomplishing. thirteen tasKs, each one of which was subdivided into five or more subtasks. These tasks and their associated objectives are as follows: The POS was conceived as a dynamic document and it had been anticipated frcrn the start of the work that changes could and would be made in response to public input as well as to take into account new information discovered as the work progresses. A number of changes have been made since the POS was first prepared. Of particular note is the fact that the conduct of Task 1, Power Studies, has been removed from the Acres scope of work. An independent consulting firm will analyze power alternatives under contract to the Office of the Governor, ensuring thereby that no conflict of interest arises in the comparison of all viable alternatives for satisfying Railbelt energy needs. Other changes have also been made in Task 6, Design Studies, Task 7, Environmental Studies, and in Task 11, Marketing and Financing, but the stated objectives remain valid. Chapter 3 described two major decision points \'klich have been scheduled to permit the State to terminate the study effort in the ever1t than an insurmountable obstacle to an affirmative determination of f~easibil ity is found to exist at those times. Should favorable decisions be forthcoming, Phase II of the work will commence in June, 1982, \'klen the license application is filed. As currently outlined in the POS, the primary effort during Phase II will be devoted to continuing data collection, particularly in support of environmental studies. l ';._ i"' I ,J '' ! <' I I· I I I I I I I ' ' 1·',' ' ' I I I ' ' I' . ' "' l l 11 ll 5-1 5 -ECONOMIC SCENARIOS AND PARAMETERS Sol -Introduction This chapter provides a discussion of current and projected economic conditions surrounding the Susitna Hydroelectric Project. The economic scenarios and parameters developed for the planning horizon (1980 to 2010) serve as inputs to several study tasks including energy and power demand forecasts, generation planning, cost estimating~ evaluation of socio-economic impacts, economic feasibility analysis, marketing and financial planning and financial feasibility analysis. Within these tasks, it is important that sets of assumptions be developed to ensure a rigorous internal consistency. For example, demographic variables, energy prices, energy demand, unit labor costs, other commodity prices, overall price inflation and interest and discount rates must be projected so that, to the extent possible, logical and non-contradictory 11 Views of the world" emerge. Sections 2 to 4 present an overview of global energy economics, U.S. energy supply and demand, and U.S. energy prices. Sections 5 to 8 concern the Alaskan economy, including the State's prospects for economic growth, forecasts of energy and non-energy costs, and appropriate interest and discount rates for public project evaluations. 5.2 -Global Energy Economics There is worldwide concern about the energy future. The oil cr1s1s of 1973, the second shock of the Iranian upheavals and recent unrest in the Middle East have confirmed the end of the post-war era of cheap and plentiful energy supplies for the global economy. For the Western world in particular, dependence on imported energy has resulted in a lessening of its security of supply. Therefore, the domestic sources of conventional and alternative energy have not only become more competitive, vis-a-vis imports based on production costs, but have also carried an advantage of supply assurance. Forecr1sts of world energy balances indicate a shortfall in oil supplies within 10 years. International Energy Agency (IEA) forecasts have recently shown a global shortfall of about 2 million barrels per day {b/d) in 1985 and 5.7 million barrels per day in 1990.1 In comparison, the U.S. alone imported 8 million b/d and Saudi Arabia produced 10 million b/d in 1979.2 lrnternational Energy Agency projection as of May 1980 (quoted in Energy Mines and Resources Canada, Report EP 80-4E, Ottawa, 1980). 2u.s. Department of Energy, International Energy Indicators, Washington, D.C., November 1980. I l' l I -i . ' l f t ' I . j, ~ f I I l' I ! r ! I 1' 5-2 In 1977, IEA countries had net oil imports of 2.3 million b/d.3 By 1985 and 1990, this trade deficit is expected to rise to 28 and 32 mi 11 ion b/d respectively. In 1990, all member states of the IEA, except Norway, are projected to be net importers of oil. At 1980 prices, the combined oil import bill for 1990 would amount to about $400 billion. Less widely reported is the fact that IEA nations are expected to maintain trade deficits in other energy commodities as well. By 1990, TEA's net imports of coal and natural gas are forecast to escalate to 0.9 million barrels of oil equivalent per day (Boe/d) and 3.8 million Boe/d respectively.4 The combined import's of coal and natural gas represent nearly 15 percent of the projected oil imports of the IEA. Within the IEA, oil imports have increased their share of total primary energy requirements in the North American 11 region". Between 1973 and 1978, North America's net oil imports rose from 15 percent to 21 percent of its total primary energy needs. This performance contrasts with those of the European and Pacific regions of the IEA where the shares of net oil imports dropped from 60 percent to 48 percent, and 72 percent to 64 percent respectively. It is therefore clear that the U.S. and Canada have registered the worst performance since 1973, and were more dependent on oil imports in 1978 than in 1973. The European and Pacific regions, although less oil-dependent in 1978 than in 1973, rely on imported oil to a greater extent than North America. By 1990, IEA projections indicate that North .America will import 43 percent and 6 percent of its requirements for oil and gas respectively. For IEA's Pacific region, net imports in 1990 are forecast to represent 99 percent and 61 percent of oil and gas requirements. Finally for the European region, the 1990 indicators of import-dependence are 84 percent and 36 percent. Tables 5-1 to 5-8 provide a summary of these global energy statistics and projections. 5.3 -U.S. Energy Supply and Demand In 1960, the U.S. consumed 60.5 million Btu of energy per constant (1972) dollar of gross national product (GNP), with 95 percent of its energy needs satisfied by domestic production. By 1978, the energy/GNP ratio had declined to 55.9 (an 8 percent improvement) while the share of domestic production rropped to 78 percent.5 Despite a significant improvement in energy efficiency, the U.S .. economy required 8.8 million Boe/d of imported enerqy in 1978, an increase of 600 percent relative to 1960 figures. IEA projections indicate that by 1990, the U.S. will be importing 16 percent of its energy needs, or 7.5 million Boe/d. 3International E'nergy Agency, Energy Policies and Programmes of IEA Countries, 1980 Review, OECD, Paris, 1980. 4'"Ib; a. 5See U.S. Department of Energy, Office of Current Reporting International Energy Indicators, November 1980, Washington, D.C., and International Energy Agency, op. cit. I I J ,., I I I I I I I I I ·~ [j I I I I J, I I I I I I I I ll ll I I TABLE 5-1 -ENERGY TRENDS 1973 to 1978 in the IEA YEAR IEA -Total 1973 1974 1975 1976 1977 1978 IEA -North America 1973 1974 1975 1976 1977 1978 IEA -Europe 1973 1974 1975 1976 1977 1978 IEA -Pacific 1973 1974 1975 1976 1977 1978 Level 0.89 0.89 0.87 0.87 0.85 0.84 1.12 1.12 1.10 1.10 1.08 1.06 0.70 0.68 0.66 0.67 0.66 0.66 0.68 0.69 0.67 0.66 0.64 0.62 TPE/GDPl Index (1973=100) 100.0 100.0 97.8 97.8 95.5 94.4 100.0 100.0 98.2 98.2 96.4 94.6 100.0 97.1 94.3 95.7 94.3 94.3 100.0 101.5 98.5 97.1 94.1 91.2 Net Oi 1 Imports Mtoe2 % of TPE 1172.9 34.9 1133.9 34.6 1072.1 33.6 1179.5 35.1 1236.6 36.0 1185.8 33.8 295.1 291.7 313~4 380.7 460.1 425.6 585.0 558.6 492.2 526.6 495.5 481.1 292.8 283.6 266.5 272.2 281~0 279.1 14.9 15.2 16.8 19.3 22.7 20.6 60.2 58.5 53.6 54.1 50.4 48.1 71.7 68.9 65.8 64.6 65.9 63.7 !Total primary energy (TPE) demand per unit of gross domestic product (GOP}. lMillion tons of oil equivalent. 1 Mtoe per year= 0.02 barrels of oil equivalent per day. Source: Intern. ational Energy Agency, Enirgy Policies and Programmes of lEA Countries, 1979 Review. Paris, 980. j ·t. l 5-4 TABLE 5-2 -IEA ENERGY CONSUMPTION, BY SECTOR AND FUEL (Mtoe) _.,......,........,~ ',, Sector Industry Transport Residential/Commercial Non-Energy Use Total Final Consumption (TFC) Fuel Solids Oil Gas Electricity Otherl Sector Industry Transport Residential/Commercial Non Energy Use Total (per cent) Fuel Solids Oil Gas Electlicity Other -~------------------- 1973 925.5 636.0 849.2 97*0 2460.8 255.0 1422.0 482.9 300.9 Shares of TFC2 (per cent) 37.6 25.9 32.6 3.9 100.0 10.4 57.8 19.6 12.2 1978 854.5 724.1 915.5 125.6 2553.4 216.1 1501.5 487.6 347.3 0."' 33.5 28.3 33.3 4 .. 9 100.0 8.5 58.8 19.1 13.6 0 1985 1153.9 781.4 1002.1 157.8 3008.6 305.9 1632.3 585.1 473.7 11.0 38.4 26.0 30.4 5.2 100.0 10.2 54o3 19.4 15.7 0.4 1Includes energy supply from non-conventional energy sources (e.g., geothermal, solar). 2Tota1 Final Consumption. Source: International Energy Agency, 1980. 1990 1360.9 847.4 171.0 3381.4 368.6 1756.0 624.0 585.6 47.2 40 .. 2 25.1 29.6 5.1 100.0 10.9 51.9 18.5 17.3 : . 4 .. i r .JJ .I' l i j. \\ """"-' 1 I I I I 'I I I I I I I I .I I I I ,) I TABLE 5-3 -lEA OIL CONSUMPTION Total Oil Consumption: (Mtoe) Oil Used In: (Mtoe) Residential/Commercial Industry1 Transport Electricity Production Non-Energy Use 0ther2 % of Oil Used In; Residential/Commercial Industryl Transport Electricity Production Non-Energy Use Other2 Total Oil as a % of Total Energy Used In: Residenticl/Commercial Industry! Transport Electricity Production3 Non-Energy Use 1973 1748.33 365.4 329.7 630.1 229.9 96.8 96.4 20.9 18.9 36.1 13.1 5.5 4.5 100.0 45.6 35.6 99.1 23.4 99.8 1978 1810.9 354.9 311.6 719.1 232.9 115.9 76.5 19.6 17.2 39.7 12.9 6.4 4.2 100.0 ll. 8 36.5 99.3 20.8 92.3 1985 2006.6 32749 385.3 774.2 276.7 144.9 97.6 16.3 19.2 38.6 13.8 7.2 4.9 100.0 35.8 33.4 99.1 18.4 91.8 1Excludes non-energy use. 2Including oil use for gas manufacture, refineries, own use by energy sector and losses. 3Qil inputs in Mtoe as a percentage of electricity generation in Mtoe. Source: International Energy Agency, 1980. 1990 2087.2 325.6 439.9 833.4 198.7 157.1 132.5 15.6 21.1 39.9 9.5 7.5 6.4 100.0 32.5 32.3 98.3 11.1 91.8 5-5 TABLE 5-4 ENERGY BALANCE FOR IEA TOTAL -YEAR 1990 Millions of Metric Tons Oil Equivalent Domestic Production Imports Exports Bunkers Stock Changes TPE Requirements So 1 id Fuels 1119.8 208.1 -145.4 +0;5 1183.0 (Based on 1919 Review Submittal) Oil Gas 809.3 630.3 1499.6 213.3 -136.5 -55.6 -83.7 -1.5 2087.2 788.0 Nuclear 455.5 455.5 Hydro/ Geothetma 1 280.9 280.9 Elec- tricity 5.9 -5.2 0.7 Others 20.9 26o6 47.5 --------------------------------------------------------------- Electricity Manufactured Gas Petroleum Refinery Energy Sector and Losses TFC Industry Transportation Residential/Corrmercial, etc Non-Energy Use -761.6 -7.0 -45.8 368.6 337.0 0.2 30.7 0.7 -198.7 -10.6 -81.9 -40.0 1756.0 439.9 833.4 32~5.6 1S7.1 Source: International Energy Agency, 1980. -86.2 +14.6 -17.3 -75.1 624.0 281.5 0.7 328.6 13.2 ~ - -455.5 -280.9 -- +662.6 -0.3 -77.4 585.6 275.1 6.3 304~2 -1.3 +1.0 47.2 27.4 6.8 13.0 ---- Total 3316.7 1953.5 -342.7 -83 .. 7 -1.0 4842.8 -1121..6 -3 .. 0 -99.5 -237.3 3381.4 1360.9 847.4 1002.1 171.0 .. •• TABLE 5-5 -ENERGY BALANCE FOR IEA NORTH AMERICAN -YEAR 1990 Millions of Metric Tons Oil Equivalent Domestic Production Imports Exports Bunkers Stock Changes TPE Requirements Electricity Manufactured Gas Petroleum Refinery Energy Sector and Losses TFC Industry Transportation Residential/Conmercial, etc Non-Energy Use So 1 id Fuels 772.8 10.3 -65.4 717 .. 7 -526.7 -14.9 176.1 174e9 0.1 1.1 (Gased on 1979 Review Submittal) Oil 637.7 456.8 -4.0 -24.1 1065.9 -76.8 -48.7 -7.9 932.5 197.7 533.5 132.6 68.7 Gas 460.0 35.1 -5.1 490.0 -14.7 -17.3 -57~4 400_6 191.6 203.5 5.5 Nuclear 241.3 241.3 -241.3 Hydro/ Geothermal 154.9 154.9 -154.9 Source: International Energy Agency, 1980. Elec- tricity -1.8 -1.8 +359.7 -34.0 323.9 133.. 6 0 .. 4 189.9 - Others Total 2266.7 501.7 -76 .. 3 -24.1 2668.0 -654.7 -66.0 -114.2 1833.1 697.8 534.0 527.1 74.2 .-ae a 2 M$l TABLE 5-6 -ENERGY BALANCE FOR lEA PACIFIC -YEAR 1990 Millions of Metric Tons Oil Equivalent Domestic Production Imports Exports Bunkers Stock Changes TPE Requirements Electricity Manufactured Gas Petroleum Refinery Energy Sector and Losses TFC Industry Transportation Residential/Commercial, etc Non-Energy Use Solid Fuels 113.3 97.4 -50.3 150.4 58.5 -1.8 -14.4 75 .. 7 74.9 0.7 0.1 (Based on 1979 Review Submittal) Oil 27.1 348.2 -8.1 -22.5 344~7 -44.2 8.3 -2.8 -15.9 273.5 106.7 95.0 63.7 8.1 Gas 30.1 53.9 -6.0 78.0 -44.7 +7.3 -10.4 30.2 13.5 0.3 15.9 0.5 Nuclear 71.5 71.5 -71..5 Hydro7 Geothermal 42.9 42.9 -42.9 Source: International Energy Agency, 1980. tlec- tricity +94.5 -11.8 82.7 49.5 1.6 31.6 Others 10.7 26.6 -' 37.3 +0.6 37.9 26.2 6.5 5.2 Total 295.6 526.1 -74.4 -22.5 724.8 -167.3 -2.8 -2.8 -51.9 500.0 270.8 103.4 117.1 8.7 . ------------------- TABLE 5-7 -ENERGY BALANCE FOR lEA EUROPE -1990 Millions of Metric Tons Oil Equivalent Domestic Production Imports Exports Bunkers Stock Changes TPE Requirements Electricity Manufactured Gas Petroleulil Refinery Energy Sector and Losses TFC Industry Transportation Residential/Corrmercial, etc Non-Energy Use So 1 id Fuels 233.7 100.4 -19.7 0.5 314.9 176.4 -5.2 -16.5 116.8 87.2 0.1 28.9 0.6 (Based on 1979 Review Submittal) Oil 144.5 695.1 124.4 -37.1 -1.5 676.6 -77.7 -2.3 -30.4 -16.2 550.0 135.5 204.9 129.3 80.3 Gas 140.2 124.3 -44.5 220.0 -26.8 +7.3 -7.3 193.2 76.4 0.4 109.2 7.2 Nuclear 142.7 142.7 -142.7 RyC!ro/ Geothermal 83.1 83.1 Source: International Energy Agency, 1980. Elec- tricity 5 .. 9 3.4 2.5 +208.4 -0.3 -31.6 179.0 92.0 4.3 82.7 Others 10.2 10.2 -1.3 +0.4 9.3 1.2 0.3 7.8 Total 754.4 925.7 -192.0 -37.1 -1.0 1450.0 -299.6 0 .. 2 ~30.7 -71.2 1048.3 392.3 210.0 357.9 38.1 U1 I c..o I I 1 I I 1.'·"· '- 1 I J I J I . I I J I· I I I 5-11 Conmodity-specific trade balances confirm that oil and gas imports have been responsible for these energy trade deficits. Between 1960 and 1978, net oil and gas imports increased by 398 percent and 518 percent respectively. By 1978, these imports amounted to 8.3 million b/d of oil and 889 million Btu of natural gas. Projections to 1990 reflect a levelling-off in oil imports (at 8.3 million b/d) and a jump in gas imports to 1500 million Btu. These import requirements are optimistic as they are based on, among others, a rapidly expanding production of coal and nuclear power. The IEA pr·ojects that coal and nuclear power productions wi 11 rise at annual rates of 5.8 percent and 9.8 percent between 1978 and 1990.6 To the extent that infrastructure investments and environmental and other regulations slow these assumed rates of growth, the U.S. will be faced with an even lower degree of self-sufficiency in oil and gas by the year 1990. Demand in various end-use sectors is projected to grow at uneven rates. Electrical energy generation is forecast to grow at an annual rate of 3.6 percent, while demand in the industrial, transport, and building sectors increase at annual rates of 3.8 percent, 0.4 percent and 0.6 percent respectively. If the conservation measures expected and embodied in these forecasts are not realized, 1990 imports of oil and gas will exceed the projected figure of 9.0 million boe/d. Figures 5-lct '.\!.\ 5-2 show U.S. energy consumption patterns. 5.4 -U.S. Energy Price Forecasts Long-term forecasts of energy prices s,how a wide range of projected growth rates. However, a common element of several projections is the expectation that prices will increase in real (inflation-adjusted) terms. Table 5-9 summarizes 3 sets of forecasts (published between 1978 and 1980) relating to oil products, natural gas, coal and electricity. Median values for annual r·eal price increases over the next 15 to 30 years are as follows (Region 10 values are excluded):? 0 0 0 0 heavy fuel oil light fuel oil natural gas co a 1 3.3 percent 2.6 percent 4.0 percent 2.1 percent In comparison to these national median figure~, Region 10 prices of heavy fuel oil, gas and coal are forecast to escalate at annual rates of 4.3 percent, 4.0 percent and 2.9 percent according to recent Department of Ener9y pt~ojecti ons. 8 6By 1990, a trade surplus of 1.0 million boe/d is projected for coal. 7Region 10 includes Alaska, Idaho, Oregon and Washington. 80epartment of Energy, Office of Conservation and Solar Energy, 11 Methodology and Procedures for Life Cycle Cost Analysis", October 7, 1980. I I I I I I I I I I I I I I I I I I I c 0 --0. E :2 "' c 0 (.) -CQ -{:. 0 -c t%) 0 ... ~ D. 100~----------------------·------------~ 90 80 70 60 50 40 30 20 10 I I I I I ,' , ,, , 1860 1880 1900 1920 1940 1960 1990 Source: U.S. Bureau of Mines and Federal Energy Administration. ' THE UNITED STATES HAS SHIFTED TO DIFFERENT FUEL USE PATTERNS 5-12 FIGURE 5-l ,, .. -' .. • • ~~ ... ~ 0 .. .. • • • : Q. ' '. • • :J ---~ ,. • .. ~ <I , • ... . .. t ' . . ~ ft ~· _;----~ • t , ~ , ' I • ;o • , -• ~ , ,. ,000 Btu er Dollar GNP 71 70 69 68 67 66 65 64 63 62 61 ~ . ' ~· ! ' i-\ ' • -, ' ~ ' ._ ~ 1- f.- . -~ ' ' ' l . ' ~ ' \ \I Annual, 1947· -:'? - I I I I l\ I -.\ J ,_ I \ ~ ' Jr, I I \ \J ' I , \ \ I ~-• ' I ' _,-J "- Quarterly, 1973· With Moving Average ~ I I 1- i . I-I . '-- .65.3 .J ·-• 'I ~ J I r 1--1 ~ (~_ ) - \ ~ 1--60.4 lr-1'--..1 ~ ,. __ ......... i...-' . r--J ~ ' 1 _l f-I ' ~ .,. ..... ~' v _j j ~ I ~-' 55.0 ~ \7 J J I 1 ~ ) f-I 60 59 58 57 56 55 54 53 52 51 50 49 48 47 46 45 1-t-"4 u I u J ~ 1'-53.57 I ... I I u u I 1-I j ._ I I I 1-t 50.45 ~ I I f-I J . ...._ . ' . ' 1- I I I I l I I I I I I I I I I I I II I l 1 I 1 I l I-I I I I I I I I I I I I I ! I I I I I I I I i I I l I! I J J 1 l l J J .._ !1 "" ~ -.,._. ,.. :t ll1 ~ ,._ !31 ., 5Z .-t'f n :t ,n !f ,._ <10 en 0 ,.. N 1'""1 ow Ill 18 "' Ill en 0 1 11 1if iv I II t!j jy ~~~~~~~~~~~~~~~~~~~~~~~~~=~=~;~~;~ . 1 ti hi IV I •I •ii lv i II ••I iv I ., ~ii >~ 1 ii 1'1 •v i 1i ui •v -(:" .. ~ .............. -........ --... --.-..-.-----___ .. _____ ... __ Years 1973 1975 1976 1977 1~78 1979 1980 U.S. Energy/ GNP Ration. 1972 Do 'll a rs Source: U. S. Department of Energy, Energy Information Administration, Annual Report to Congress 1979, DOE/EIA-0173 (79)/3 Quarters November 1980 FIGURE 5-2 (J"J I ..._.. w - .... Q) c. :I +-1 Dl c 0 ·---·-.... "tJ ro :I a - 160l 120- 80- 40- .. Supply Consumption 1978 Supply ' , , ' .. .. , ~ . , \ , , \ 2000 .. .. .. Supply Supply '-.: .. .. - Consumption ... , ,. til II .. .. Comparison of Total Primary Energ,y Supply and End-Use Consumption .. - Legend ~Other liD ,Nuclear 0 Electric 1m Oil ~Gas 1il Coal Source: U. S~ Department of Energy, Energy Information Administration, Annual Report to· Congress 1979, DOE/EIA-0173 {79)/3 FIGURE 5-3 --.. I ' ' -~---------------~- .... ro Q) 100 80 >-60 .... Q) Percent Share 19 Electricity 15 a. ::J • t 21 . . . . ..... .-:·:~:-;.::,::,:~~~~ .. ·.:·.·,~~:·.··:·.····~····~··'·~····· ~ m c 0 ·---·~ "'0 40 co :J 0 20 ~~·~~.NVJ~.~.~~'~A~~~- 1960 1970 1980 1990 2000 U.S. END-USE ENERGY CONSUMPTION BY FUEL Source: U. S. Department of Energy, Energy Information Administration, Annua 1 Report to Congress 1979, DOE/EIA-0173 ( 79 )/3 I 2010 2020 . r-.. -'- FIGURE 5.· U1 I ....... U1 --.. .. .. 100 Percent Share· "' 80 '-lO CD >-60 '- CD c. :l ..., co c: 0 ·---·-40 '- "0 ro :J 0 20- 1960 1970 1980 1990 2000 U.S. Energy Demand by Consuming Sector I Source: U. S. Department of Energy, Energy Information Administration, Annual Report to Congress 1979, DOE/EIA-0173 (79}/3 -' . - --- 2010 2020 FIGURE 5-5 :J +J Ol c 0 ·--_, ·-· ... "'0 ro :I d :l ..., 00 c 0 'iO 60 E 25 ·-t... "'0 co :J d·· 1960 ._" ... ... 1960 Residential Commercial 10 1980 2000 2020 1aso 1980 2060 Industrial Transportation 25 1980 2000 2020 1960 1980 2000 End.;Usa Energy Consumption by Sector and Fuel Source: U. S. Department of' Energy, Energy Information Administration, Annual Report to Congress 1979, DOE/EIA-0173 (79)/3 2029 2020 legend · fJ Othsr [J Coal ~ Natural Gas fll Oil EJ Eiectricity FIGURE 5-6 01 ' ....... ""-J, I . .'. ·: < I I I I I I I I I I I I I I I ll I I TABLE 5-9 -PROJECTIONS OF REAL {INFLATION ADJUSTED) RATES OF GROWTH IN U.S. ENERGY PRICES 1. Oil Prices Heavy Fuel Oil -NASl -EIA2 -DOE ( U. S • ) 3 -DOE (Region 10)3 JJ ght Fue 1 Oi 1 -NAS1 -EIA2 2. Natural Gas Prices -NAS1 -EIA2 -DOE ( U. S • ) 3 -DOE (Region 10)3 3. Coal -NASl -EIA2 -DOE ( U • S . ) 3 -DOE (Region 10)3 4. ElectYicity -NASl -residential ,.. commercia 1 -industrial Growth Rat.e/Yr. of Real Prices (%) -1.5, 0, 2.5, 4.6 3.3 to 4.0 4.1 4.3 -1.5, 0, 2.5 to 4.6 2.6 to 3.2 1.0, 2.5, 5.1, 7.2 4.0 3.9 4.0 -1.0, 0, 2.0, 4.0 2.1 3.9 2.9 -1.2 to 3.5 -1.2 to 3.5 -1.2 to 3.5 -EIA2 -residential 0.7 -commercial 0.7 -industrial 1.2 5-18 1National Academy of Sciences (1978) ~ Growth rates apply to prices paid by utilities and industry in the period 1975 to 2010. 2Energy Information Agency (1979). Growth rates apply to prices in the industrial sector between 1978 and 2010. 3Department of Energy, Office of Conservation and Solar Energy, Federal Register, October 7, 1980. Growth rates apply to prices in the industrial sector over the period 1980 to 1995. I I I I I .I I I ~.~ . ~ ' ' ··' I I I I I I I . - 1-. . I I J I 5-19 Base period (1980) prices for these projections were established for the U.S. and R~egi on 10 as fo 11 ows: Heavy fuel oil Natural. gas Coal 1980 Price u.s. 6.93 3.58 1.46 5.5 -Alaskan Prospects for Economic Growth 5.5.1 -ISER Assumptions ($/million Btu) Region 10 6.55 4.89 1.55 This section describes economic growtn scenarios assumed by the Institute of Social and Economic Research (ISER) of the Univer-sity of Alaska in a recent study of future electricity demand in the Railbelt. The scenarios reflect different assumptions on future employment and output for basic sector industries such as mining, manufacturing, agriculture (forestry, fisheries), federal government, exogenou~ construction and exogenous transportation to define high, moderate and low economic growth. In defining these scenarios..-, special projects and other economic eve~ts expected to occur prior to 2000 were ident·ified. The following is a brief description of the timing and nature of future projects assumed for each scenario. (a) Low Economic Growth Scenario (Table 5-10) Population and employment grow at annual rates of 2a1 percent &nd 2.3 percent respectively. Low growth assumes the following events to take place for each of the exogenous industries. (i) Mining (Employment drops by 0.3 percent per year 1980 -2000) -- Prudhoe Bay Petroleum Production -Production from the Sadlerochit formation and Kaparu~ormation is assumed. Construction of project will take place during 1982 to 1984 with peak emplo,yment of 2917 in 1983. Mining employment for 1980 to 2000 assumes a long run average of 1802 per year. Upper Cook Inlet Petroleum Production -Declining oil production will 6e replaced by rising gas product1on to maintain current levels of employment. Employment for 1980 to 2000 will be 705 workers per year. Other Mini!l[ -Reduction in mining employment as a result of land policy or world market conditions. Employment to decline at 1 percent per year from present levels. ,., ... ,.~,. AW -lQJJ RJI fiJI •• .. .. .. -ll.lL • -· TABLE 5-10 -ISER LOW ECONOMIC GROWTH -MEDIUM GOVERNMENT EXPENDITURE SCENARIO EMPLOYMENT (Thousands) .. ' --·-.... - --~----------------------~--------------------------------------------------~ 1980 1990 2000 Percent change per year 1980-2000 Population 421.7 511.6 635.6 2.07 Total 210.1 254.5 332a3 2.32 Mining 5.1 5.0 4.8 -0.30 Exogenous Transpor- t at ion 1.5 1.7 1.7 0.63 *Figures denote cumulative employment over the 10-year periods 1981-1990 and 1991-2000. Manufac- turing 12.5 15.8 18.8 2 .. 06 Exogenous Construc- tion 19.9* 0* N.A. Federal Govern- ment 43.2 44.4 45.4 0.25 Agriculture -Forestry -Fisheries 1.2 1.1 1.0 -0.91 0'- i N 0 I I I ' I I I I ,I I I I I I I ( I I I I I (ii) Agriculture (Forestry, Fisheries) (Employment drops by 0.9 percent per year) 5-21 Agriculture -Unfavorable conditions for agricultural development occur. Agriculture disappears in Alaska by 1992. Forestry -This is a small component and is discussed under manufacturing industry. Fisheries -Existing fishery is maintained but no bottom fish development occurs. Emplo~nent to remain at 1000 per year. (iii) Manufacturing (Employment grows by 2.1 percent per year) Seafood Processina -Moderate growth in seafood processing to accommodate expan ing catch in existing fisheries. A 22 percent increase is assumed during 1980 to 2000. Lumber-Wood Products-Pulp -Japanese market conditions and the Forest Service allowable annual cut increases employment levels to accorrrnodate product ion of 960 mi 11 ion board feet of 1 umber. Petrochemicals -Current developments in Kenai to continue. No expans1on 1s expected. Other Manufacturing -Extension of existing production for local markets 1s assumed. Output will grow at 1 percent per year. (iv) Federal Government Civilian employment assumed to grow at 0.25 percent per year while military wi 11 stay constant. (v) Exogenous Construction This portion of the industry is that which serves special projects. Cumulative employment drops from total of 20,000 (1980 to 1990) to zero (1990 to 2000). TransAlaska Pipeline-Although completed in 1977, additional construction of four pump stations is assumed. Construction will be completed by 1982 with employment for 90 workers annually. Pipeline operations will also employ 1000 people annually during the forecast period. Northwest Gas Line -Construction of natural gas pipeline from Prudhoe Bay and an associated gas facility on the North Slope from 1981 to 1985 with peak employment of 7823 in 1983. Operations w·ill begin in 1986 continuing to 2000 with employment for 400 petroleum workers and 200 transport workers. i _j I ' I I I I I I I I ' I I I I I I ,f ' j ' I j l ~ ~ (b) 5-.22 (vi) Exogenous r~an~portation This portion of transportation is that which serves special construction projects. These are TransAlaska Pipeline and Northwest Gas line. Only the operations employment is included as exogenous transportation -this grows from 1500 to 1700 between 1980 to 1990. Moderate Economic Growth Scenario (Table 5-11) This scenario reflects a f~ster growth rate than the low scenario. Population and employment grow at annual rates of 2.6 percent and 2.9 percent respectively. The economic events envisaged to take place during 1980 to 2000 are described. (i) Mining (Employment grows by 2.3 percent per year) Prudhoe Bay Petroleum Production -Same as in Low Growth Scenario. Upper Cook Inlet Petroleum Production -Same as in Low Growth Scenario. National Petroleum Reserve in Alaska Petroleum Production -Petroleum production in two fields with 1.2 billion barrels equivalent of oil and gas. Leased between 1995 and 2013, development will begin in 1998. Average mining employment of 286 a year from 1998 to 2000. Outer Continental Shelf Petroleum Production -Production in six OCS lease sale areas with mining employment peaking at 4900 workers in 1990. Beluga Coal Production -Moderate development of coal for export. Operations employment of 210 per year from 1988 to 2000. Other Mining -No expansion is assumed. Employment will stay constant at current 1 evel of 2350 per year. (ii) Agriculture-Forestry-Fisheries (Employment grows by 2.9 percent per year) Agriculture -Low development because of priorities to recreation or lack of markets. Employment grows to 1037 by 2000. Forestry -Discussed in manufacturing sector. Fisheries -Existing fishery maintained. Bottom-fishery expands. Employment increases to 1228 by 2000. I I "I I I I I I I I I I Iii tJ .. --- 1980 1990 2000 Percent change per year 1980-2000 ... - Population 421.7 548.0 700.1 2.57 .. -M: -< .. .] .. .. .. I!.JII;r TABLE 5-11 -ISER MEDIUM ECONOMIC GROWTH -MEDIUM GOVERNMENT EXPENDITURE SCENARIO Total 210.1 280.8 371.5 2.89 Mining 5.1 6.5 8.1 2.34 EMPLOYMENT (Thousands) Exogenous Transpor- tation 1.51 2.3 2.6 2.79 Manufac- turing 13.3 19.4 24.3 3.06 Exogenous Construc- tion 31.8* 10.1* N .A. *Figures denote cumulative employment over the 10-year periods 1981-1990 and 1991-2000. -,_. Federal Govern- ment 43.2 44.4 45.4 0.25 -- Agriculture -Forestry -Fisheries 1.3 1.7 2.3 2.89 - 01 ' N w :i I .I I ' I l I 1 (iii) Manufacturing ( Emp 1 oyrnent grows by 3.1 percent per year) 5-24 Seafood Processing -Expansion of existing fisheries and bottom-fishery leads to increased output for existing fisheries by 149 percent and bottom-fishery by 49 percent between 1980 and 2000. Lumber-Wood Products-Pulp -Same as in low scenario. Petrochemicals -Expansion takes place with the development of Pacific LNG facility, fuels refinery in the Alpetco project and LNG facilities associated with OCS activity in Western Alaska. The Alpetco and Pacific LNG projects will create operations employment of 518 per year starting in 1985 and 100 per year starting in 1986 respectively. Other Manufacturinq -Expansion of manufacturing of locally consumed goods. Output will increase at 2 percent per year. (iv) Federal Government Same growth as in low scenario. (v) Exogenous Construction Cumulative employment drops from 31,800 (1980 to 1990) to 10,000 (1990 to 2000). Northwest Gas Line -Same as low scenario. Alpetco Project -Construction employment of 600 per year from 1982 to 1984. Pacific LNG Project -Construction period from 1982 to 1984 with peak employment of 1323 per year in 1984. Outer Continental Shelf Petroleum Production -Construction employment will peak at 3300 workers in 1992. National Petroleum Reserve in Alaska -Construction employment is mentioned but no figures given. ._. Beluga Coal Production -Construction period from 1985 to 1990 with peak employment of 400 in 1987. (vi) Exogenous Transportation As in the low scenario, this sector included the operations employment for TransAlaska Pipeline and Northwest Gas Line. In addition, transportation employment in OCS petroleum development is also included. Employment is projected to increase from 1500 to 2600 between 1980 and 2000. I ,I I I I I I ll I I ,, I I .I J m I . . ' ~ I ~ i ___ } I I I I . I . I. I I I I I I I I I I' I li I 5-25 (c) High Economic Growth Scenario (Table 5-12) This scenario represents the fastest rate of economic growth, as greater economic expansion in the state is envisaged. Forecast growth rates of population and employment are 3.5 percent per year and 3.9 percent per year respectively. The nature and timing of economic events are described. (i) Mining (Employment grows by 5.4 percent per y~ar) Prudhoe Bay Petroleum Production -Same as low and medium scenario . Upper Cook Inlet Petroleum Production -Same as low and medium scenar1o. National Petroleum Reserve in Alaska -Production in five fields with a total reserve of 2.5 million barrels equivalent of oil and gas. Project will begin 1985 with average mining employment of 460 per year. Outer Continental Shelf Petroleum Production -Production in eleven OCS lease sale areas with different startup dates beginning in 1979. Mining employment will peak at 9066 per year in 2000. Beluga Coal Production -Major development of Beluga coal for export during l988 to 2000 with mining employment of 379 per year. U.S. Borax Mining -Development and exploration begins in 1980. MRning development of 440 per year begins in 1993. Other Mining -Other mining opportunities expand with employment growing at 1 percent per year. (ii) Agriculture-Forestry-Fisheries (Employment grows by 8 percent per year) Agriculture -Major development of agriculture in Alaska. Employment reaches 4600 by 2000. Forestry -Discussed in manufacturing sector. Fisheries -Level of employment in existing fisheries maintained. Major development of bottom-fishery. Employment in fisheries increases to 1350 by 2000. (iii) Manufacturing (Employment grows by 4.5 percent per year) Seafood Processing -Because of expansion in fisheries, seafood processing industry will increase output by 157 percent between 1980 and 2000. 1980 2000 Percent change per year 1980-2000 Population 421.7 615.0 831.0 3.45 TABLE 5-12 -ISER HIGH ECONOMIC GROWTH -MEDIUM GOVERNMENT EXPENDITURE SCENARIO Total 210.1 330.5 454.7 3.94 Mining 5.1 9.9 14.6 5.4 EMPLOYMENT (Thousands) Exogenous Transpor- t at ion 1.5 2.7 3.8 4.76 Manufac- turing 13.4 23.6 32.0 4.45 Exogeno.us Construc- tion 60.9* 37.3* N.A. *Figures denote cumulative employment over the 10-year periods 1981-1990 and 1991-2000. -:-- Federal Govern- ment 43.2 45.1 47.3 0.45 .. Agriculture -Forestry -Fisheries 1.3 2 .. 1 6.0 01 ' N m f~ .-:. IJ I' (' I I ·I' I I I I I I I. I I I I I 5-27 Lumber-Wood Products-Pulp -Due to favorable markets and increased annual allowable cut, employment expands to accommodate an annual cut of approximately 1.3 billion board feet by 2000. Petrochemicals -Two petrochemical projects over and above that deBcribed in medium scenario are included. The first is a moderate petrochemi ca 1 fac i 1 ity at Fairbanks employing 600 workers per year between 1987 and 2000. The second is a major deve1opment of the Alpetco pt'oject employing 1925 workers per year between 1987 and 2000. Other Manufacturing -Output in other manufacturing increases at 3 percent per year to serve local markets. (iv) Federal Government Civilian federal government employment grows at 1 percent per year. Military employment remains constant. (v) Exogenous Construction (vi) Cumulative employment drops from 60,900 (1980 to 1990) to 37,000 {1990 to 2000). Northwest Gas Line -Same as low and medium scenarios. Alpetco Project -Major development increases construction activity from 1982 to 1986. Constr·uction employment will peak at 3500 per year. Pacific NLG -Same as medium scenari0. Outer Continental Shelf Petroleum Production -Increased development requires construction employment to peak at 53,000 per year in 1992. National Petroleum Reserve -Construction employment increases because of increased development. Beluga Coal Production -Construction will peak employment of 400 in 1987. State Capital Move -The movement of the state capital to Willow will begin in 1983 and be completed in 1996. C<.'~struction employment will reach a peak of 1560 per year in 1990. Exogenous Transportation -Employment in exogenous transportation is higher than the med1 urn scenario. The increase is attributed to expansion of OCS in eleven lease sale areas resulting in an annual growth rate of 4.8 percent in employment. I ~ I -, '1 I ' I ·' I l 1 I I I I I I I ' 1 ! ~ 5-28 (d) Low Economic Growth and (e) Low Government ExpendTfures (Table 5-13) Population and total employment are projected to grow by 1o6 percent per year between 1980 and 2000. TABLE 5-13 -ISER LOW EONOMIC GROWTH GOVERNMENT EXPENDITURE SCENARIO Year 1980 1990 2000 Percent change per year 1980 -2000 High Economic Growth and Population (Thousands) 421.7 490.3 574.2 1.56 High Government Expenditure (Table 5-14) Total Employment (Thousands) 210.1 238.2 287.8 1.59 Population and total employment are projected to grow at annual rates of 3.9 percent and 4.5 percent respectively from 1980 to 2000. The five alternative scenaric.,s and associated population and employment growth rates are summarized below: Scenario 1. Low Economic Growth- Medium Government Expenditure 2. Medium Economic Growth- Medium Government Expenditure 3. High Economic Growth- Medium Government Expenditure 4. Low Economic Growth- Low Government Expenditure 5. High Economic Growth- High Government -Expenditure Annual Growth Rate (Percent) Population Employment 2.1 2.3 2.6 2.9 3.5 3.9 1.6 1.6 3.9 4.5 I ' . I I I I I I I I I I I I .. I I I f I I .1~' t f· 1: ,., I.;) ' ,-, I, I· I' I I I_ I I· I· I I I Year 1980 1990 2000 Percent change TABLE 5-14 -ISER HIGH ECONOMIC GROWTH HIGH GOVERNMENT EXPENDITURE SCENARIO Population Total Emplo}ment 421.7 645.3 908.4 210.1 354.5 510.3 4.54 per year 1980 -2000 5.5.2 -Demographics 5-29 Between 1970 and 1977, Alaska's population grew by 4.5 percent per year to 411,200. As shown in Table 5.15, population growth was not distributed evenly across regions. The southcentral region accounted for over 80 percent of the population increase with an annual growth rate of 6.4 percent. Its share of Alaska's inhabitants rose from 54 percent to 62 percent. In contrast, the interior region's population grew by only 0.4 percent per year and its share of state population declined from 19 percent to 14 percent. Medium-term forecasts of total population reflect growth rates below recent historical trends. In three forecasts examined, the base case projections indicated annual increases of 2.7 percent, 3.6 percent and 3.7 percent.9 ISER has also developed high-and low-growth scenarios with annual population increases of 5.5 percent and 2.1 percent between 1980 and 1985. Long-term forecasts have been produced only by ISER. For the period 1980 to 2000, ISER has projected annual growth rates of 2.1 percent (low case), 2.6 percent (medium case), and 3.9 percent (high case). (These increases apply equally to the State and the Railbelt.) Even the high growth rate is over 13 percent below the historical pattern of the 1970's. 5.5.3 -Employment (a) Historical Trends -Between 1960 and 1977 employment in Alaska advanced at an annual ra~e of 6.5 percent. As shown in Table 5.16, there was a significant variation in industry-specific growth rates in the historical period. In particular, the mining services, local government and finance, insurance and real estate sectors grew by over 9 percent per year. Employment growth was slowest in the manufacturing and Federal Government sectors, with annual increases of less than 5 percent. 9These growth rates were forecast by the Division of Economic Enterprise, ISER, and the Department of Labor, respectively. TABLE 5-15 -ALASKA'S POPULATION BY REGION 1970-1977 ~J Year Total Alaska Southeast Southcentra 1 Southwest Interior 1970 302,173 42,565 163,792 26,491 1971 312,930 43,349 174,609 26,650 1972 324,281 44,772 182,954 26,765 1973 330,365 46,417 188,698 26,040 1974 351,159 50,232 194,569 28,165 1975 404,634 50,374 229,492 28,492 1976 413,289 51,172 244,056 28,448 1977 411,211 52,162 252,836 26,512 Southeast includes: Angoon, Haines, Juneau, Kitchikan, Outer Ketchikan, Price of Wales, Sitka, Skagway-Yakutat, and Wrangell-Petersburg Census Divisions. Southcentral II Southwest II Anchorage, Cordova-McCarthy, Kanai-Cook Inlet, Kodiak, IVlatanuska- Susitna, Seward, and Valdez-Chitina-Whittier Census Division. A 1 eut ian Is 1 and s, Be the 1 , Bri sto 1 Bay Bora ugh, Bri sto 1 Bay, Wade Hampton, and Kuskokhwim Census Divisions. 56,479 54,977 56,797 56,593 63,151 78,614 68,572 58,208 Interior II Fairbanks, Southeast iairbanks, Upper Yukon and Yukon -Koyukuk Census Divisions. Northwest II Barrowo Kobuk and Nome Census Divisions. Source: The Alaska Economy Year End Performance Report 1978, Division of Economic Enterprise, Department of Commerce and Economic Development. Northwest 12,846 13,345 12,993 12,617 15,042 17,662 21,041 20,493 ~ ~ ._ lsw -........ --.. • .. -•... ,. til I w 0 --- TABLE 5-16 -STATE EMPLOYMENT GROWTH BY INDUSTRY Annual Growth Rates (percent) Manufacturing Mining Contract Construction Transportation, Com- munications and Public Utilities Wholesale and Retail Trade Finance, Insurance and Real Estate Services Government -Federal -State -Local Total Employment 19601 1977 3.8 9.3 7.3 5.0 8.0 10.6 9.8 4.8 0.8 7.8 11.1 6.5 4.3 13.1 9.2 4.5 3.6 7.1 4.5 3.0 0.9 4.6 1980-85 LABM00 3 ISER 4 Medium 6~0 5.1 11.6 1.1 6.1 6.4 6.3 7.6 7.6 4.1 0.3 6.1 4.6 ISE~ Low 2.7 0.2 0.3 3.0 ISER 4 High 5.6 3.2 0.4 6.8 1980-2000 ISER · 4 Medium 3.1 2.3 0.3 2.9 ISE~ Low 2.1 0.3 0.3 2.3 lAlaska Division of Economic Enterprise, The Alaska Econom·ic Information and Reporting System, July 1980. Figures exclude agriculture, forestry and fishing industries. 2The Alaska Economy Year-end Performance Report 1978. Figures exclude agriculture, forestry and fishing. 3Alaska's Economic Outlook to 1985, Department of Labor. LABMOD model excludes agriculture, forestry and fishing. 4S. Goldsmith and L. Huskey, June 1980. Includes agriculture, forestry and fishing. ISER 4 High 4.5 5.4 0.5 3.9 , r,..t:: ·~. ,. : ........ ' " '~ .... . ' ~ . ~ ~ '}. } I I I I 1- I I I I I I I I I I I I I i -' 5-32 More recently, between 1970 and 1977, employment rose by 8.5 percent per year. The regional breakdown of employment levels is shown in Table 5.17. Above-average growth rates were experienced in southcentral Alaska (10 .. 6 percent), Anchorage (9.2 percent), northwest Alaska (9.2 percent), and northcentral Alaska (8.9 percent). Below-average rates of employment were registered in the southwest Alaska (6.4 percent) and southeast Alaska ( 4 .. 8 percent) . The share of total employment held by various industries shows the predominance of the government, wholesale/retail trade and service sectors. These sectors provided 69 percent and 675 percent of all non-agricultural jobs in 1973 and 1978 respectively. In the same period, manufacturing industries declined in importance as their share of state employment dropped from 8.5 percent to 7.1 percent. (b) Forecast Trends Medium-term employment forecasts to 1985 have been developed by the Alaska Division of Economic Enterprise, (AEIRS model), the Department of Labor (LABMOD model) and ISER (MAP model) as shown in Table 5.16. In the respective base case forecasts, employment growth rates per year are consistently below the historical trends. LABMOD projections point to 6.1 percent while AEIRS and MAP show 4.6 percent growth. The most significant differences relate to growth in the mining sector where MAP predicts 1.1 percent annual growth while the other forecasts call for 13 percent and 12 percent increase per year. For the long-term horizon extending to 2000, only the ISER forecasts are available. As these are discussed in detail in Chapter 6, only a brief summary is provided at this time. The most significant feature of the ISER forecasts is the decelerated employment growth. In the medium case, employment rises at 2.9 percent per year from 1980 to 2000, or at one-third and two-thirds of the growth rates in the periods 1970 to 1977 and 1980 to 1985 respectively. Manufa~turing empl~yment also exhibits a substantial slowdown in growth with a long-term annual rate projected at 3.1 percent. 5.5.4 -General Price Inflation Despite the fact that the levels of prices are generally higher in Alaska than in the lower 48, there is little difference in the comparative rates of price changes; i.e., price inflation. Between 1970 and 1978, for example, the U.S. and Anchorage consumer price indexes rose at annual rates of 6.9 percent and 7.1 percent respectively. From 1977 to 1978, the differential is even smaller: consumer prices increased by 8.8 percent and 8.7 percent in the U.S. and Anchorage. I I I I I I I I I I I I I I I P:l ),Jl L I!!!I!!IMI'III!IIIIIIIII .... RI------- CETA Region Region I Southeast Alaska Region II Northcentral Alaska Region III Northwest Alaska Region IV Southwest Alaska Region V Southcentral Alaska Anchorage Statewide TABLE 5-17 -ANNUAL AVERAGE NONAGRICULTURAL WAGE ·AND SALARY EMPLOYMENT BY CETA REGION 1970 1971 1972 1973 1974 16,710 17,393 19,415 20,423 21,676 18,138 17,882 18,768 18,750 26,146 1,579 1,749 2,088 2,297 2,264 2,909 2,931 3,141 3,601 3,637 11,136 12,179 12,579 14,153 15,743 41,995 45,452 48,252 50,267 58,713 92,467 9?,586 104,243 109,851 128,179 Source: Alaska Department of Labor, Alaska Annual Planning Information, fY, 1980, Aug. 1979. 1975 1976 22,279 22,836 41,763 42,109 2,746 2,952 4,368 4,475 20,505 25,836 70,028 73,733 161,689 171,941 -IMI 1977 23,251 33,048 2,923 4,504 22,540 77,858 164,124 U1 I w w I I I I I I ' ' I • ~ 5-34 Forecasts of Alaskan prices extend only to 1986.10 These indicate an average rate of increase of 8.7 percent from 1980 to 1986. For the longer period between 1986 and 2010, it is assumed that Alaskan prices will escalate at the overall U.S. rate, or at 5 to 7 percent compounded annually. The average annual rate of price inflation is therefo~"e about 5.7 percent to 7a3 percent between 1980 and 2010. A base case value of 7 percent is selected as the appropriate rate of price inflation for the period 1980 to 2010~ Sensitivity and risk analyses will, of course, test the impacts of higher and lower rates of price inflation. These upper and lower bounds will be established in the near future on the basis of discussions with several econometricians engaged in long-term forecasting. 5.5.5 -Government Oil and Gas Revenues Recent projections indicate that Alaska's oil and gas production revenues will rise from $1.4 billion in 1980 to $10.6 billion in 1991, and fall to $7.5 billion by 1996.11 The cumulative government revenues from oil and gas production amount to $126"2 billion between 1980 and 1996. These forecasts are based on declining oil production fuld increasing gas production in the North Slope and Cook Inlet regions. The Alcan pipeline is assumed to be built with deliveries corrmencing in 1985. The production volumes of oi 1 and gas and total government taxes and royalties are shown in Table 5-18. State government revenues comprise oil and gas production taxes, oil and gas royalties, and oil conservation taxes. These component revenues are shown in Table 5-19 for the period 1980 to 1996. Assuming a 25 percent contribution to the State Permanent Fund from oil and gas royalties, the Fund would be increased by $18.6 billion between 1980 and 1996. Table 5-20 provides details of the annual and cumulative contributions to the Fund. 10see Alaska Division of Economic Enterprise, the Alaska Economic Information and Reporting System, July 1980. 11Alaska Department of Revenue -Petroleum Revenue Division, Petroleum Production Revenue Forecast, Quarterly Report, September 1980. 11 r:l I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I II I u TABLE 5-18 -OIL AND GAS PRODUCTION AND GOVERNMENT REVENUES IN ALASKA 5-35 1980 1996 Total (1980 to 1996) North Slope Oil Production (MMB/D) Gas Production (Bcf/D) Oil and Gas Taxes and Royalties (billion $) Cook Inlet Oil Production (MMB/D) Gas Production (Bcf/D) Oil and Gas Taxes and Royalties (billion $) Totals Oil Production (MMB/D) Gas Production (Bdf/D) Oil and Gas Taxes and Royalties (billion$) 1.452 0 1 .. 37 0.106 0.517 0.06 1.558 0.517 1.43 G.633 2.01 7.32 123.9 0.014 0.617 0.14 2.3 0.647 2.617 7.46 126.2 1 It is assumed that the Alcan pipeline would be built and that gas would be delivered commencing in 1985. Source: Petroleum Revenue Forecast, Quarterly Report, September, 1980. TABLE 5-19. PETROLEUM PRODUCTION REVENUE FORECAST (Average Expected Va 1 ues in Mi 11 ions of Don ars) Prudhoe Bay Cook Inlet Year OPT GPT 0 ROY 1980 476.51 0.92 891.30 1981 1154.64 1.04 1457.21 1982 1714.25 1.05 2263.92 1983 2061.69 1.06 2817.04 1984 2370.00 1 .. 08 3300.70 1985 2761.18 6.81 3853.97 1986 3067.73 14.03 4283.80 1987 3404.44 26.52 4754.95 1988 3752.98 43 .. 84 5238.66 1989 4121.95 54.14 5701.29 1990 4300.97 56.05 5939.27 1991 4328.65 57.64 5993.59 1992 4067.71 59.11 5704.79 1993 383L.72 60.47 5440.20 1994 3455.92 61.41 5006.22 1995 3125.79 62.30 4620.86 1996 2853.56 62.64 4302.14 OPT = Oil Production Taxes GPT = Gag Production Taxes 0 ROY·= Oil Royalties G Roy = Gas Royalties OCT =Oil Conservation Taxes G ROY OCT Total OPT 1.39 0.57 1370.69 12.12 1.58 0.60 2615.07 16.15 1.64 0.61 3981.48 24.41 1.69 0.61 4882.0~ 28.80 1.74 0 .. 61 5674.12 32.16 10.98 0 .. 61 6633.54 24.80 22.63 0.60 7388.79 19.89 42.75 0.60 8229.27 15.04 70.68 0.60 9106.77 10.35 86.75 0.60 9964.72 6.00 89.66 0.57 10386.50 2.31 92.34 0.52 10472.74 0.03 95.46 0.46 9927.52 0.0 98.37 0.40 9431.16 0.0 101.27 0.34 8625.16 0.0 104.17 0.29 7913.40 0.0 106~23 0.25 7324.82 0.0 Source: Petroleum Revenue Forecast, Quarterly Report, September, 1980. GPT 0 ROY G ROY 9.88 29.95 5.95 11.02 36.44 7.19 11.91 81.32 8.03 12.19 96.12 9.54 12.95 116.90 10.79 18.32 114.84 16.33 19.25 113.19 17.09 19.62 111.67 17.63 19.72 107.76 18.53 20.11 104.38 19.15 21.07 99.72 20.08 21.46 95.99 20.70 22.32 91.42 21.50 21.47 87.29 22.12 22.37 83.53 22.95 22.80 37.76 23.64 22.80 92.79 23.64 OCT Total 0.04 57.94 0.04 70.84 0.03 126~70 0.03 146.68 0.02 172.82 0.02 174.31 0.02 169.44 0.02 163.98 0.01 156.37 0.01 149.65 0.01 143.19 0.01 138.19 0.01 135.24 0.01 130.89 Oc01 128.86 0.01 134.21 0.01 139.23 Statewide Total 1428.63 2685.90 4108.18 5028.77 5846.95 6807.85 7558.23 8393.25 9263.13 10114.37 10529.68 10610.93 10062.76 9562.05 8754.02 8047.61 7464.05 01 I w O'l I I I I I I I I I I I II II ll II D u u u TABLE 5-20 -PROJECTED STATE OF ALASKA PERMANENT FUND CONTRIBUTIONS FOR FY 1980-FY 1996 ASSUMING A 25% CONTRIBUTION RATE (In Millions of Current Dollars) 5-37 Fiscal Year Annual Contribution Cumulative Contribution 1980 232 .. 15 370.46* 1981 375.61 746.07 1982 588.73 1334.80 1983 731.10 2065.90 1984 857.53 2923.43 1985 999.03 3922.46 1986 1109.18 5031.64 1987 1231.75 6263.39 1988 1358.91 7622.30 1989 1477.89 9100.19 1990 1537.18 10637.37 1991 1550.65 12188.02 1992· 1478.29 13666.31 1993 1411.99 15078.30 1994 1303.49 16381.79 1995 1209.11 17590.90 1996 1131.20 18722.10 * The balance in the Permanent Fund as of June 30, 1979 is assumed to be $138.31 million. Source: Petroleum Revenue Forecast, Quarterly Report, September 1980. { I I • I I • I I I 11 II ll ll 11 ll 0 ~ ·~ 5.6 -Forecasts of Energy Prices in Alaska It is proposed in this study that energy prices in Alaska be estimated at opportunity costs of comparable energy fuels in the world market. In this section forecasts of market prices will be discussed first, then concepts and development of energy shadow prices. The shadow prices are defined as the opportunity costs of energy fuels produced in Alaska. 5.6.1 -Forecasts of Market Prices 5-38 Forecasts of market prices of oil and gas produced in Alaska were made in the Quarterly Report of 11 Petroleum Production Revenue Forecasts,11 issued in March 1980 (Reference 1). Over the 17-year forecast period, weighted average prices for Prudhoe Bay type crude were forcasted to rise from $22.14/B in FY 1980 to $28.32/B in FY 1981, and to $146.43/B in FY 1996. Free market prices for Cook Inlet Oil were forecasted to incr·ease from $22.50/B in July FY 1980 to $150.22/B in FY 1996. This represents roughly a 12.5 percent average per annum increase for both cases. The ceiling price of Prudhoe Bay gas as of December 1978, under the interim rules of the Natural Gas Policy Act of 1978, was estimated at $1.63 per MMBtu or $1.78 per Mcf (assuming a heat rate of 1.092 MMBtu per Mcf). Under the lowest expected rate of inflation, price of Prudhoe Bay gas was estimated to be at least $2.25 per Mcf by FY 1985 (the earliest date forecasted for production or throughput along an Alcan route for a gas pipeline). Cook Inlet gas prices were adjusted according to contract escalation agreements and wet"e inflated at an annua 1 rate approximating the rate of inflation after the termination of contracts. Gas prices not subject to contractual agreements were estalated one penny per quarter in accordance with the Federal Power Commission's Opinion 770. 5.6.2 -Concepts and Development o.f Energy Shadow Prices The concepts of shadow prices or opportunity costs of goods were introduced when the local market prices would not represent real values of those goods. The market prices of energy in Alaska and in the international market were reviewed and opportunity costs were develpped in this study. Table 5-21 lists current (1980) fuel prices in the Railbelt Region from different references reviewed from this study. I I I I I I I I I I I I ~ l l \ !'.-! (1 ti ~ I I I I I I I I IJ ll 11 11 ll ll ll ll ll u n 5-39 Limited use of coal in the Railbelt exists at present. The Usibelli Coal Company mines Nenana coal at a facility located in Healy that produces approximately 0.7 million tons/year. This coal represents the only major commercial coal operation in Alaska. The coal is trucked several miles from the mine site to a 25 MW power plant owned and operated by the Golden Valley Electric Association (GVEA) at Healy, where the delivered cost is $1.25/MMBtu. The Nenana coal is also trucked to a railway spur loading station at Suntana 8-1/2 miles away for tro!lsport to Fairbanks (111 miles). The Chena Station (4 units, total capacity 29 MW) is owned by Fairbanks Municipal Utility System (FMUS) and uses this coal at an increased cost of approximately $0.34/MMBtu for transportation costs tarrifs bringing the price for FMUS to $1.40/MMBtu. Interest in expansion of production of the Nenana coal field has been expressed. Potential export markets for Beluga coal include: Lower 48; California and Pacific Northwest markets and Japan. The average market price for coal in the Pacific Northwest and California region, as reported in June, 1980 to the U.S. Department of Energy, ranged from $1.46/MMBtu to $1.55/MMBtu which is slightly higher than the average U.S. price. The costs for transporting a Beluga mined coal to the Pacific Northwest or to California were estimated in a 1977 Report (Reference 6) on 11 Alaska Coal and the Pacific.11 These prices \'Jere estimated and appear in Table 5-22. A report issued in December 1980 by Battelle Pacific Northwest Laboratory analyzed market opportunities for Beluga Coal, with results generally consistent with earlier Bechtel and DOE reports. The two Beluga Coal studies done for Placer-Amex and the Bass-Hunt-Wilson venture have resulted in opportunity costs for coal of $1.00 - $1.33/MMBtu. for purposes of this study the value of $1.15/MMBtu will be used for future coal generating plants to be constructed in Alaska. Markets for Prudhoe Bay gas were not considered in developing a cost for Railbelt fuel alternatives since an existing market and transportation system has been developed with the inception of the Alaska-Canada pipeline project. Markets for Cook Inlet gas include the lower 48 via two transportation modes: LNG tankers or a pipeline spur constructed from Anchorage to Delta Junctior1 and intersect with the Alaska-Canada pipeline~ The regulated ceiling mar~et price for natural gas on the west coast as reported in the Federal Register, Department of Energy, Tuesday October 27, 1980 was $4.89/MMBtu in the Region 10 area (Washington, Oregon, California) and $3.58/MMBtu as the average U.S. price. The LNG tanker scheme as proposed by PALNG ·vas ·astimated to cost $2 .50/MMBtu for transportation and procassing. A 310 mile pipeline spur was estimated based on cost data available from the current pipeline project and would be expected to be $1 .. 97/MMBtu which represents the incremental cost of the Alaskan-Canada pipeline and the cost of the tap from Cook Inlet ($1.27/MMBtu plus $0.70/MMBtu respectively). Tabl~ 5-22 lists the resulting Alaskan opportunity values under these assumptions for markets in Region 10 and the Lower 48 based on the two transportation routes; LNG~tanker and Pipeline Spur. i -.• '. ' ' I I I I I I I II Ill ll 11 ll ll ll D 5-40 The current Japan market price for natural gas from the Nikiski LNG project sales is $4.50 -$4.65/MMBtu per Dr. Charles Logsdan of the State of Alaska Department of Revenue (Reference 46). Based on information collected from Nikiski the transportation/processing costs were estimated to be $3.00/MMBtu which results in an Alaskan opportunity value of $1.50 to $1 .. 65/MMBtu. The prices developed in this analyses range from $1.08 to $2~92/MMBtu. For· purposes of this study $2.00/MMBtu was adopted as the opportunity value of natural gas in Alaska. Since the installation of the Alyeska oil-pipeline, which has made Alaskan oil marketable, the opportunity cost to Alaska has been experienced as the existing price. The contracts for oil to utilities range from $3.45/MMBtu to $4.01/MMBtu as reported to FERCe For purposes of the generation expansion study where oil is considered only available for standby units the price adopted for use will be $4.00/MMBtu as shown in Table 5-22. Base period (January 1980) energy prices will be estimated based on both market and shadow (opportunity) values. The initial set of generation planning parameters will use base period costs (market and shadow prices) of $1.15/106 Btu and $4.00/106 Btu for coal and distillate respectively. For. natural gas, .the.curre~t actual market price is about $1.05/106 Btu and the shadow pr1 ce 1 s est 1rnated to be $2.00/10 6 Btu. The shadow price for gas represents the ~xpected market value assumi1g an export market were developed. This assumption and value is to be used for both the economic and cost of powe; analysis. Real growth rates in energy costs (excluding general price inflatiun) are shown in Table 5-23. These are based on fuel escalation rates from the Department of Energy (DOE) mid-term Energy Foreca3ting System for DOE Region 10 (including the States of Alaska, Washington, Oregon and Idaho) (Reference 9). Price escalators pertaining to the industrial sector were selected over those available for the ~ommercial and residential sectors to reflect utilities' bulk purchasing advantage. A composite escalation rate has been computed for the period 1980 to 1995 reflecting average compound growth rate pe.r year. As DOE has suggested thai the forecasts to 1995 may be extended to 2005, the composite escalation r~tes are assumed to prevail in the period 1996 to 2005. Beyond 2005, zero real growth in energy prices is assumed. Initial development of the Beluga coal fields will be economically possible only if Beluga coal is competitive with other Pacific Rim coal exporters, particularly Australia~ Markets for Beluga coal in the U~S. will probably follow Beluga coal field development for the Japanese market. By the early 1990's, it may l;e anticipated that Beluga coals not then under· contract wi 11 be marketGd wtv~re the resu 1 t; i ng opportunity cost is greater. Because of the competition with Pacific Rim suppliers, opportunity costs for the Japanese market may not escalate as rapidly as has been projected by DOE for Region 10, even though Beluga coals will enjoy an advantage over Australian coals in terms of a lesser transportation component of Japanese market costs. To account for the ' ,· l ';.f I ,< ,; 1(,' '. } ¥' I I I I I I I I I I •• ~ I ~ ~; (I f~1 ~J fl u I·_ ,( I I I I I ll I I I IJ II 11 ll 11 m ll I! ll 5-41 uncertainty in escalation for the Japanese market and to ensure the validity of generation planning analysis (See Chapter 8), sensitivity tests will be run to determine whether using zero escalation on coal price changes selection of economic future generation system components. For cost of power analyses, the nominal (inflation-inclusive) rates of energy price escalation will b~ used. These are defined as (1 + general price inflation rate) x (1 + errergy price escalator) .. For example, using 7 percent and 3 percent values for the rates of general price inflation and fuel prices, the nominal escalator for fuel would be 1.07 x 1.03 = 1.102, or 10.2 percento 5.7 -Non-Energy Cost Forecasts 5.7.1-Wage Rates 1 Forecasts of wage rates extend to 1986.~/ The average rates of increase from 1980 to 1986 ar~ as follows: - Industr,x Mining Contract Construction Manufacturing Wholesale Trade Retail Trade Average Rate of Increase Over 1980-86, Percent 10.8 8.7 8.9 3.6 8.7 Over the period 1980-2010 it is assumed that the annual average increase will be seven percent in nominal term and zero in real (inflation-adjusted). ---- 1; Alaska Division of Economic Enterprise, The Alaska Economic Information and Reporting System, Quarterly Report, July 1980. i .,. .... ,=··--"·-----' ' i I ~. ll I I I I I ~ TABLE 5-21 -1980 ALASKAN FUEL PRICES · cosr1; FUEL SOURCE/USE MMBTU Coal Healy/Mine-Mouth 1.25 (GVEA) Healy/Fairbanks 1.40 (FMUS) A·-·~rage Lower 48 1.35 DOc. Region 10 1.55 DOE U.S. Average 1.46 Natural Gas Kenai-Cook Inlet/ Anchorage Utilities AMLPD 1.00 CEA Beluga 0.24 Other 1.04 Average 0.34 Cook Inlet/LNG export to Nikiski 4.50 -4.65 Average Lower 48 1.98 DOE Region 10 4.89 DOE U.S. Average 3.58 Oil Prudhoe Bay/Fairbanks Utilities GVEA 3.45 FMUS 4.01 Average Lower 48 5.44 DOE U.S. Average 4.63 -4.93 Healy Coal -8,500 Btu/lb - ~atural Gas = 1005 Btu/cf _/ July 1980 Price Level 5-42 ~1 l ....J ~ ~ REFERENCES I (2) & (3) I (2) & (3) I (4) June 1980 ( 5) October 1980 (5) October 1980 I (7) I (4) June 1980 I (4) June 1980 (4) June 1980 (10) I (4) June 1980 I (5) October 1980 (5) October 1980 I I (7) (8) (4) June 1980 11 (5) October 1980 I I ,1 l lU I I I D II I I I I ll I ll 11 I I I ll I I TABLE 5-22 -SUMMARY OF FUEL PRICE ANALYSES FUEL MARKET COAL Pacific NW Lower 48 Japan Japan Japan Japan NATURAL Region 10 GAS Region 10 Lower 48 Lower 48 Japan OIL Lower 48 MARKET PRICE VIA barge barge barge Placer-Amex barge B-H-W LNG-tanker Pipeline spur LNG-tanker Pipeline spur LNG-tanker Pipeline- tanker $/MMBTU 1.55 1.46 N/A N/A N/A N/A 4.89 4.89 3.58 3.58 4.50-4.65 N/A * from Beluga Coal Studies Reference (11 & 12) ** estimated TRANSPORT COST $/MMBTU 0.50 0.63 N/A N/A N/A N/A 2.50 1.97 2.50 1.97 3.00** N/A 5-43 ALASKAN OPPORTUNITY VALUE $/MMBTU 1.05 0.83 1.33 1.33* 1.00-1.30 1.00-1.30 2.39 2.92 1.08 1.61 1.50-1.65 4.00 I I l i ' TABLE 5··23 -FUEL PRICES AND .ESCALATION RATES Base Period (January 1980) Prices {$/million Btu) Natural Gas Market Prices $1.05 Shadow (Opportunity) Values 2.00 Real Escalation Rates (Percentage fhange Compounded Annually) 1980 -1985 1986 -1990 1991 -1995 Composite (average) 1980 -1995 1996 -2005 2006 -2010 1.79% 6.20 3.99 3.98 3.98 0 Coal $1.15 1.15 9.56% 2.39 -2.87 2.93 2.93 0 5-44 Distillate $4.00 4.00 3.38% 3.09 4.27 3.58 3.58 0 ~ . . . • IJ I I I I I I I I I I I 11 ll I ·In f' J ilr; I e: __ l I I I I I ll ·~ IJ l1 IJ ~ t1 lJ .~ tl I[J tJ u 5-45 5.8 -Discount and Interest Rates 5.8.1 -Introduction Discount rates are required to compare and aggregate cash flows occurring in different time periods of the planning horizon. In essence the discount rate is a weighting factor reflecting that a dollar received tomorrow is worth less than a dollar received today. This holds even in an inflation-free economy as long as the productivity of capital is positive. In other words, the value of a dollar received one year from today must be deflated to reflect its earning power foregone by not receiving it today. The use of discount rates extends to both real dollar {economic) and esca.lated dollar (financial) evaluations, with corresponding inflation-adjusted (real) and inflation-inclusive (nominal) values. 5.8.2 -Real Discount and Interest Rates Several approaches have been suggested for estimating the real discount rate applicable to public projects (or to private projects from the public perspective). Three common alternatives include: (i) the social opportunity cost (SOC) rate, (ii) the social time preference (STP) rate, and (iii) the government's real borrowing rate or the real cost of debt capita 1. The SOC rate measures the real social return (before taxes and subsidies) that capital funds could earn in alternative investments. If, for example, the marginal capital investment in Alaska has an estimated social yield of X percent, the Susitna hydroelectric project should be appraised using the X percent measure of "foregone returns• or opportunity costs. A shortcoming of this concept is the difficulty inherent in determining the nature and yields of the foregone investments. The STP rate measures society's preferences for allocating resources between investment and consumption. This approach is also fraught with practical measurement difficulties since a wide range of STP rates may be inferred from market interest rates and socially desirable rates of investment. lsee W.J. Baumel, "On the Social Rate of Discount," American Economic Review, Vol. 58, September, 1968, pp. 788-802, E. J. M1shan, Cost-Benefit Analysis 9 George Allen and Unwin, London, 1975, and A. R. Prest and R. Turvey, 11 Cost-Benefit Analysis: A Survey,11 Economic Journal, Vol. 75, 1965, pp. 685-705. I I l ! j. l l 1 l ~ 1 i I ; I I I ' I II IJ I I I li m E G ,U 5-46 A sub-set of STP rates used in project evaluations is the owner's real cost of borrowing, that is, the real cost of debt capital. This industrial or government borrowing rate may be readily measured and provides a starting-point for determining project-specific discount rates. For example, 1 ong-term industria 1 bond rates have avera~ed about 2. 0 percent in the U.S. in real (inflation-adjusted) terms. In comparison, the Alaska Power Authority guidelines recommend a value of 3.0 percent for economic apprais~ls conducted in real terms. In the current hydroelectric project evaluation, a real rate of 3.0 percent has been adopted as the base case discount and interest rate for the period 1980 to 2010& 5.8.3 -Nominal Discount and Interest Rates The nominal discount and interest rates are derived from the real values and the ant~cipated rate of general price inflation. Given a 3 percent real discount rate and a 7 percent rate of price inflation, the nominal discount rate is determined as 10.2 percent or about 10 percent .3 2sased on data from the U.S. Department of Commerce, Survey of Current Business. 3(1 + the nominal rate) ~ (1 + the real rate) x (1 +the inflation rate). = 1.03 x 1.07, or 1.102 Therefore, the nominal discount rate is 10.2 percent. I •• I I I I I I I I .I I I ,I J 11 I I I m I Jj 11 D ·~ JJ IJ I IJ (] ~ IJ 1J t1 BIBLIOGRAPHY 1. International Energy Agency, Energy Policies and Programmes of IEA Countries, 1980 Review, OECD~ Paris, 1980. 2. U.S. Department of Energy, Office of Current Reporting, International Energy Indicators, Washington, November, 1980. 3. U.S. Department of Energy, Office of Conservation and Solar Energy, Methodology and Procedures for Life Cycle Cost Analysis, Washington, October 7, 1980. 5-47 4. U.S. Department of Energy, Energy Information Administration, Annual Report to Congress, 1979, Volume 3, DOE/EIR-0173/3, Washington, 1980. _ 5. National Research Council, Committee on Nuclear and Alternative Energy Systems, Alternative Energy Demand Futures to 2010, National Academy of Sciences, Washington, 1979. 6. Goldsmith, S. and L. Huskey, Electric Power Consumption for the Railbelt: a Projection of Requirements. Prepared jointly for the State of Alaska House Power Alternatives Study Committee and Alaska Power Authority. Institute of Social and Economic Research, Anchorage, Alaska, June, 1980. 7. Alaska Department of Commerce and Economic Development, Division of Enconomic Enterprise, The Alaska Economy, Year-End Performance Report 1978. 8. The Alaska Economy, Year-End Performance Report, 1979. 9. The Alaska Economic Information and Reporting System, Quarterly Report, July 1980. 10. Alaska Department of Labor, Alaska's Economic Outlook, to 1985, July 1978. 11. Alaska Department of Revenue, Petroleum Revenue Division, Petroleum Production Revenue Forecast. Quarterly Report, September, 1980. II E E 11 E u fl IJ ·.•t.l1 (J ~ } I • ~l lJ 1] 0 lJ ~ i lJ 5-48 REFERENCES (1) (2) (3) (4) (5) State of Alaska, Petroleum Production Revenue Forecast, Quarterly Report, March 1980. Abeg, F., Burning Coal in Alaska-A Winter Experience, ASME, 1980. The Energy Report, Vol, No. 3, Fairbanks North Star Borough, Community Information Center, September, 1980. U.S. Department of Energy, Cost and Quality of Fuels for Electric Utility Plants, FPC Form No. 423, DOE/EIA-0075 (80/04), June 1, 1980. U.S. Department of Energy, Office of Conservation and Solar Energy, Federal Energy Management and Planning Programs; Methodology and Procedures for Life Cycle Cost Analyses Average Fuel Cost, The Federal Register, Tuesday, October 7, 1980. (6) Alaskan Department of Commerce and Economic Development, Alaska Coal and the Pacifi~, Juneau, Alaska, Deptember 1977. (7) Federal Energy Regulatory Commission (FERC) Form No. 12 Power System Statements for (a) Anchorage Municipal Light and Power Department (AMLD), (b) Chugach Electric Association (CEA), (c) Fairbanks Municipal Utility System (FMUS), (d) Homer Electric Association (HEA), and (e) Golden Valley Electric Association (GVEA), December 31, 1979. (8) (9) (10) (11) (12) William Brothers Engineering Company, Report on FMUS and GVEA Systems, 1978 . Department of Energy, Office of Conservation and Solar Energy, Methodology and Procedures for Life Cycle Cost Analysis, Federal Register, October 7, 1980. Personal Communication with Dr. Charles Lo9sdam, Alaska State Department of Revenue, December 1980. U.S. Department of Energy, Office of Environmental Assessments, Division of Energy and Power. Alaska Regional Energy Resources Plannin Project, Phase 2, Coal, Hydroelectric and Energy A ternat1ves; Vo . Be uga Coa D1str1ct Ana ysis. Prepared by Alaska Department of Commerce and Economic Development 1980. Bechtel Corporation, Executive Summary, Preliminary Feasibility Study Coal Export Program, Bass-Hunt-Wilson Coal Leases, Chuitna R1ver Field Alaska. April 1980. (13) Battelle Pacific Northwest Laboratory, Beluga Coal Market Study, State of Alaska, Office of the Governor, December 1980. ~· I I I I . I. I I I I ll ·~ t· IJ 1:. ~ 1: li 6 -MARKET AREA AND POWER DEMAND FORECASTS 6.1 -Electricity Demand Profiles This section reviews electricity demand profiles in the Railbelt. The review begins by tracing the historical growth of electricity consumption in the Railbelt and comparing it to the national trend. Railbelt electricity consumption is then disaggregated by regions and by end-use sectors to clarify past usage patterns. 6.151 -Historical Trends in Electricity Consumption Between 1940 and 1978, electricity sales in the Railbelt grew at an average annual rate of 15.2 percent. During this period, the 1940 1 s had the highest growth rate at 20.5 percent. This was followed by a gradual dec 1 i ne over the years and by the 1960 1 s, the growth rate was be 1 ow the 1 ong-run trend. In the 1970 1 s, the growth rate had dec 1 in ed to 11.7 percent. Table 6-1 shows the annual growth rates at different periods from 1940 to 1978. 6-1 At the national level, electricity sales grew at an average annual rate of 7.3 percent during the same period. By the 1970 1 s, the growth rate was below the long-run trend. Table 6-1 shows that the growth rate between 1970 and 1978 was 4.6 percent, with growth in the years prior to the Arab oil embargo of 1973 double that of later years. A ccmparison of the national and Railbelt growth rates indicates that electricity sales in the Railbelt have been more rapid than the national average since 1940. Although the Railbelt growth rates are higher, there is a discernible downward trend due to the gradual maturing of the Alaskan economy. The high rate of growth is the result of both more rapid increases in the number of customers and in consumption per customer. Table 6-2 compares the growth in the number of customers and consumption per customer in the residential sector over a recent period in the Railbe 1 ! with the U.S. growth. Growth in the Railbelt has exceeded the national average for two reasons. First, population growth in the Railbelt has been higher than the national rate. Second, the proportion of Alaskan households served by electric utilities was lower than the U.S. average so that some growth in the number of customers occurred independent of population growth. The historical growth in the Railbelt in recent years is illustrated graphically in Figure 6-1. 6.1.2 -Regional Demand Electricity demand in the Railbelt is disaggregated by regions as shown in Table 6-3. During the period 1965 to 1978, Greater Anchorage accounted for about 75 percent of Railbelt electricity consumption followed by Greater Fairbanks with about 24 percent and Glenallen-Valdez with 1 percent. The pattern of regional shares during this period has been quite stable and no discernible trend in regional shift has emerged. This is main 1 y a result of the uniform rate of economic deve 1 opment in the Alaskan Railbelt. 1 ! ! I ,. ' l 1c I i ~ ,. I l I ,, .r L r. : :f""· ' I ' ·• r~ ,. t f'"'· t ' t l. ~ [ L. t . 1 t t· . L. t. t. t 0~--------~------~--------·~ 1965 1970 1975 1980 TOTAL RAILBELT UTILITY SALES TO FINAL CUSTOMERS •• .~ 1: .~, I I ,, I I I I· I I I I I I. I. l TABLE 6-1 HISTORICAL A~NUAL GROWTH RATES OF ELECTRICITY UTILITY SALES Period u.s. 1940 -1950 8.8% 1950 -1960 8.7% 1960 -1970 7.3% 1970 -1978 4.6% 1970 -1973 6.7% 1973 -1978 3.5% 1940 -1978 7.3% Anchorage and Fairbanks Area 20.5% 15.3% 12.9% 11.7% 13.1% 10.9% 15.2% 6-3 I· u I ~ I ~ ~ The growth in regional electricity consumption has also been fairly uniform. During the period, Greater Anchorage experienced an average annual growth rate of 12.7 percent while Greater Fairbanks and Glenallen-Valdez grew at 12.1 percent and 13.9 percent respectively. At the same time, customer growth has been slower than consumption rates but fairly uniform between regions. The average annual growth in customers for Greater Anchorage is 8.2 percent while Greater Fairbanks and Glenallen-Valdez experienced 6.1 percent and 7.8 percent respectively. The reason for consumption growth rates higher than customer growth rates is more intensive electricity usage per customer. 6.1.3 -End-Use Consumption 6-4 Rail belt electricity consumption for residential, commercial-industrial- government and miscellaneous sectors is sho~1 in Table 6-4. During the period 1965 to 1978, the residential and commercial-industrial-government sectors grew at annual growth rates of 12.8 percent and 12 e6 percent, resp~ctively, while the miscellaneous sector grew less rapidly at 8.8 percent. In the residential sector, electricity consumption is largely attributed to space heating, while refrigerators, water heaters, lights and cooking ranges are next in order of usage. In the commercial- industrial-government sector, end-use consumption is less clear because of lack of data; however, it is expected that end-use consumption is attributed mainly to lighting, space heating, cooling and water heating. End-use consumption in the miscellaneous sector is attributed mainly to street lighting and electricity usage in second homes. During this period, the distribution of electricity consumption in these end-use sectors has been fairly stable. In 1965, the commercial- industrial-government and residential sectors accounted for 53 percent and 45 percent of Railbelt utility sales while the miscellaneous sector accounted for only 2 percent. By 1978, the situation had only changed marginally with commercial-industrial-government and residential sectors accounting for 52 percent and 47 percent respectively, while the miscellaneous sector dropped to 1 percent. £.2 -ISER Electricitx Consumption Forecasts Understanding future electricity requirements in the Railbelt is vitally important in the planning of electricity generation for the region. As an input to this study, the Institute of Economic and Social Research of the University of Alaska (ISER) was contracted by the Alaska Power Authority and the House Power Alternatives Study Committee of the State of Alaska to project future electricity power consumption in the Railbelt. ISER's methodology and results are discussed below. I I I I I I I I I I I I f'} \ LJ TABLE 6-2 NUMBER OF ELECTRIC UTILITY CUSTOMERS AND CONSUMPTION PER CUSTOMER Greater Anchorage Customers Consumpt1on per (10 3 ) Customer {MWh) Residential 1965 2.7 6.4 1978 7.7 1039 Annual Growth Rate (%) 8.4 4.2 Commercial 1965 4.0 1978 10.2 Annual Growth Rage (%) 7.5 Greater Fairbanks Customers Consumpt1on per (10 3 ) 8.2 17.5 6.0 1.3 2.9 6.4 Customer_.( ~lWh) 4.8 10 .. 2 6.0 u.s .. Customers Consumption per (10 6 ) Customer (MWh) 57.6 4.9 77.8 8.8 2.3 4.6 7.4 9.1 1.6 8!11 ... P'.-Iiiii. TABLE 6-3 UTILITY SALES BY RAILBELT REGIONS Greater Anchorage Greater Fairbanks Glenallen-Valdez Railbelt Total Sales No. of* Sales No. of* Sales No. of* No. of* Regional Custo~ers Regionc.l Custo~ers Regional Cust~mers Customers Year GWh Share (10 ) GWh Share (10 ) GWh Share (10 ) GWh -----· 1965 369 78% 31.0 98 21% 9,.5 6 1% .6 473 41.1 1966 415 32.2 108 9 .. 6 NA NA 523 41.8 1967 461 34.4 66 NJ~ NA NA 527 34.4 1968 519 39.2 141 10 .. 8 NA NA 661 30.0 1969 587 42.8 170 11 .. 6 NA Nl\ 758 54.1.1· 1970 684 75% 46.9 213 23% 12 .. 6 9 1% .8 907 60.3 1971 797 49.5 251 13 ... 1 10 .9 1059 63.5 1972 906 54.1 262 13 ... 5 6 .4 1174 68 .. 0 1973 1010 56.1 290 13.,.9 11 1.0 1311 71.0 1974 1086 51.8 322 15.,.5 14 1.3 1422 78.6 1975 1270 74% 66.1 413 24% ].6 ... 2 24 1% 1.9 1707 84.2 1976 1463 71 .. 2 423 17'. 9 33 2.2 1920 91.3 1977 1603 81 ,,l 447 21% 20:.0 .. 42 2.1 2092 103.2 1978 1747 79% 87.2 432 19% 20.4 38 2% 2.0 2217 109.6 Aranual Growth 12.7% 8.2% 12.1% ,fi .1% 13.9% 9.7% J? .6i% 7.8% *Includes residential and commercial users only, but net mi see 11 aneous users. Source: Federal Energy Regulatory Commission, Po\"'er System Statement. 0) I Q) ----... -.. .. I I I I I I I I I I I I I I I I I I TABLE 6-4 RAILBELT ELECTRICITY END-USE CONSUMPTION (GWh) Year Residential 1965 214 1966 241 1967 208 1968 294 1969 339 1970 402 1971 478 1972 542 1973 592 1974 651 1975 790 1976 879 19.77 948 1978 1029 Average Annual Growth 12.8% % of Annual Consumptton 1965 1970 1975 1978 45% 44% 46% 47% Commercial-Industrial Gover'nment 248 275 241 355 407 489 555 613 698 749 886 1012 1117 1156 12 .. 6% 53% 54~~ 52% 52% Miscellaneous 9 8 8 11 12 14 25 17 19 20 28 26 21 27 8.8% 2% 2% 2% 1% 6-7 I ~ -1 -,, 1 -: I J \ I I I I I I ( i ~ l ~ I 6-8 6.2.1 -Methodology The ISER electricity demand forecasting model has a logical structure and flow of information between components. The output of the model is in the form of projected values of electricity consumption for each of the three geographical areas of the R-J.ilbelt (Greater Anchorage, Greater Fairbanks and Glenallen-Valdez) classified by final use (i.e., heating, washing, cooling, etc.) and consuming sector (commercial, residential, etc.).-The model produces values for the years 1985, 1990, 1995, 2000, 2005 and 2010. The TSER model consists of several submodels linked by key variables and driven :~ policy and technical assumptions and state and nation~ trends. These submodels are grouped into economic models w~ich forecast future levels of economic activities and electricity consumption models which forecast electricity requirements by consuming sectors.. The structure of the submodels and the assumptions employed are discussed in the following: Economic Submodels Man in the Arctic Model (MAP) . Household Formation Model . Regional Allocation Model Housing Stock Model. Electricity Consumption Submodel~ ~ Residential Non-space Heating Electricity Requirement . Residential Space Heating Electricity Requirement . Commercial-Industrial-Government Electricity Requirement . Miscellaneous Electricity Requirement . Military Net Generation . Self-supplied Industrial Requirement. A brief description. of these submodels and their interaction with one another fo 11 ows * (a) The MAP Econometric Model MAP is an econometric model which translates forecasted or assumed levels of national economic trends, state government activity, and developments in tht; Alaska resource sector into forecasted levels of statewide population by age and sex, employment by industrial sector and income. MAP is internally complex, but its basic logic is that the State of Alaska will tend to follow national trends, resource activity and state government policies assumed as inputs. The output produced by ~lAP is not apprcpr1ate for direct input into the electricity model for two reasons.. The first is that MAP produces forecasts for the ~ntire State of wrich the Railbelt and ·its component ~ ~ I I I I ·I I I I ~ ' ' i ( ( ~.· I I ,I I I :I I I I I I I I I I I I I I 6-9 areas are only a part. Secondly, r~AP produces population forecasts, but electricity consumption is more closely related to households and the number of housing units than to the number of individuals in the market area. Therefore, the downstream submodels of household formation, housing stock, and regional allocation are required to translate MAP output into its required form for input into electricity demand models. (b) The Household Formation Model The household formation model groups individuals into how;ehold units on the basis of national and state demographic trends. The model estimates the probability of an individual's being a household head as a function of age and sex. Input is required fran the ~1AP model in the form of projected level and age-sex distribution of the population. The output of the model is future number of household heads by age and sex, which is used as input to the housing stock and electricity consumption models. Regional Allocation Model This model regionalizes MAP's projections of population to regions of th~ Railbelt. The model uses a regional shares technique under the assumpti1n that population location is sensitive to regional employment opportunities. Regional shares are estimated as a function of basic sector activity and dummy variables representing comparative advantage and scale of regional economy. Because of short data series and the need to capture regional variation, the estimation is based on pooled-time-series cross-section technique. The results serve as input into both the housing stock models and the electricity consumption model. (d) Housing Stotk Model The housing stock model combines the household headship information from the househo 1 d format ion model, the reg ion a 1 popu 1 at ion information from the t~egional allocation model, anq the results of an independent survey on housing choice, to produce the number of housing units by type (e.g., single family, duplex, multifamily, etc.) and region for each of the forecast years. Two basic steps are involved. Initially the number 0f households per region is calculated for the forecast period by combining househo~d and regional population information. This is followed by est·imating the probabiiity that a household head of a specific age and sex will choose to live in a particular housing type. In this way, the model produces future housing stock by type and region for input into electricity consumption models. (e) Resident i a 1 No;t-space Heating Electricity Req~irements This model estimates electricity requirements for the following household appliances: ,,, n l I :1 I I I I I I I I I I I I I ' l ~ •. .• ~ ... · '· .; • I ' I . water heater . range (cooking) . c 1 othes dryer . refrigerator . freezer . dishwasher . clothes washer . te.levision . air conditioner . small appliances. Electl'·icity requirement for each appliance type is the product of five factors as follows: . number of households . appliance saturation rate . fuel mode split . average annual consumption . average household size. Residential non-space heating electricity requirements are obtained by summing the electricity requirements of all appliances. This model is linked to the economic submodels through the household variable .. The remaining variables such as appliance saturation rates, fuel model split and average annual consumption are determined within the submodel. For example, saturation rates are based on 1978 estimates and extrapolated to future years by past Alaskan and national trends. Fuel model split is calculc.ted as the proportion of appliances using electricity by taking into account the vintage of consuming devices. Average annual electricity consumption is calculated as a function of the &ge distribution of the appliance stock and the electricity requiremen~ for each vintage. (f) Residential Space Heating Electricity Requirements 6-10 This model estimates space heating electricity re~uirements for four types of dwelling units: single family, duplex, multifamily, and mobile home. The space heating electricity requirement for each type of dwelling unit is calculated as the product of the number of dwelling units, fuel mode split and average level of consumption. The number of dwelling units is obtained from the housing stock model. The.: fuel mode split is calculated as the proportion of houses for each vintage using electricity space heating. The average level of consumption for each vintage is computed as the product of base level consumption, a size 7actor and conservution factor. In arriving at these paraweter values, explicit assumptions are introduced where appropriate . I I I I I I I I I I ~ ~ I I I I I I I I I I I I I I I I I I I (g) Commercial-Industrial-Government Electricity Requirement Total electricity requ·irements for the commercial-industrial-government sector is defined as the product of non-agricultural wage and salary employment and average electricity consumption per employee. Electricity consumption per employee is a function of time and application of conservation standards. This implies that new electricity users in this sector will have different electricity requirements from previous customers. (h) Miscellaneous Electricity Utility Sales Th·is model estimates two remaining sectors of electricity consumption: street lighting and re~reational homes. Street lighting requirement is calculated as a fixed percentage of the total of residential (space heating and non-space heating) and commercial-industrial-government electricity requirement. Recreational home consumption is calculated as the product of a fixed level of electricity consumption and a fixed proportion of households. (i) Mil~tary Electricity Requirements 6-11 For many reasons, including a lack of historic~ data series, no model was ct~structed to correlate military electricity consumption with causal factors. Hence, future electricity requirements for the military are assumed to be the same as the current level. (j) Self-Suppl~ed Industrial Electrical Requirements No model \vas constructed to project future self-generated electl"icity for industry. Existing users were identified and current electricity consumption was determined for APA sources. New users and future consumption levels were identified from economic scenarios. (k) Model Assumption~ To make these models operational, a number of assumptions enter the model through a series of calculations. The following is a summary of the assumptions utilized in the model. o Economic growth in the state will be driven by different assumptions concerning development of special projects and industry, and state goverrh.le.::t fiscal policy. The development of special projects and industry is assumed to grow at a high, moderate or low rate. State government fiscal policy is assumed to follow three directions representing high, moderate and low government expenditures. This results in nine possible economic growth scenarios for the state. o The electricity market is presently in relative equilibrium except for space heating in Fairbanks, where a shift away from electric space heating is underway. \ i I l I I I I I I -~ o Thi; equilibrium is expected to remain in effect throughout the forecast period because of relatively constant fuel price ratios. o The price of energy relative to other goods and services will continue to rise. o Rising real incomes wi1l act to increase the demand for electricity. o Federal policies will be effective in the area of appliance energy conservation, but will have a much smaller impact on building stock thermal efficiencies. o No State conservation policies 'directed exclusively toward electricity will be implemented. o No significant State po1 icies designed to alter the price or availability of alternative fuels ar-e implemented. o No new electricity technolog~es will be introduced. o In terms of residential appliances -saturation rates ~tJill .track national trends; -for some appliances, reduced household size will act to reduce average electricity requirements; -consumption is sensitive to the appliance scrapping rate; -unspecified appliance consumption grows in order to accommodate the possibility of new domestic electricity applications. o In terms of residential space heating - a slight trend toward single family homes is projected; -average housing unit size continues to grow; natural gas availability will not significantly increase; 6-12 space heating alternatives such as oil, wood or coal will not greatly affect aggregate space heating demand; no significant increase in heat pumps occurs. o In terms of commercial-industrial-government use -employment will grow more rapidly than the population; -no major conservation measures are anticipated; -the distribution of electricity end-uses will not shift significantly. o Miscellaneous utility sales (street lighting and second home use) will grow at rates consistent with overall utility sales. ~ IJ I I I I I I I I I I I I ~ &J I I I' ! I I I I I I I I I I I I I : .•.. ' ' I I 6-13 6.2.2 -Base Case Results ~1any assumptions enter the model through a series of calculations. Of the nine economic scenarios formulated by ISER, only three have been run by the mode 1. The three scenarios are those represen.t ing high, moderate and low economic growth combined with moderate government expenditure. At the same time, ISER has held constant its electricity end-use assumptions with the exception of the moderate economic growth shift to electricity case. Of all of the runs made by the mode 1, ISER considers the moderate economic growth-moderate government expenditure case (no shift to electricity) to be the 11 most probable." Thereforf~, this is used as the base case in the study. The base case results are presented in Table 6-5. Utility sales for the Railbelt will grow from the 1980 level of 2390 GWh in 2010, representing an average annual growth rate of 4.09 percent. Over the period, the highest growth rate will occur during 1990 to 2000 at 4.76 percent, followed by a decline at 3.33 percent during 2000 to 2010. 6.2.3 -E2nge of Forecasts This section presents electricity forecasts generated by assqmptions of the ISER model different fran the base case. The intent is to provide a range of forecasts with alternative growth rates that would bound the base case. ISER 's remaining results represent a higher and lower rate of economic growth, and also the case where a shift to electricity takes place. However, these results do not provide the envelope of alternative growth because the impacts of high industrial growth/high government expenditure and low industrial growth/low government expenditure on electricity demand have not been calculated by the electricity consumption models. Estimates of these impacts have been made by the method of proportionality as approximations to the model runs. The estimates would thus represent the upper and 1 ower bounds of the r'ange of forecasts. A summary of aggregate Railbelt electricity growth for the range of scenarios is presented in Table 6-6. Between 1980 and 2010, the following annual growth rates in demand are associated with each scenario: Annual Growth in Total Railbelt Utility Sales (Percent) 1. Low Economic Growth, Low Government Expenditure 2. Low Economic Growth, Medium Government Expenditure 3. Medium Economic Growth, Medium Government Expenditure 4. High Economic Growth, High Government Expenditure 2.78 3.22 4.09 6.07 ~,------------------~----------~·------------ --... ., .... --. . . TABLE 6-5 BASE CASE FORECASTS* (GWh) Utility Sales to All Consuming Sectors Glenallen-Total Utility Year Anchor a~ Fa ·irbanks Valdez Sales 1980 1907 446 37 2390 1985 2438 669 64 3171 1990 2782 742 75 3599 1995 3564 949 88 4601 2000 4451 1177 102 5730 2005 5226 1397 119 6742 2010 6141 1671 140 7952 Average Annual Growth Rate (%) 1980-1990 3.85 5 .. 22 7.32 4.18 1990-2000 4.81 (~. 72 3.12 4.76 2000-!010 3.27 3.57 3.22 3.33 1980-2010 3.85 4.50 4.54 4.09 *Reproduced from ISER's Moderate Economic Growth/Moderate Government Expenditure (without price induced shift to electricity) Scenario. ---- - Military Self-Supplied Net Industry Net Generation Generation 334 414 334 571 334 571 334 571 334 571 334 571 334 571 0.0 3.27 0.0 0.0 0.0 0.0 0.0 1.08 --- ~~--~-~------------ TABLE 6-6 SLM4ARY OF RAit..BELT ELECTRICITY PROJECTIOOS ( GWl} Utility Sales to All Consuning Sectors Lrr • .er M:S-GM Year Bourrl LES-GM (Bad Case) 1900 2300 23~ 2300 1985 2798 CJ21 3171 19£0 3041 3236 3599 1995 3640 3976 4601 2000 4468 5101 5730 2005 4912 5617 6742 2010 5442 6179 7952 Average Jlllnua l Growth Rate (%) 1900-1900 2.44 3 .. 00 4.18 1990-2CXJO 3.92 4.66 4.76 200)...2010 L99 1.94 3.33 1980-2010 2.78 3.22 4.C9 Lo~r Bollld = Estimates for LES-GL L.P~r Bound =Estimates for HES-9-1 LES = Low Econanic Growth M:S = fvb<:Erate Econanic G"owth HES = High Economic Growth GL = Low Governrent Bq:endi ture 9-1 = High Govemnent Exj:Erditure M:S-GM with Price Induced Shift HES-£/4 23SO 2300 3171 3561 3599 42~ 4617 5789 6525 7192 8219 9177 10142 11736 4.18 6.00 6.13 5.32 4.51 5~02 4.94 5.45 Military ~t Exanination Self-Supplied Industry Net Generation M:S-GM l.PJ:er M:S-GM fv£S-GM ~t with Price Botn:J (Base Case) LES-GM {Base Case) Induced Shift HES-GM 23~ 334 414 414 414 414 3707 334 414 571. 571 847 4443 334 414 571 571 981 6317 334 414 571 571 981 8010 334 414 571 571 981 10596 334 414 571 571 981 14000 334 414 571 571 981 6.40 0.0 0.0 3.27 3.27 9.0 6.07 0.0 0.0 0.0 0.0 0.0 5.75 0.0 0.0 0.0 0.0 0.0 6.07 0.0 0.0 1.00 1.00 2.92 (J) I ....... U1 I •; r\ i ~ I I I The medium growth rate of 4.1 percent is shown to be bounded by lower and upper limits of 2.8 percent and 6.1 percent. In comparison, historical electricity demand has increased by 11 percent in the Railbelt. 6.3 -Past Projections of Railbelt Electric Power Requirements A number of electricity projections have been developed in the past. This discussion is confined to work conducted since 1975. The purpose is to compare ISER's forecasts with previous work and to understand the basic differences between them. 6-16 Forecasts of electric power requirements developed since 1975 (excluding ISER's latest forecast) are summarized in Table 6-7 0 A cursory examination indicates that there is a dispersion of forecasts in initial years and progressively widening within the forecast period. The performance of these forecasts can be ascertained by comparing them to 1980 utility sa 4 1es. Table 6-9, extracted from ISER (Electr·ic Power Consumption for the Railbelt: A Projection of Requirements, Institute of Social and Economic Research, Univeriity of Alaska, 1r980), shows the percent error in the forecasted growth rate to 1980. As can be seen, all of the forecasts are significantly overestimated. These forecasts are shown also significantly different from those developed recently by ISER. The differences are mainly attributed to assumptions concerning economic growth and electricity consumption rates. Economic growth assumptions among the various studies have been inconsistent on the type, size and timing of pl"ojects and other economic events which result in higher projections of economic activities compared to the recent ISER study. Electricity consumption rates in these studies are also high because the recent ISER study has explicit estimates of appliance saturaticn rates, end-use patterns and conservation measures. For these reasons, the recent ISER forecasts are loNer than those in previous studies. 6.4 -Peak Demand Forecasts 6.4.1 -Introduction The peak demand forecast~ for the Railbelt Region were prepared by Woodward-Clyde Consultants (WCC) of San Francisco. The overall approach was to examine the available historical data with regard to the generation of e 1 ectri cal energy and to app 1y the observed generation patterns to existing sales forecasts. The main sources of data are two: the information supplied by the Railbelt utilities to the Federal Energy Regulatory Commission (used to determine standard load patterns) and the sales forecasts produced by the University of Alaska's Institute of Social and Economic Research (ISER). I I I I I I I I ll I I I i [I rJ ------------ TABLE 6-7 SUMMARY OF RECENT PROJECTIONS OF RAILBELT ELECTRIC POWER REQUIREMENTS (GWh) Source 1. South Central Railbelt Area, Alaska Interim Feasibility Rep:>rt: H)ilro- electric Power and Related PurJX>ses for the Upper Susitna River Basin, Alaska District CollJS of E~ineers, Oepa~nt of tre Anny, 1975. 2. Electric Po\\er in Alaska 1976-1995 Institute of Social and Econonic Researdl, Lhiversity of Alaska, 1976. 3. Alaskal Electric Po\\er: An Analysis of Future Requirements and Supply Alternatives for the Railbelt Region, Battelle Pacific North.-e;t Lcboratorie;, 1978. 4. Upper Susitna River Project Pm'ff Market Analyses, U.S. ~partrrent of Energy, Alaska Po~er Adninistrat "bn, 1979; South Central Railbelt Area, Alaska, Upper Sus1tna R1ver Basin, Supplemental Feasibility Report, Corps of Engineers, 1979 ard Phase I Technical ~tnnrandum: Electric Power Needs Assessment, South Centra1 Alaska Water Resotrces Corrnittee, 1979. 1980 1990 1995 2000 2025 3020 3240 3550 5470 6480 8540 6656 8688 12576 8100 11650 18520 2478 -'.f377 5415 -12706 W2 -LUJ84 2600 -3400 8500 -10000 10341 -17552 1600) -22500 2920 3155 3410 4550 6110 8200 5672 8175 11778 7070 10940 16920 8110 17770 38020 TABLE 6-8 PERFORMANCE OF PAST PROJECTIONS -RAILBELT ELECTRIC POWER REQUIREMENTSa -·--------~----~- Annual Growth Rate of Net Energy (l03MWh) Net Energy Between Percent Error Forecast Year & 1980 in Forecast Studyb of Growth Year of Year of Forecast Implicit in c Rate to Number Publication Forecast for 1980 Forecast Actua 1 1980 (%) 1 1975 1851 3240 11.9 7.3 + 63 2 1976 2093 2985 9.3 !:' 9 ,) . + 58 3 1978 2397 3000 11.9 4.8 + 148 4 1979 2469 3155 27.8 6.5 + 328 a Net Energy figures calculated from sale:, plus 10 percent for losses b Corresponds to Table 6-6. c Assuming 1980 Net Energy consisting of 2390 o~ sales plus 10 perc~nt losses. 6-18 1 'I '·' -. ••• •• I I I I I I I I .I r jJ JJ rf JJ I I •• I 11 IJ Jj 11 m 11 ~ ll ·~ IJ I] n lJ 11 IJ 6-19 6.4.2 -Load Patterns The first component of the forecast methodology is an analysis of the load patterns in the Railbelt. The analysis emphasizes the identification of average patterns over the 10-year period from 1970 to 1979 and not trends or changes in the patterns. Regardless, such trends are not evident in the available data. In addition, the use of average values reduces the impact of yearly variations in such parameters as weather and outages. Four standard load patternsl are developed to represent electrical use in the Rg.ilbelt based on data covering over 98 petcent of the sales in the area~ Each load pattern consists of five items: (i) average hourly distribution of generat;~~ for the first weeks of Apri 1, August and December. These figures are the average of the normalized use patterns for each month (ii) averaf)e monthly distribution of generation for all months (iii) average dis tr ibut ion of annual generation by consumer category (iv) average percentage of energy generation unaccounted for or lost (v) average annual load factor. Unfortunately, three weeks of hourly generation data is a limited base from which to compute annual 1oad curves. This 1 imitation is explained by the fact that the three weeks of data is unlikely to include either the minimum or the maximum load. The result is that the calculated load durat·ion curve will show less variation than a computed load from a complete data base and the utility will be assigned a higher than actual load factor. In addition, hourly data will combine the actual peak demand in an average of the surrounding observations, a subassumption which would not occur with observations of shorter duration; for example, twenty minutes or less. The peak demand forecast will, therefore, underestimate actual power requirements. 6.4.3 -Sales Allocation The sales forecasts provided to wee are based on service area rather than generating utility, whereas the above load data is available by utility and not service ar-ea. To resolve this, wee allocated the sales data to the indiv·idual utilities in accordance with the predicted mix of consumer 1 one for each of Chugach, Anchorage Municipal, Go.lden Valley and Fairbanks Municipal. ... , .. ,...J···.·· .. · .. c···· ,., "' ' ' "' .~~.. !'..u:~ ' '.• ' l i. I J . ' . ] categories in the area and the current mix of sales by consumer category at the utilities serving the area.2 This procedure will determine a reasonable allocation provided that the expansion plans captured in the sales forecasts does not markedly change the residential percentage at each utility. If this occurs and the overall residential percentage is outside the range specified by the utility percentages, the total sales to one of the utilities will exceed 100 percent of the total area sales~ The ISER sales forecasts are adjusted with these equations in order to allocate the sales area data to the four utilities and thereby the four standard patterns. (.30 X .25) + (.70 X .55) = .46 Fr-cm the ISER forecasts, we know that the residential percent age of total area sales changes over time. If we make this percentage an input variable and holr.! the residential percentages of total utility sales ·(25% and 55%) constant, we can rearrange the equation and solve for total sales by uti 1 i ty: Yc = 3.33X -.833 Ya= 1.0-Yc where, X is predicted residential sales in the areas as a percentage of tot a 1 sa 1 es, Yc is the percentage of the total area sales allocated to Chugach, and Ya is the percentage of the total area sales allocated to Anchorage Municipal. Thus, if the ISER sales forecast for the Anchorage area in 2010 were 9000 GWh, 40 percent of which were residential, the equations would allocate 50 percent (4500 GWh) to Chugach and 50 percent (4500 GWh) to Anchorage Municipal. 2 !f in the Anchorage area: Anchorage Municipal sold 30 percent of the total area sales, 25 percent of which is to residential customers and Chugach sold 70 percent of total area sales 55 percent of which is residential we could say that 46 percent of the total area sales are to residential customers: 6-20 ~ ~ ~ ~ ~ ~ ~ ~ I I [I [I I]; !· l! .. :. rJ 11 [J ~ . ' ' 1 J_j J , {j [J~ ' ( J ~ ~ I 6.4.4 -Peak Loads The two data sets discussed above are combined to determine peak loads for the Railbelt area. 6-21 The first step is an adjustment to the allocated sales to reflect losses and energy unaccounted for. The adjustment was made by increasing the energy allocated to each utility by a factor3 computed from historical sales and generation levels. The result is gross energy generation for each uti 1 i ty. The factors determined for the monthly distribution of total annual generation4 were used to allocate the gross generation for each year by month. The monthly generation figures for April, August and December were further allocateg based on the average of the first week's hourly distribution pattern. This was computed by extending the one week of observations over the complete month; thus for April, which has 30 days or 4.29 weeks, it was assumed that each observation represented 4.29 hours at a given generation level4 The resulting hourly loads for each utility are added together to obtain the total Railbelt load pattern for each forecast year. The largest load is the peak load for the month in the interconnected Railbelt region. This and the total gross generation in the month determines the monthly load factor. The load factors for the other months ar·e. calculated as a linear interpolation fran the three available months. The monthly peak loads for all months are then computed based on gross monthly generation and the monthly load factors. The largest monthly peak is the annual peak load and allows the calculation of the annual load factor. Table 6-9 summarizes the total energy generation and the peak loads for each of the low, medium and high ISER sa 1 es forecasts. The three weeks of hourly load data computed as the total Railbelt load pattern for each forecast year were averaged, sorted and normalized to give average weekl~ay and week-end load duration curves for April, August and December. The intermediate months wer-e calculated using linear interpolation. The load fdctors computed in this study average seven percentage points higher than the average load factors observed in the four utilities over the 10-year period. The most severe limitation of this work is the data base used to determine the load patterns. More detailed generation data at hourly intervals or less is required for entire months before any problems in this methodology can be corrected. 3 Item (iv) abova 45 Item (ii) above Item (i) above TABLE 6-9 FORECAST TOTAL GENERATION AND PEAK LOADS -TOTAL RAILBELT REGION! ISER LOW ISER MEDIUM ISER HIGH YEAR 1978 1980 1985 1990 1995 2000 2005 2010 Percent Growth/Yr. 1978-2010 GENERATION (GWh) 3323 3522 4141 4503 5331 6599 7188 7822 2.71 PEAK LOAD (MW) 606 643 757 824 977 1210 1319 1435 2.73 PEA.'. GENERATION LOAO GENERATION (GWh) (MW) (GWh) 3323 606 3323 3522 643 4135 4429 BOB 5528 4922 898 6336 6050 1105 8013 7327 1341 9598 8471 1551 11843 9838 1800 14730 3.46 4.76 1 Includes net generation from military and self-supplied industry sources. '····' ~ a.~ ~1 PEAK LOAD (MW) 606 753 995 1146 1456 1750 2158 2683 4.76 0'1 I N N 0 [J 0 ' 0 r'1 I I t....J 0 lJ 0 J rt '\ '-- J J Q 6-23 6.5 -Potential for Load Management and Energy Conservation The utilities are currently paying increasing attention to the implementation of load management and conservation measures in an attempt to reduce or shift peak load and reduce energy demand in the future, and, consequently, to increase average load factors. In this study, load management is defined as the 11 shifting 11 and corresponding reduction of peak demands and the alteration of daily load shapes by means of appropriate measures, with no significant difference in total energy demand. Load management may generally be achieved by one of two methods: direct control, in which the utility controls the end-use devices; indirect control, in which price incentives are used to motivate load shifting by consumer. Conservation is defined as a net reduction in energy demand by means of appropriate measures, with a corresponding reduction in peak demand. The potential benefits of power demand control and reduction measure require careful evaluation before implementation on a major sc~ie. A considerable amount of Research and Deve 1 opment (R&D) work has been undertaken in the Lower 48 states on methods, cost strategies, as well as the potential impact of such strategies on demand. One Anchorage utility, Municipal Light and Power, has instituted an experimental time-of-day rate for electricity. Load management and energy conservation concepts have been implemented or planned by utilities in the Lower 48 states, and anticipated effects on the growth of future peak load and electrical energy consumption in their systems have been accounted for in their forec&sts. Alaska utilities generally have significant winter peaks, and the potential for baseload conservation through peak leveling may be significant. ISER forecasts considered and included the impacts of some energy conservation measures, but did not include the impacts of load managl~ment measures. 6.5.1. -Technological Developments Technological developments would have significant impacts on implementation of direct control measures of load management. While there exist several R&D projects on end-use devices that utilities could use to control electrical load, commercialization of these devices is not fully developed. Technological progress would increase implementation of load management programs by utilities. At the same time the indirect control measures of 1 oad management could be imp 1 emented at a faster rate than the current rate, through use of price incentives to motivate load shifting by consumer. Technological developments have been made in the energy conservation measures. The improvements in appliance efficiency have contributed to some extent to the slower growth rate of electricity consumption experienced during the last few years. Its effects are expected to cant inue and therefore have been taken into account in the for·ecast of future growth of electricity consumption. 6.5.2 -Economics of Energy Conservation and Substitution Conservation was found to be the most economically attractive source of new energy available to t~~ Railbelt area in a recent study by Alaska Center for Po 1 icy Stud i e~ . This cone 1 us ion was based on evidence from existing weatherization programs and projections from the Alaska Federation for Community Self-Reliance in Fairbanks. The viability of solar energy as a possible source of energy subsitution was also investigated in that study. The three methods of collecting solar energy considered to have the greatest potential for meeting Railbelt energy demand are: passive solar, which maximizes the use of sunlight for space heat through improved building siting and design; active solar, which is used to provide space heat and hot water through the use of so 1 ar "co 11 ector 11 which heat air or 1 iqu id that is pumped from the collector to transfer heat inside the building; and photovoltaics which convert sunlight directly into electricity. The study by the Alaska Center for Policy studies concluded that both active and passive solar contributions are cost competitive today with other fuel sources. 6.5.3 -Impact of Load Forecasts Implementation of load management and energy conservation measures will influence the rate of growth of electrical peak load and energy consumption. ISER forecasts have taken into consideration the federally mandated efficiency standards for electrical home appliances with a reduction of 10 percent. The other conservation measures considered by ISER include: retrofitting of single family residence which would reduce between 4 to 2 percent of energy consumption; application of mandatory construct ion or performance standards to new housing which would reduce the heat load in new construction by 5 percent; and application of mandatory construction performance standards to new construction in commercial-industrial government sector which would reduce electricity requirements between 10 to 5 percent. The impact of the state energy conservation legislation could be nnre significant than provided for in the ISER forecasts. The Energy Probe's study indicated that the total growth rate over the 1980-2010 period in electrical demand could be further reduced with a conservation program more stringent than that presently contemplated by the State Legislature. The rate of growth in peak load demand would also be reduced through the implementation of load management measures. The sector the most affected by this reduction would be the residential sector. A further discussion on impact of load management and energy conservation on load forecasts is presented in Section 8.2.9. l/ Alaska Center for Policy Studies, "Energy Alternatives for the Railbelt", Study of End-Use Structure, Energy Conservation Potential, Alternative Energy Resources, and Related Public Policy Issues, August 1980. 6-24 ~~l tJ I I I I I I I I ' I I I I ' ' I ' ' ' [~ FF I· ii' ~.t• I f' IT!) ' r&~.l\ :~ i tJ Pf t_J n I <-.I I I I : I I I I I I I I I I [. I I I I I I 7-1 7.0-SUSITNA BASIN ST 1JOTES 7.1 -Introduction During the past year a massive field data collection effort got underway~ Operating mainly out of the base camp constructed at the Watana site and supported by helicopter transportation, investigative teams were engaged in environmental data collection, survey activities, geotechnical exploration, geologic mapping, seismologic investigations and hydrologic and climatologic data collection. Commencing in January 1980, CIRI/H&N, acting under contract to Acres American, Inc. entered into agreements with KNIK/ADC-JV, a joint venture between the KNIK villa9e and the Ahtna Development Corporation, to undertake construction of :he main base camp near the Watana site on the north side of the Susitna River. Bids were received from two camp suppliers and a purchase order was subsequent~y issued to Arctic Structures, an Alaskan manufacturer of modular camp components, for the supply of the camp structures. CIRI/H&N provided camp design as well as overall management for the c~~9 construction, which included the purchase of ~11 camp equipment, miscellaneous structures and fuel storage facilities. The camp was designed to accommodate 40 people, with four offices and a recreation room. A warehouse is located alongside the quarters for the storage of large equipment. Transportation of the camp modules, the warehouse structure, fuel, equipment, and all building materials to the site was accomplished by all-terrain rolligons provided by Crowley All Terrain Company (CATCO). KNIF/ADC-JV first established a temporary camp at the site to house the construction personnel as well as supervisory staff from CIRI/H&N and Acres American, Inc. The camp modules were then erected on wooden cribbing which minimized ground disturbance and permitted subsequent re-levelling. The warehouse structure was placed on timber footings. A prefabricated POL berm was purchased and erected at the site for containment with a total storage capacity of 160,000 gallons. Fuel was hauled to the site in tanks on the CATCO units. Three helicopter pads were constructed near the fuel dump. Camp construction had been essentially completed by April 15, 1980. A communications base station including a 150-foot communication tower was installed at the camp. This facility includes equipment for local radio communication to 20-watt portable radios in the field as well as ground-to-air radio for aircr-aft operations in the area. Day-to-day operation of the c~np is handled· by a full-time staff of four, consisting of a cook, cook•s helper and two maintenance people. Problems were experienced with poor site drainage and well-water shortage. Remedial work was done to improve the drainage situat1on and an overland pipe was installed to draw addition a 1 water from a nearby 1 ake to augment the water supp 1 y. During the periods of peak field activity, the number of field personnel exceeded the camp capacity. The overflow was accommodated in the nearby 1odges at Stephan Lake and High Lake as well as tent camps. It proved to be more cost effective to utilize these lodges than to build a larger camp. ' " ·~ '• I .1' J J ' ' ·t ··I • 1 I I I I I I I I I 7-2 Acres American engaged two local companies, Era and Akland, to provide helicopter transportation from Talkeetna to the camp and for all the field work taking place within the Susitna Basin. The total helicopter support services provided during 1980 amounted to about 4000 flying hours. Much of the time three helicopters, a 205 Bell (Huey), and two smaller Jet Ranger 206's were used. The larger craft was required to transport the geotechnical drilling equipment to the dam sites. Additional helicopter support was called in when required to meet peak demands. The field activities conducted during 1980 involved a large number of technicians, scientists and engineers from the University of Alaska, local engineering companies and many others from as far as California and New York State. It is estimated that a total of 6270 man-days of field work was under takeno During peak periods, there were over 56 people in the field. Surveyors from R&M, Inc. spent much of the year surveying in the horizontal and vertical control network from Gold Creek through the Susitna Valley to the Dena 1 i Highway. They a i so put in the ground cant ro 1 for the air photography and mapping work and surveyed cross sections on the Susitna River between Talkeetna and Portage Creek. Hydrologists, also from R&M, undertook periodic field excursions to collect data, to install water level recorders, automatic climatic stations and snow depth markers, and to undertake streamflow and sediment gaging. The U.S. Geological Survey (USGS) and the Soil Conservation Service (SCS) are also actively involved in stream gaging and snow depth measurement. Seismologists from WCC installed and operated a microseismic network involving ten seismographs located near the dam sites. All earthquakes recorded by this equipment were transmitted by radio to the base camp where the tremors were recorded on strip charts. Teams of geologists from Acres, wee and R&M undertook extensive geologic reconnaissance mapping in the basin, evaluated several hundred surface lineaments to determine whether they had any potential for generating earthquakes, conducted geologic mapping of the dam sites, supervised exploratory diamond and auger drilling at the dam sites and potential borrow areas and supervised seismic refraction surveys. A major group of people in the field consisted of the environmentalists who, managed byTES, were engaged in base line data collection. TES assigned full-time field coordinator to assist with the groups from ADF&G engaged in the study of furbearers, non-game mammals and birds and large game. Groups from the University of Alaska were engaged in archaeological and land use and recreational 9lanning studies. Members from the University and TES are engaged in vegetation 1nappi ng and habit at description studies. Should the State decide to proceed with the project, the 1981 field activities will involve an even larger data collection effort. Most of the programs started during 1980 will be continued and some will be expanded. All this information will be required to refine the details of the Susitna project outlined in Section 9 during the latter part of 1981 and early 1982 and to. produce the FERC license application documents by June 1982. The following sections describe in detail the engineering data collected and the results of the analyses of this information undertaken to date. The environmental studies are dealt with in detail in Chapter 10. I I I I I I I I I I I I ·'I I 1 .. · 1/ ' I I ,J I I I I I I (. I I I I I 'I .... ~ - 7-3 (5'. PI Cll.JRES OF CAt,lP FROM THE AIR See Slides fe:---el\.1.. . ·"" J.{~ '· _; tAJ_ C.~ ( .. ---·-~-... -~..--,.,.. .. <~~..,_,.,_.., ·..:~':!'lll.o ... ,.~,~~·~-·-·· ... 11 • (:: I ]. , ' J ~ j I 1 ~ I ,, i I t ;f ! i . 1 I , I 1 I I I ,I . j I J ~~ ~ l ' PICTURES OF ENVIRONr·1ENTALISTS AT i~ORK See Slides 7-4 (i ,_, I I I I 'I ,. I I I I I I I I I I I 11 1 !f) ·r:;l <, ,.,.,;l r~"-"'""'·, I •• I I I I ;1:, 'i I I I I I I '1-',f , I . I I I I 'I ... 7-5 (b) , .. PICTURES OF DRILLING ACTIVITY See Slides I 1 ·: . . . •' I • ,~ ~·MtWt&ttl t 'f}MM·&ttWNfNi'"#OiH~ . ~·. i \:'~ ; .. ' - - 0 ~ ~ ~ ~ \.-' ..... \.)· ~ ..._ ~ ~ ~ ............ ........ \)· ~ ' ' . l !\ l! u •P l ( " u n u n li f( LJ r J r ~ 6,1 .. [] 0 r ·\ 'i _j n u ~ r. !rr ,_) l.A l ( -· ~ r, i 1 i ' I I !~ .-J ( I I I '11 ll I ! I Jj 11 .11 .I I 'll 7-6 7.2-Technical Data 7.2.1 -Hydrology and Climatology Prior to 1980, the USGS operated eight gaging stations on the Susitna River (see Figure 7.1). The longest records which extend over 30 years are at the station at Gold Creek. Two of the stations, the Susitna River station near Cantwell and the Chulitna River station near Talkeetna, were discontinued in 1972. Partia 1 and short records also were collected at some of the small tributaries of the river. During 1980 APA funded the USGS to reinstate the gage on the Chulitna and that on the Susitna at Cantwell and to install a new gage on the Susitna at the Parks Highway bridge anG one on the Yentna near its confluence with the Susitna. R&M Consultants are operating a gaging station at the Watana dam site and are also conducting supplementary sediment gaging at several USGS stations. Data obtained from the pre-1980 USGS stations was analyzed to obtain a general idea of the annual flow contribution of the various major Susitna tributaries. Figure 7.2 illustrates the results of this analysis and shows the contribution of the tributaries to the total annual river flow at the Susitna gaging station. The contribution of the Upper Susitna Basin; i.e., that portion which would be affected by the project, amounts to less than 40 percent of the total Susitna flow just downstream from the Talkeetna confluence and decreases to less than 20 percent of the flow at the mouth of the Susitna. The Susitna River exhibits two distinct seasons of flow: the high spring and sumner flows augmented by snow and glac~al melt and heavy rainfall, and very low winter flows. Roughly 90 percent of the annual flow at ~c1d Creek occurs in the 6 months bet~~een May and October. Most of the sma 11 er tributar-ies do not sustain winter flows. Typical seasonal distributions of flow of the Susitna River at Gold Creek for typical dry, average and wet years are shown in Figure 7.3. The seasonal flow distribution is out of phase with electrical demand in the area. Maximum power demands occur during the winter months when the river flow is the lowest and vice versa. Thus, any hydroelectric development on the river requires extensive "seasonal" storage of summer flows for power generation during winter. Statistical analyses of flood flows in the river were performed to provide input to the design of spillways and construction diversion facilities. These analyses incorporated a regional frequency analysis of flood peaks recorded in the Susitna and neighboring basins to check the accuracy of the results obtained from the flood frequency analyses at the stations near the proposed Susitna project; i.e., at Gold Creek and Cantwell. The results of these analyses were then used to estimate design flood peaks for the various dam sites under study. Typical 1 in 10,000 year flood peak values for selected locations are shown in Table 7.1. \ \ \ ~ 't.~ 2 - ] \ ;. ~·~· --------~-----l~·----- • . ! • ' • • h tl i- I \ \ ' ·• I I t ~ ~ '"' .J ~ . ~ ~ ~ ': !:1 ~ ~ ~ ~ ?! ,. ! ~ . I • • • • ..... .... , < 'l~ I ~~ \ ~ jJ \ • { (1 t i\_.:. l. ! ~ ~ '-~ ~ " ~ • l ~ • ~ 111 l ~ ~ 8 ~ ~ • -u ... ;j = ~ ~ • llr I i ~ = ~ ' -c __ .· ) li . • • I I c • L ,. ' ~~ ... .:... r-. n:r ~ ~ ~ ~ ' ..., ..J <:" ~ ~ ~ ~ ~ ~ ~ -~ A c:t J ~ .. . .. C~TNA RIVER _______ ,. ... ··----- !~0% COOK INLET TRIBUTARIES SUS,TNA STATION 47670 CFS RIVER FLOW CONTRIBUTION OF TRieUTARIES ,.FIGURE 7.5! ,-.... .r' n I .r ... * ti -> w a: d z :E a: 0 u. Calculations SUBJECT: 0 0 0 0 ~ 0 0 0 E) - 7-9 j -· JOB NUMBER _______ _ FILE NUMBER ______ _ SHEET _____ OF ___ _ aY DATE __ _ APP DATE ttl f- 2 - 0 r1 cr i ' ;! 1.U ·~· J 7-10 Any dam project on the Susitna River will have a pronounced effect on the natural ice regime at the dam a.nd reservoir site and for some distance downstream. Once a project is commissioned, surface freezing of the reservoir and of a certain downstream reach of the river will be delayed due to summer heat trapped in the reservoir. Jl.lso, the level of ice cover downstream of the project will be increased due to the ice formation taking place at regulated winter flows which will be significantly higher than naturally occurring flotNS. Also, due to the ice, special provisions will have to be incorporated in the design of the structures assocjated with the project. During construction, the cofferdam crest levels will have to be set high enough to ensure that, should ice jams occur, the dams will not be overtopped. Spillway gates must be designed to withstand additional ice forces. River ice is important from both an environmental and an engineering viewpoint. Detailed field data collection programs and studies are underway to identify problem areas and develop mitigation measures. The field programs involve extensive observation of current freeze and thaw processes. This data will be used to calibrate computer models which car. be used to predict the ice cover regime under post project conditions. It will then be possible to anticipate potential problems and develop solutions to them. 7.2.2 -Site Exploration and Geology Regional Geology and Physiography The Susitna Basin lies within the Talkeetna Mountains geological area. This area has a complex geology and a history of at least three periods of major tectonic deformation. The oldest (250-300 m.y.b.p1) volcanic flows and limestones are overlain by sandstones and shales dated approximately 150-200 m.y.b.p. A period of upheavals approximately 135-180 mny.b.p. resulted in large diorite and granite intrusions which caused intense metamorphism. This was followed by marine deposition of silts and cla\'s. The argillites and phyllites at Devil Canyon were formed during this sequence of events (Reference 7.1). A large amount of the faulting and folding of the Talkeetna Mountains occurred in the late Cretaceous period (65-135 m.y.b.p.). As a result of this faulting and uplift, the eastern portion of the area was elevated and the oldest volcanics and sediments were thrust over the younger metamorphics and sediments. The major area of deformation during this period of activity was southeast of Devil Canyon and included the Watana area. The Talkeetna Thrust, which is discussed in the following section, was one of the major mechanisms of this overthrusting from southeast to northwest. The Devi 1 Canyon area was probably deformed and subjected to some tectonic stress during this period, but no major deformations are evident at the site. 1million years before present .,,.., u • 4 7-11 Currently, studies arG being conducted to review, and if necessary, to refine, the probable maximum flood estimates previously undertaken by the COE. TABLE 7.1 ONE IN 10,000 YEAR FLOOD PEAKS Location Flood peak in cfs Watana Dam Site 155,000 Devil Canyon Dam Site Susitna River at Gold Creek Precipitation 175,000 185,000 Figure 7.1 shows the location of climatic stations where precipitation data is being gathered. All the stations within the Susitna Basin upstream from Talkeetna were installed by R&M only during 1980. These stations are all fully automatic and collect information on temperature, precipitation, solar radiation, wind speed and direction, relative humidity and barometric pressure. The only long term National Weather Service data is available at the Talkeetna and Summit stations. Also part of this study, the snow course station network of the SCS has been expanded in the Upper Susitna Basin. R&M is cooperating with the SCS in obtainin~ data from four new stations. Temperature There are no temperature records available pr1or to 1980 at or near any of the dam sites. The closest locations at which temperature has been recorded are the climate stat ions at Ta 1 keetna to the south and Summit to the north of the dam sites. Typical temperature records observed at the two stations are shown in Table 7.2. The temperatures at the dam sites should fall somewhere between the values at these two stations. Minimum temperatures occur in January and could average around 5 oF at the dam site. Such low temperatures for prolonged periods of time will require that special consideration be given in the design and construction of the projects. For example, concrete structures would have to be designed to cope with high stresses induced by the cold weather, and special high quality frost-resistant concrete would have to be used. Permafrost in foundations would have to be treated and the placement of ·impervious fill in dam embankments wi 11 nut be possible during cold weather; thus construction schedules will be affected. I I I I I I I I I I I I l1 I . ,j ' . ' 1~;:.;', r: f .'}. ·l; I ~; [! IJ 11 u ll l·>t .. 1 l 'J u u IJ ,(1 u IJ 7-12 TABLE 7.2 RECORDED AIR TEMPERATURES AT TALKEETNA AND SUMMIT IN oF Talkeetna Station Summit Daily Daily Monthly Daily Daily ~1onth l y Month Max. Min. Average Max. Min. Average Jan 19.1 .4 9.4 5.7 -6.8 .6 Feb 25.8 4.7 15.3 12.5 -1.4 5.5 Mar 32.8 7.1 20.0 18.0 1..3 9.7 Apr 44.0 21.2 32.6 32.5 14.4 23.5 May 56.1 33.2 44.7 45.6 29.3 37.5 June 65.7 44.3 55.0 52.4 39.8 48.7 Jul 67.5 48.2 57.9 60.2 43.4 52.1 Aug 64.1 45.0 54.6 56.0 41.2 48.7 Sept 55.6 36.6 46.1 46.9 32.2 39.6 Oct 40.6 23.6 32.1 29.4 16.5 23.0 Nov 26.1 8.8 17.5 15.6 4.0 9.8 Dec 18.0 .1 9.0 9 .. 2 -3.3 3.0 Annual Average 32.8 25.0 River Ice Conditions The Susitna River usually starts to freeze by late October. Ice characteristics such as thickness and strength vary according to the river channel shape and slope and, more importantly, with river discharge. Periodic measurements of ice thicknesses at several locations in the river have been carried out during the winters of 1961 through 1972. The maximum thickness observed at selected locations on the river are given in Tab'l e 7. 3. TABLE 7.3 MAXIMUM RECORDED ICE THICKNESS ON THE SUSITNA RIVER Location Susitna River at Gold Creek Susitna River at Cantwell Talkeetna River at Talkeetna Chulitna River at Talkeetna Maclaren River at Paxson Maximum Thickness in Feet 5.7 5.3 3.3 5.3 5.2 During the winter, the ice performs an important service to the particularly moose and caribous as it allows them an easy means the river. ~ce breakup in the river commences by late April or and ice jams occasionally occur at river constrictions. wildlife, to cross early May li I 1 I ll I ,I 7-13 The dioritic pluton that forms the Watana site was intruded into sediments and volcanics about 65. m.y.b.p. The andesite and basaltic flows near the site may have been formed immediately after this plutonic intrusion. The area surrounding the sites was uplifted as much as 3000 feet (20-40 m.y.b.p.) Since then, widespread erosion has removed much of the older sedimentary and volcanic rock. During the last several million years~ at least two alpine glaciation periods have carved the Talkeetna Mountains into steep ridges and peaks and broad glacial plateau valleys. Continued uplift during this period induced continued downcutting of streams and rivers resulting in the 500-to-700-foot v~shaped canyons at the Vee and Devil Canyon dam sites. Virtually all streams and rivers in the region appear to be actively downcutting, and this process has removed much of the glacial debris at higher elevations, with little alluvial deposition. The resulting landscape consists of barren bedrock mountains, glacial till covered plains and exposed bedrock cliffs in canyons and along streams. Geotechnical Exploration The current study incorporates an extensive geotech .. ical exploration program at both dam sites to supplement the information gathered by the COE and other ear-lier ·investigations. ihe 1980 field program at the Watana site involved geologic mapping, core drilling, and auger drilling. Three deep core holes were drilled in the dam area~ Borrow areas were explored with 15 auger holes. Site geologic mapping was conducted both by Acres and R&M personnel and involved measurement and description of outcrops, aerial reconnaissance and air photo interpretatiol'l. Approximately 15,000 ft of seismic lines was run through the proposed dam site site, and another 6000 ft was used to delineate the boundaries of the relict buried river channel on the right bank of the river upstream of the dam site. The auger drilling and a further 5000 ft of seismic lines in potential borrow areas provided additional information on the availability of borrow materials. Three core holes were drilled at Devil Canyon during 1980. One hole was drilled at the location of a suspected fault under the lake situated on the left abutment, and 2200 ft of seismic line was run in this area to assist with delineation of this potential shear zane. However, none of this information is as yet conclusive. The two other holes were drilled in the right abutment to determine abutment conditions. Two auger holes were drilled in the large gravel bar just upstream of the dam for the purpose of further exploring the availability of borrow materials. The information obtained from the dam sites to date has not indicated anything that would make the construction of the large dams and underground facilities infeasible. The rock type and characteristics at both sites are suitable for both large fill or concrete dams. While permafrost is prevalent at Watana and may exist sporadically at Devil Canyon, the temperature of the frozen ground is conducive to thawing by conventional, proven methods and is not considered likely to be a major 1 I I I I I I I I I I I I I . . .. :~ lr···."' t•' I'' j IJ IJ I I I I I ·.I··. .' . .. I I I 7-14 problem.. Likewise, indications are that conventional support systems and grouting around underground openings in conjunction with installation of grout and drainage systems will suffice to ensure stability and safety. From the information obtained to date, it appears that adequate amounts of construction materials are available at Devil Canyon for a concrete dam. Adequate sources of material are available at the Watana site for a fill dam with either a rock or a gravel shell. However, further field investigation and laboratory testing are required to locate the most economical sources. The 1981 field program will take into account all available data from previous investigations, on-going geologic studies by Government agencies in the area and the 1980 program results. It is designed to provide sufficient data to establish the feasibility of constructing the dams and the power facilities at the two sites from a geotechnical point of view. The program will incorporate the following elements: ( 1) Watana ~ determination of the location of the most economic construction materia 1 sources and their eng i neer·i ng properties; ~ definition of conditions at the intersection of the buried channel on the right abutment and the current river channel to evaluate the potential for leakage; -improved definition of suspected shear zones within the dam site and their impact on location of project components such as spillways, diversion tunnels, powerhouses and penstocks and appropriate foundation treatment and rock support requirements; detailed evaluation of the two major shear zones -11 The Fins 11 upstream from the dam and "Fingerbuster 11 located just do\vnstreamj -delineation of the geologic contact between the diorite and the andesites adjacent to the dam so that the potential impact of this contact is incorporated in the location and orientation of undergrourtd excavations and support requirements. (2) Devi~l Canyon -determination of the engineering properties of the construction materials for both concrete and earth structures; -additional core drilling in the abutments at lower elevations to determine typica1 rock conditions, permeabilities and shearing strengths; ·· additional drillinq across the river to determine if a fault exists down the length ofwDevil Canyon under the river; ll l l J l! ' IJ 7-15 a second angle hole on the left abutment to intersect the suspected shear zone on the left abutment; -additional field mapping to determine accurate bedding and joint orientations, to produce a structural geologic model of the site and to determine if any significant faults occur at, or very close to, the site. 7.2.3-Seismic Considerations The Susitna Hydroelectric Project is located in a seismically active area. That portion of south-central Alaska which surrounds the project sites has been termed the Talkeetna Terrane (Figure 7.4). This region, which includes most of the Talkeetna Mountains, is bounded on the north and west by the Denali Fault and Alaska Range. On the east, it grades into a relatively inactive, ancient zone under the C~pper River Basin, and is bounded in the south by the Castle Mountain Fault. During 1980, Woodward-Clyde Consultants conducted the first phase of an extensive regional and site seismicity and earthquake en9ineering study. As a result of that study, the two major boundary faults, namely Denali and Castle Mountain which are considered by most seismologists to have experienced displacements in recent geological time, and the Benioff Zone (where the North Pacific Plate is being subducted under the North American Plate) were identified as the locat·ions outside the Talkeetna Terrane that could produce severe earthquake events. Within the Ta 1 keetna Terrane, numerous 1 i neaments and .suspected features were ·investigated. An office investigation of the entire area was conducted using all available air photos, satellite imagery and airborne remote sensing data. All features or lineaments in the site region that had been reported in the literature or were observable on remotely sensed data were identified. Further field study of those features that might have been caused by faults was undertaken as these could have significant impact on the project design from the standpoint of seismic potential or potential for surface rupture. Some features were studied during 1980 by air reconnaissance and spot checking on the ground. In addition, a microseismic network using 10 stations was installed and operated to collect microearthquake data for the site region. The geologic stud·ies and microseismic data were used to evaluate these features and resulted in designating 48 faults and lineaments as potentially significant and requiring further investigation. A further screening of these 48 features was done using more quantitative criteria, such as length of feature, distance from site and potential of surface rupture on the project location to evaluate their impact on the project design. The screening resulted in a short list of 13 features which have been selected for further study during 1981. On the basis of the current state of knowledge, the Denali Fault (65 km north of the sites) and the Benioff Zone (60 km below the sites) are designated as the most severe seismic hazards. The preliminary estimates I I I I I I I I I I I I [ 1 L.. I U) z ~ z ::::> ~v 0 ~ (!) ~~ fJ~ '7 ~~ ...._ ~ 1-~CJ w 1-0-<;. w "' z (/) <( z (.) 0:: w I -....J ....J I !IE ~ 0:: <( I wc::x:o (f) z u-z z I z-':::> -w w --'o w ....J I a:-(/) (f) I-(.!) I a.3: • I Cl) 1-I z (.) - I <( w 1- <t I z J :::> 0 1 0 :E cr: ....J I a.. <( v~ (/) :2: <( z .u ~ <! z (.!) I-z :.:> :.:> 0 :r: =:E u (./) ::::> <t (l) z • 1- l-z w w 0 ~ >-....J z ~ <( --· () _J -> w 0 11 I I E I I I I I I I 7-17 of the maximum credible earthquakes on these features suggest a magnitude of 8.5 (Richter) for each case, resulting in high seismic accelerations for Watana and Devil Canyon sites. Assuming that these earthquake events are postulated for the sites, mean peak accelerations as high as 0.4g can be extrapolated on the sites. Large dams have been designed to accoi11Tlod ate ground motions from relative 1 y 1 arge earthquakes c 1 o se to the dam. In California, ~dams are routinely designed to withstand ground motion from 7.5 to 8.5 magnitude earthquakes at distances of 20 k i lometE'~rs. Dams have also been designed to accommodate up to 20 ft of horizontal d~isplacement and 3ft of vertical displacement (Sherard 1980). The subject of Reservoir Induced Seismicity (RIS) was studied on a preliminary basis using a worldwide RIS study and the site specific information. The phenomenon of RIS has been observed at numerous large reservoirs by direct correlation of seismic tremors under or immediately adjacent to the reservoir. In recent years, this subject has drawn considerable attention within the engineering and seismic community. RIS may be caused by the increased weight of water in the reservoir or by the i~creased pore pressure migrating through joints in the rock and 11 lubricating 11 and hydraulically acting upon highly stressed rock. For a reservoir system to trigger a significant earthquake, a pre-existing fault capable of movement has to be located under the reservoir or within its area of load influence. The analysis of previous reported cases indicated a high problbility of RIS for the Susitna system on the basis of its rlanned depth and volume. However, most RIS is felt to be an earlier release of stored energy in a fault, so in serving as a mechanism for energy release, the resultant earthquakes may be smaller than if full energy buildup occurred. In no case studied has an RIS event exceeded the maximum credible earthquake that could be associated with a fault. Therefore, RIS does not affect the determination of design earthquake. In addition to further study of the shortlisted 13 features in the dam site region, additional work will be undertaken to assess in greater detail, the engineering parameters such as earthquake response spectra which can be used in the design studies associated with the projects. 7.3 -Selection of Dam Sites In selecting the basic Susitna schemes for input to the generation planning studies described in Chapter 8 a three-stage screening process was used. These stages included a preliminary screening in which all the obviously economic and environmentally inferior sites were eliminated from further consideration. This was followed by a more detailed screening using a computer model to determine the economics of various combinations of sites. The final step involved detailed computer model simulation of the various developments. During the initial, preliminary and detailed screening step extensive use was made of capital cost estimates presented in previous studies. Simultaneously, conceptual engineering layouts and cost estimates for several of the more promising s1tes were being developed. As this new information became available, the cost data was fed into the screening process. I ! I l l ·.! ~ I l 'f ' I I f I I I I I I I I j I J. I 7-18 The initial selection of the sites and the subsequent screening exercises are discussed 1n the following sections. Initial Site Selection In the previous studies of the Susitna Basin discussed in Chapter 4, twelve dam sites were identified in the upper portion of the basin; i.e., upstream from Gold Creek (see Figure 4.2). Figure 7.5 shows a profile of the river and the normal water levels associated with these sites. Table 7 ... shows which sites are mutually exclusive and which can be grouped to develop the potential of the basin. Subsequent study of these sites indicated that they covered the total basin potential and no additional sites were evident. All relevant data concerning dam type and capital cost, height, power and energy output was assembled and is summarized in Table 7.4. In obtaining the information for these tables, the latest source of information was used in each case. At the Gold Creek, Devil Creek, Mclaren, Butte Creek and Tyone sites, no new engineering or energy studies were undertaken; only data from previous studies was used. Costs were updated to 1980 levels. The results of the engineering and cost studies at other sites were used as an aid in reviewing these costs. For all the other sites, new conceptual engineering layouts and the capital cost estimates have been revised using calculated quantities and unit rates. Layouts developed during the site selection process are shown in Figure~ 7.6 to 7.13. These layouts are conceptual and do not represent definitive and optimum project arrangements at the sites. They ~o, however, represent feasible schemes and provide a basis for a reasonable cost estimate of developing the sites. Initially, all sites were developed to their fullest extent; i.e., the dam heights are set close to their practical upper limits. The cost of energy listed in Table 7.4 was calculated using the economic parameters outlined in Chapter 5 (3 percent interest rate, 0 percent inflation, and 50-year economic 1 if e). The results in Table 7.4 clearly show that High Devil Canyon and Watana are the two 1 argest and most economic energy producers in the basin. Other sites such as Devil Canyon, Olson and Gold Creek are competitive provided they have additional upstream streamflow regulation. Sites such as Vee and Susitna III are medium energy producers although somewhat more costly than the larger dam sites. Sites such as Denali, Mclaren and Tyone are expensive compared to other sites. Preliminary environmental impacts associated with the various dam sites were derived from a review of available information and from the results of field reconnaissance trips. The type of information assembled is general in nature, but does serve to rank the impacts at the various sites. To facilitate synthesis and presentation of the environmental information, the river is divided into six study reaches starting with reach A at the downstream end and finishing with reach F located upstream of Denali (Figure 7 .4). Within each of these reaches, the environmental aspects are assumed constant for the level of stud" at this stage. The major envitonmental features for each of these reaches are summarized as follows. "; .. , I I I .I I .I I I ~ ~ f! . ! !P l k._.r ' flJ , I I I I I I . I I I I I I ~I ' I I I I I 7-19 . ·. .. ... •• ... .. ,• • I ·• " • • . . . . .. . . . . .. . .. ! .... . . . . . . . . •. . . . . .. . . . .. . . . . . . . . ·.. . . "' .. . . . .. . . . . . . . . . . . -· . PORTAGE CR, · • . . . . ·. . . . . • : ..1 ...... .. --_. .. . ·. IOfJ •. ' · 120 . . . . . .1: • : . . . . . . . . . • -'IIIIi:.'·-. . • • ' ., : ..... • • ! •. : •. • • • . . . . .. . . . , . . . : • t ·• . . ---. .. •• . 1-f \ <t . : • •:;;;:: ,_ .. • u; : . • :J . ..~ I (/) ,• t ' -• • '2:: :'. .. §!. . •:z <( u . • • . . . • .. . i ... -~ . . .. -~~ .. ' .. . . ,. . . •' .. . ' ~ ... .. . .. I!I!J· ·t&JI .. w&J·-~ •.. an. Mif. · ~14f • ~ ~. • • l. • • .... • • ·-• • • ,. • p • l t f ! t ,; t 1-• ·•I OSHElNA RIVER . . \ I • I • L •• • •. !., • ~·. : : . · .. . . . .. . . . .. . "' . .. r----·__,· 2000' . I t . . . . . 11 I J :-TYONE RIVER ,-..-:----.·---.&... _._ 2 00 0 I . . . . ~· .~ MACLAREN RIVER .. 220 . .. . . ~ ' 240 . . ·.· 1500 1 280 . .. NOTE:_.' ~igure to be changed to i !JC~rpora te only ·dam X eights previously studic~~ . . . . ..... . . . . . . . . . . . . . . • • . . .. . . . . . . . . .... '. : -· I .. .. • . .. . . . . ~ . . SUSITNA HYDROELECTRIC PROJECT !"" _ , . _ .... . . _ . . o E s, aN o EvE La r M EN r 1 .~ n ~ r; i--•r 11 -ll-. ,. .. d ' ... i 1 • 0 i ~ - I i : ! I I a l ~ \. I ~ • ~ ' c• .. . ... ·. I I 1: 1.'21i.il • \ \ "l. ' I . . ...... ! I ; !~ l " i I I I J I 1 4 l , l ~ ., J l .. • i ~· •! , .. .. , ... 1= .a ,_ ... 014'YA'I~~ .J "'"" I , . -· I ~ ... ·~~ . ~·" .... I ' i ! ~ : ,. \ ,.. ·----r- ...... , .,, • ... , _, -.. i·~s . -. , .. . ' .. ~ -.. . -. . • ; . .. ... . . • . ·' .. • ': .. .. 'lo ;. •• .. \ • ., • :. I s ~ ~ • . . Q; -~ . ' ! . ' . ; . . -i ~ • i ' • .. I J • • • . • I ! .. g ! ·. .. .. . .. . <I . .. It . \ \ ·-;, ~ a u :1 u Cl 4 \. t .. t i w a __J (/) ~ <! Cl w 1-w 0:: u z 0 u I z 0 >-z <t u -' -> w a oc.c ... ./ ;, .. , . . . .... -: '-... .. . ' \ ~ • s --· ..... ! -··· •• ! ' -...... ' ., . '"'-· ... ~ .. - -'ni'IU"' ....,r ·~-..._,.,.. . '· .. _ .. .. ... --·- • • •• _ .. --.... ___ .... , 0 0 I I' I f .. I I ' ,I I --- • ••• : 1 . ) . I i I . l : • l • 1 ' • t • ' l .. ,, / / . / ~ I J a. \1 .n ... ,. I ' .. . , . l ~ • . i a : • h . .. 7-22 ~ I ~ I ( l l t I • I I : /' I . f j • I ~ ..... 01.&..,.....,.. I , \\ \ \ '\ ~ ~ ,. .. .. • I t; • ..1 --~ 1 ... " • l fl oil ~ • .. • li }l ·' 1" ;I •• •• \ I \{ I • • ~ . a I .... ~ ,, I ~ 4 i· . 1 J i ,.. i I ... f2 "~l t~~\ 7-23 -1 i .. "' "' ~~ ' a • I ' '-.,) I -l..L •• ... -A ,__ '""" :o Ia • .. Q. • f • .. J • ~; ~ i • f I 4:3, .,_, _, a. § . • 1 j z 0 >- ~ l J z <t " ............ -c. ....... ...,..,. u _J -> w 0 . :c (.!) - "' :r: .. .. .. II . ' \ \ . 0 0 "' "! • \ 1J· 1 1! l l' ;. y .. . " . j i 4 f .. l Lt\ ) \ -=-j -A.-~ _i· ~ J i A .urt•.... v • ou . ., .... ,. ,. J ( j ~ c ' I .. -:1 -I 1 -il ~ ~ J I ~ ~~ j ! : : • -'!. . \ " t • . .. , t ~. :1 ji H li H ... •' t! ,. A• li H IJ 7-24 ~ I· tV :. "f ' ~;\ , ... : ' ~~ • • " ' \..C ,' I I I .I I I I ,. I I I I ,, I I .I I I I 7-25 SUSITNA III LAYOUT I :~ ,..., FIGURE 7 .W- 7-26 •• . ' • • • ' . .. . ., • .... .. -.:., . '-. . .._ • . .. '} • .. ~. . .... . · c .. u til" r; . . . .. . . I ..... :.. . .. .. ) . '·· ' . . . ·,.J ,~ .-..... ~ -. --- t~ ~~ ..., 6 ;: • •.J'. \.1.1 J v; 4 ~ .J 4 ~ . 0 ~ .... • i I I I I .· 'I I I I I I I I I I I I I I .I I I I I MCLAREN / r~ .. - FIGURE 7 • ~ 7-27 ·I .I I I I I I I I I I I I I I I I I I DENALI \ '.J FIGURE 7 .~ 7-28 I •• I I I I I I ll ll D '11 D ·~ 01 tl r~: tJ Reach A -Talkeetna to Devil Canyon Under existing conditions, salmon migrate as far as Devil Canyon, utilizing Portage Creek and Indian River for spawning. The development of any dam downstream of Portage Creek would result in a loss of salmon habitat. The necessary FERC license and permits for such development would probably be difficult to acquire. Reach B -Devil Canyon to Watana 7-29 The concerns associated with development in this section of the river relate mainly to the inundation of Devil Canyon, which is considered a unique scenic and white water reach of the river, and has dam safety aspects associated with the occurrence of major geological faults. In addition, the Nelchina caribou herd !1uS a general migration crossing in the area of Fog Creek. Reach C -Watana to Vee There are concerns 'tlhich relate to the loss of some moose habitat in the Watana Creek area and the inundation of sections of Deadman and Lokina Creeks. Other aspects include the effect on caribou crossing in the Jay Creek area, and the potential for extensive reservoir shoreline erosion and dam safety because of the possibility of geological faults. Reach 0 -Vee to Maclaren Inundation of moose winter range, waterfowl breeding areas, the scenic Vee Canyon and the downstream portions of the Oshetna and Tyone Rivers are all potential environmental impacts associated with this reach of the river. In addition, caribou crossinq occurs in the area of the Oshetna River. The area surrounding this section of the river is relatively inaccessible and development would open large areas to hunters. Reach E -Maclaren to Denali Environmentally, this ar~a appears to be more sensitive than Reaches B and C. Inundation could affect grizzly bear denning areas, moose habitat, waterfowl breeding areas and moist alpine tundra vegetation. Improved access would open wilderness areas to hunters. Reach F -Upstream of Denali This area is similar to Reach E with the exception of grizzly bear denning areas. Human access to this area would not impact to the same extent as in Section D and F. However, due to the proximity to the Denali highway, the inflow of people could be greater. This information was used in Table 7.5 for environmental site ranking. Environmental impacts are divided into three basic categories; i.e., biological (impact on fish and wildlife), social (local and regional impacts) and institutional aspects which include licensing and permitting requirements. a ll Q JJ 1l ll Jl ,,_, ' 7-30 TABLE 7e5-ENVIRONMENTAL RANKING OF SITES River Section Gold Creek Olson (Susitna II) Devil Canyon Devil Canyon (Susitna I) Devil Creek Watana Susitna III Vee Mclaren Denali Butte Creek Tyone Degree of impact: Preliminary Screening Biological Social Fish Wildlife Local Reg. Institutional Overall M M L L L L L-M L-M L-M L L L M M L M M M-H M-H M-H M-H M-H M-H M-H M L M L M-H M-H M-H M-H M-H M M-H L-M M-H M-H M-H M M L-M M M L-M L-M L-M H L: Potential for Low Impact M. Potential for Moderate Impact H: Potential for High Impact X Potentially Unacceptable X X M M M M M-H M-H M-H M-H M M-H M-H M-H M M M M M-H r~-H M M M M-H To reduce the number of sites for further detai 1 ed study, sever a 1 were screened out. The screening criteria used included energy cost and potential environmental impact. In cases where a site was an alternate site for a main site the information about the alternate site would be generated only if the main site is in the optimal development scheme. This exercise resulted in the elimination of the following sites. I I I I I I I I I I I I I n l \ k. _ _,i I I I I I D II I 11 D Jl JJ 1l 'f~ Wl ll· .. · . . ., ' ' .r.·~. ~ r.·r. w: 7-31 Devil Creek -This site is close to and for planning purposed can be assumed to be an alternative for the High Devil Canyon site. Butte Creek -This site is close to and alternate for the Denali site. Gold Creek and Olson -Severe problems would be encountered in obtaining an FERC license because of the potential environmental impact, particularly on anadromous fisheries. Tyone -Relatively low energy and power potential and anticipated severe env1ronmental impact. Detailed Screening A special computer screening model was developed to undertake the next, more detailed screening processes. Basically, the model selects an optimum basin development scheme for a given total basin power and energy demand; i.e., it will select the sites, approximate dam heights and installed capacities. Input to the model takes the following form: Streamflow -Representative streamflow for a typical dry year and an average year is provided as an average flow for the 6-month summer period and the 6-month winter period. Site Characteristics -For each site storage, capacity versus cost curves are provided. Thesecurves were developed from the engineering layouts presented in this section. Utilizing these layouts as a basis, the quantities for lower level developments were determined and used to estimate the costs associated with the low levels of development. Because of the importance of the Watana and High Devil Canyon dams, engineering layouts were developed for intermediate levels of these dams. For each model run, the total power/energy demand is specified. A review of the energy forecasts discussed in Chapter 5 reveals that between the time a Susitna project could come on line in early 1993 and the end of the planning period, 2010, approximately 2200, 4250 and 9570 GWh of additional energy would be required for the low, medium and high energy forecasts, respectively. In terms of capacity, these values represent 400, 780, and 1750 MW. Based on these figures, it was decided to run the screening model for the following total capacity and energy values. Run 1 -400MW - Run 2 -800MW - Run 3 -1200MW - Run 4 -1400MW - 1750 GWh 3500 GWh 5250 GWh 6100 GWh Runs 1, 2 and 4 were selected as these represented realistic increments in capacity in terms of anticipated local growth. Run 3 was selected as it represents the maximum yield of the High Devil Canyon-Vee development plan which is, as demonstrated by the results below, a highly competitive scheme. 7-32 The results of these runs are shown in Table 7.6. Because of the simplifying assumptions that are made in the screening model, both the best and second best solutions from an economic point of view are presented and studies in more detail follow. System Simulation As is evident from the screening studies described above, the most econom1c Susitna development plans involve either Watana and Devil Canyon or High Devil Canyon and Vee. To study these developments in more detail a mult~reservoir, monthly computer model was used to simulate the energy yield of these plans. The computer mode 1 simu 1 ates, on a month 1 y basis, the energy production from a given system of reservoirs for the 30-year period for which streamflow data is available. The model simulates daily peaking operations if these are required to generate the necessary peak capacity. All the model runs incorporate preliminary environmental constraints. Seasonal reservoir drawdowns are limited to 150ft for the larger and 100ft for the smaller reservoirs; daily drawdowns for daily peaking operations are limited to 5 ft and minimum discharges from each reservoir are maintained at all times to ensure all river reaches remain watered. These minimum discharges were set approximately equal to the average natural low flows at the dam sites. Two types of operating modes were considered. In the first set, large capacities were installed at the various dam sites and the plants were allowed to peak on a daily basis. These schemes were operated at a total combined plant factor of around 50 percent. In the second set, it was assumed that no downstream peaking was ;llowed because of either environmental or ice cover stability considerations. In these runs, the downstream generating plant in each case was not allowed to peak and would generate at constant rates during individual months. The upstream reservoirs were allowed to peak. The more important plans considered, together with their associated capital costs, energy and power production and water level and discharge fluctuations; are summarized in Table 7.7. In all cases, the costs include access road and transmission line costs, engineering fees and owners' administration but do not include allowance for funds during construction. Some of these results are plotted in Figure 7.14 which provides easy economic comparison between the schemes. The table of results shows that additions have been made to the basic schemes selected by the detailed screening model. To allow allow peaking operations from the first stage, Watana or High Devil Canyon dams downstream re-regulation dams were incorporated. In the case of the Watana project, allowance has been made for a small dam located somewhere downstream. Further studies will determine whether it would be feasible to utilize such a dam as one of the Devil Canyon cofferdams. In the case of High Devil Canyon dam, a more substantial dam incorporating generating facilities has been incorporated. To overcome the deficiencies of the Olson site, this dam is located just upstream from Portage Creek and is referred to as the Portage Creek site. l. J ] 1 I I I I i r: l --- 3 4 - Ru:.~ NO. 1 2 --... .. ... l ._, --... -... ' ' ------ TABLE 7.6 SCREENING MODEL RESULTS ----OPTIMUM SOLUTIO 1-------; ----NEXT BEST SOLUTION~--------- TOTAL DEMAND (MW) 400 BOO 1200 1400 SITE Watana High Devil Canyon Watana Devil Canyon Watanna Devil Canyon MAX. WATER LEVEL (Ft) 2060 1750 2200 1450 2200 1450 INST. CAPACITY (MW) 400 800 BOO 400 BOO 600 TOTAL COST 9 $x10 770 1320 1350 B50 2210 1360 1040 2400 MAX. W\TER SITE LEVEL (Ft) High 1640 Devil Canyon Watana 220 High 1750 Devil Canyon Vee 2350 NO SOLUTION INST. CAPACITY (MW) 400 BOO BOO 400 TOTAL COST 9 $x10 780 1360 1320 910 2230 NOTE: Above figures are currently being revised to reflect more recent cost estimates. ""'-J I w w . . -·· .. ~ • ' J • \ ' J ' ' . . t ~ . .. . .. 4 \ ·l Jl· : f. I . ·, l ' i. ~ ... .., . ~ ~ j, I . Incremental Operation Maximum Capital Cost Canst. Earliest Full Supply Seasonal Plant $ Mil lions Period* On-line level Dr a ~·Jd own factor Plan Stage Construction (1980 Values) Yrs. Date ft. ft. Finn Averane % ------· -- 1 1 L~atana 2223 ft SOONH 1860 9 1993 2200 150 2669 3252 46.4 2 Devil Canyon 1458 ft 600HH 1000 61, "'2 ±1996 1438 150 2640 2975 TOTAL SYSTEf1 1400NH 2860 5309 6227 49.9 2A 1 \4a tan a 2060 ft 400l1H 1570 8 1992 2000 100 1708 2109 60.2 2 Hatana raise to 2223 ft • 360 3 ' 2200 150 96! 881 3 Watana add 400MW capacity 130 3 2200 150 0 262 4 Dev i 'I Canyon 1458 ft 400ftiH 900 61. '2 ±1996 1438 150 2640 2975 TOTAL SYSTEM 1200N~l 2960 5309 6227 59.2 3A 1 Watana 2223 ft 400t1H 1740 9 1993 2200 150 2669 2990 85.3 2 llatan~ add 400l1H capacity 150 3 2200 150 0 262 3 Devil Canyon 1458 ft 40uNH 900 61, '2 ±1996 1438 150 2640 2975 TOTAL SYSTEt1 1200HW 2790 , 5309 6227 59.2 Incremental Operation t-1aximum Capital Cost Canst. Earliest full Supply Season a 1 Plant $Millions Period On-line level Dr a \'ld 0\'1 n Factor Plan Sta11~t Construction (1980 Values} Yrs. Date Ft. Ft. finn Averaf@ % 4 1 lHgh De vi 1 Canyon 1734 ft BOONH 1500 10 1994 1712 150 2546 3615 51.6 2 Vee 2348 ft 400MH 1060 7 2328 150 1323 1292 -- TOTAL SYSTEH 1200NH 2560 3869 4907 46.7 5 1 High ne~ri 1 Canyon 1630 ft 400Hl~ 1140 7 1992 1610 100 1849 2106 60.1 ~ High Oevi 1 Cany~m add 400Ni~ capacity ra&sc dam to 1734 ft 500± 3 1712 100 697 1509 3 Vee 2348 ft 400HH 1060 7 2328 150 1323 1292 TOTAl SYST£fr1 1200f1H 2700 3869 4907 46.7 6A l High Devil Canyon Start 17 34 ft 400t1H 1390 8 1992 1712 150 2397 2732 78.0 2 High D'evil Canyon 1:~} add 400NH capacity 140 5 1712 534 1276 P-ortage Creek 15ot1U 650± 3 Vee 2348 ft 400NH 1060 7 2328 150 1437 1536 TOTAL SYSTEH 1350HH 3240 4428 5544 46.9 •• !' 7-36 t-·· F'. r -: 1:-..:· . r• I L..:·· • .;... "' ~ . ,, '-I r<~ \: . : • ~ • .. ~ I <t t() -0 0 -1 <t <t ....J 0 a_ (.0 1'-~· ::z ~ <:t .. ....J a.. 0 :t 0 0 (0 ::c ~ 0 ~ ..Q~ 0 I() ' 0 ~ lO 0 I 0 >,.. 0 .. ~(' (~ a:: w !:> 0· z w 0 0 l'() __J <( .. • .. • :::::> z • • 0 z· --0 . 0 . <::( . C\1 • ' ' " • • 0 ' 0 0 -f , .. 0 ~ 0 0 "" 0 .. • -l ,-., fiOl X " . ' s r ~():\ f"'\ ' . •• I I ·t I I I :!f. I ·~ ,, at !l m ~ :!l ,,, (t ~ n r~ u D Installed Capacity: Watana Devil Canyon Re-regu 1 at ion TOTAL Average Annual Energy: Watana Dev i l Canyon Re-regu 1 at ion TOTAL Annual Firm Energy: Watana Devil Canyon Re-regulation TOTAL TABLE 7.8 TUNNEL SCHEME 3 2-30' Diameter 1-40' Diameter Tunnel Tunnel 850 MW 850 MW 300 MW 300 MW 30 MW 30 MW 1180 MW 1180 Ml~ 3192 3194 2053 2064 188 195 5433 5453 2833 2810 1925 1927 127 127 4885 4864 Watana-Devi 1 Canyon Dam 800 MW 400 MW ---- 1200 MW 3250 2977 6227 2669 2640 5309 7-37 t J •, I ~· ll ~ 11. l j· ~ [J 7-38 7.4-Tunnel Alternative to a Dam at Devil Canyon A long power tunnel could conceivably be used to replace the Devil Canyon dam in the Watana/Devil Canyon Susitna development scheme. It could develop similar head for power generation at costs comparable to the second large dam. Obviously, because of the low winter flows in the river, a tunnel alternative could be conce\ved only as a second stage to the Watana development. Four basic alternative schemes were developed and studied. All schemes assume an initial Watana development with FSL at 2200 ft and associated powerhouse with an installed capacity of about 800 MW. Figure 7.15 is a schematic illustration of these schemes. Schemes 1 and 3 involve development of the head represented by the Devil Canyon dam. Scheme 1 considers peaking through the tunnels, while Scheme 3 considers base load operation. Schemes 2 and 4 involve development of the full head A3presented by both the Watana and the Devil Canyon dams. These schemes involv~ locating the major portion of the generating equipment in the tunne 1. As before, Scheme 2 considers peaking through the tunne 1 s while Scheme 4 considers base load operation of the tunnel flow. The four tunnel schemes were screened and the best tunnel scheme was selected for further refinement and study. Costs, power and energy, geology and environmental aspects were used as screening criteria. Scheme 3 was se'tected as the most appropriate and detailed engineering layout and cost studies were undertaken. Figures 7.16 and 7.17 show the corresponding engineering layouts. Total project cost of Scheme 3 is $1,221,000,000. Detailed energy simulation runs also were undertaken using the same multi-reservoir computer program discussed in the previous section. A detailed comparison of tunnel Scheme 3 with the Devil Canyon dam scheme is presented in Table 7.8. A comparison of the costs of the dam schemes versus the tunnel scheme shows that the tunnel scheme is more costly. Due to the lack of available geologic information on the tunnel and inherent lower accuracy associated with estimating tunnel costs, the tunnel cost estimates are not as reliable as those associated with the dam schemes. A comparison of the potential environmental impacts associated with these two schemes revealed that the tunnel scheme should have a lesser effect than the twv dam scheme. This is determined by the much smaller size of the second dam involved (245 ft, versus over 600 ft), which produces flooding of minimum river length and terrestrial habitat, as well as a lower aesthetic impact. The tunnel scheme may, in fact, improve considerations for anadromous fisheries between the re-regulation dam site and Portage Creek due to the regulation of flows. One negative aspect of the tunnel scheme is that of the disposal of tunnel muck. An increase in costs of up to 1 percent may be required to dispose of the excavation material in an environmentally acceptable manner. ~ I ~ - I . 1 I ~ I :i '· I 2. ~ 3 l 4 ~· ! 1 I ~ .·! 4 ~ ' . ! .. } ~ . -\.; .. " .• ·-. ., --· .. ...; -----.. ·- ·---· ·-·· -··-· -·-·-··-. -· -· ··-·-·· ·- €..€,~ Cj~ Gr, ' ~i~ ?0 2-38 I ~ 'T!JN NELS ,_ __ ---------~~ . . . ~OMW _ DEVJL CANYON/ ~;:; DA\1SITE W.4TANA DAM 800,MW 800 MW l 70 MW . ' . . . 800 MW t ... 850 MW • .. 365 MW • • . . • .. • TUNNEL SCHEMES 7-39 1 • .. • • 4 -•• • zw.~. iJ. MODE OF Tur-:1\:~fi.. · O?ERATION ~ PEAKING PEAKING BASE lOAD" • • . . BASE LOAD • .,, . :.J I I I Ll ~· ·I .I I •• ~;'"\ J l ' .. ' l .. -t' .. I .J . I Q. • " tO ul :l • . uJ :r , U· Ill • • ~11.-- . "~,\ ..... ! ; ' .. --~ ........ • _.1 \ • .. ' \ 0. ~ ·r • ... ! !I .. % % :2 .. I . I ·' ' -I. :~ . . I .. ' . . . \ . ,, "~ .. , 7-40 ~ ;l .. ' ~: i / 1 ( x. I , • I • \ l)"'" \ / ! rf-7· \ ~ ! ~ i fll' .. -- L. • • S' f .. -:----.._ ·• J ... .J -i I=:; --5I -- --- -- -- -- 1 I J I J • tr • .. t .. I ·tt I ! I ~ w l -· } ; J J. j Jn .... "'CK.l .... ra ~ i . . I 1 • u··· I i I t • I I i ! , • . i : l : J "' I J ~ ~ <. o• .A ~= £i a ~ . w r.;c: ,..., -........ .,. --I . . I . I ; I • . i • I I I l I I I I . I ' I ' . I I I --. -------. ~r .. ;: d , '-, l J • I • ' ..... -... , ........ . . I ' I I • I • , --. .,..,. . ·' ./ . . . ,, . I I . j I I I . • I '!.-\• • ) ~M .__ • • I ! .. i • ! • .. .• I ....J > bJ 0 l ' i ~~ . !} )f. I 7-41 • '/ j! I J I .. n ·u I ~. • I ' 1). ~ . . 1 L.J 7-42 From the foregoing discussions, the tunnel scheme cannot be ruled out completely at this stage, particularly since it would be required only in the late 1990's or early next century, as outlined in Chapter 8. Therefore, the tunnel. scheme should remain on the list of options to developing the Susitna basin, particularly since innovative tunneling techniques could be developed during the next decade which could possibly reduce the cost of the tunnel scheme. At some stage additional geologic and geotechnical work should be done on the tunnel along the route to firm the cost estimates and technical feasibility. (.. , .. ·I I I I I I I I I ' . I I . I .J!!IJ I li .e; I 11 '.•~ ,1 li 8-1 8 -GENERATION EXPANSION PLAN 8.1 -Introduction A discussion of forecasts of Railbelt electric power and energy demands is provided in Chapter 6. A variety of means exists to meet each such forecast. This chapter addresses the problem of generation planning as the basis for determining which of the many possible Susitna Basin developments can reasonably meet expected future demands. Chapter 9 describes the selected development in some detail. Any projection calling for growth in demand necessarily implies a requirement for sufficient generating capability to meet that demand, as well as a prudent reserve to deal with emergency requirements and normal scheduled maintenance on primary generating facilities. Development of the Susitna Basin offers one means for expansion of generating capability. Adding fossil-fired units to the current predominantly thermal power system offers another. Indeed, a detailed independent study of alternatives to meet future Railbelt needs is being conducted concurrently with the Susitna Hydroelectric Project Feasibility Study. It is unlikely, however, that any single type of development will be selected as the exclusive solution for the future. Rather, some mix of generation approaches will be necessary to meet the many constraints which must be considered. If, for example, the earliest possible date for putting power on line for any favored generation means is later than the point at which reserve margins become dangerously low, it may be necessary to develop other facilities in the interim--in spite of possibly higher costs or less desirable impacts. To determine which of the possible Susitna developments represents an apparent optimum to deal with the range of forecasts and their associated uncertainties, it has been necessary to synthesize the Railbelt Electric System as it might exist in the 1990's and beyond. This synthesis provides the basis for a dynamic elraluation of the benefits for a Susitna project and other generating resources under varying power needs and levels of economic activity. The selected Susitna development will ultimately become one of many candidates to be ir.cluded in the independent study of Railbelt alternatives. It follows that generation planning as described in this chapter leads only to a rational choice for the best Susitna development. Any decision as to whether the hest Susitna development should in fact become a part of the future Railbelt system must necessarily be made by the State of Alaska. The generation planning process recognizes that the system which will exist in 1990 is been largely predetermined. Existing facilities and certain improvements now in process will constitute the bulk of the 1990 system and any currently unscheduled additions necessary to meet 1990 requirements must necessarily be limited to those which can be installed in the near term without 0 8-2 violating regulatory constraints. Since it is not possible to bring a Susitna project on line before the 1990's, a base 1990 system was developed as a starting point for consideration of alternative future system expansions. The economic viability of various thermal and hydroelectric developments in the post 1990 period was then tested against most likely future needs with and without inclusion of a Susitna Project. The various expansion plans will later be · evaluated to determine their environmental impacts as well as overall sensitivity to the relatively broad range of potential growth patterns and possible variations in financial and economic assumptions. 8.2 -Options Available to Meet Capacity Requirements 8.2.1 -Coal-Fired Steam Power Generation Aside from the military power plant at Ft. Wainwright and the self-supplied generation at the University of Alaska, there are currently two coal-fired steam plants in operation in the Railbelt. Fairbanks Municipal Utilities System (F~1US) operates the Chena unit with 29 MW capacity. The other is operated by Golden Valley Electric Association (GVEA) in Healy with a 25 MW capacity. These plants are small in comparison to new units under consideration in the lower 48 and in Alaska. Based on the general magnitude of the Railbelt load requirements, three coal-fired unit sizes were chosen for potential capacity additions: 100, 250 and 500 MW. However, it is unlikely that a 500 MW plant will be proposed in the Fairbanks region because forecasted demand there is insufficient to justify placing this much capacity on line at ore time. All new units would have an average heat rate of 10,500 Btu/kWh , maximum flue gas desulphurization equipment and an average construction period of five to six years. Capital costs and operating parameters are defined for coal and other thermal generating plants on Table 8.1. Fuel not used for power production can, of course, be used for other purposes. The value of alternative usage is said to represent an 11 0pportunity cost" since other opportunities are foregone when the fuel is consumed. Projected opportunity fuel costs for Alaskan coal range from $1.00 to $1.33 per million Btu2 (MMBtu). A cost of $1.15 was selected as the base coal cost for generation p 1 ann i ng. The market price for co a 1 is currently within the same general cost range as the indicated opportunity cost. 1Heat rate is a measure of the efficiency of conversion of heat energy to electrical energy. In general terms, low heat rates suggest high efficiency. The selected value of 10,500 Btu/kWh is consistent with rates currently being achieved in modern coal-fired steam plants in the selected capacity range. 2A Btu (British thermal unit) is a measure of heat energy. By expressing costs for coal and other fuels in terms of price per mill ion Btu rather than per ton or gallon, it is possible to make economic comparisons readily. ft~~. IJ f<::::1 5 J ... J '-i ' > • TABLE 8.1 THERMAL GENERATING RESOURCE PLANT PARAMETERS PARAMETER PLANT SIZE CONSIDERED Heat Rate {Btu/kwh) O&M Costs Fixed O&M ($/yr/kw) Variable O&Mi ($/Ml4H) Outages Planned Outages (%) Forced Outages (%) Construction Period (yrs) Start-up Time (years) Economic Life (years) 500 MW 10,500 1.05 2.00 11 5 6 6 30 COAL-FIRED STEAM 250 MW 10,500 1.05 2.00 11 5 6 6 30 100 MW 10,500 0.55 2.00 11 5 5 6 30 PLANT TYPE COMBINED- CYCLE 250 MW 8,500 1.00 0.30 14 6 3 4 -... --~ :~ ~ GAS- TURBINE 75 MW 12,000 1.00 0.30 12 38 2 4 30 gas-fired 30 DIESEL 10 MW 11,500 0.50 5.00 1 5 1 1 3J co I w 8-4 8.2.2 -Combined Cycle Generation A combined cycle plant is one in '.vhich electricity is generated partly in a gas turbine and partly in a steam turbine cyclee Combined cycle plants achieve higher efficiencies than conventional gas turbines. There are two combined cyc'1e plants in Alaska at present. One is operational and the other is under construction. The operational unit is owned and operated by Anchorage Municipal Light and Power Department (AMLPD). This facility, the George M. Sullivan plant, consists of three units which, when operating in tandem produce a net capacity of 140.9 MW, 33 MW being associated with the combined cycle addition. The plant under construction is the Beluga #9 unit owned by Chugach Electric Association (CEA). It wi 11 add a 60 MW steam turbine to the system sometime in 1982. A new combined cycle plant of 250 MW capacity was considered to be representative of appropriate future additions in the Anchorage area based on economic sizing for plants in the lower 48 and projected load increases in the Railbelt. A heat rate of 8500 Btu/kWh was adopted based on technical publications issued by the Electric Power Research Institute (EPRI). The combined cycle facilities would burn only gas with the opportunity value ranging from $1.08 to $2.92 per million Btu. A gas cost of $2.00 was chosen to reflect the equitable value of gas in Anchorage, assuming development of the export market. Currently, the local incremen~al gas market price is about half of this amoun~ due to the relatively light local demands and limited facilities for export. 8.2.3 -Gas-Turbine Power GefJeration Gas turbines are by far the main source of thermal power generating resources in the Railbelt area at present. There are 470 MW of installed gas turbines operating on natural gas in the Anchorage area and approximately 168 MW of oil-fired gas turbines supplying the Fairbanks area. Their low initial cost, simplicity of construction and operation, and relatively short implementation lead time have made them attractive as a Railbelt generating alternative. The extremely low cost contract gas in the Anchorage area also has made this type of generating facility cost effective for the Anchorage load center. A unit size of 7 5 MW \vas considered to be representative of a modern gas turbine plant addition in the Railbelt region. However, the possibility of installing gas turbine units in Beluga was not considered, since the Beluga development is at this time primarily considered for coal. The potential for coal conversion to methanol for use as synfuel in a gas turbine may be a possibility, but no cost advantage is likely to occur. The gas turbine plants can be built over a two-year construction period and have an average heat rate of approximately 12,000 Btu/kWh. (; ·,; it. r .. ) . ~ ·ji '. .. J\ -. I J I I I I I I I I I I. I 1: I I I I I I I. I I __ ,. 8-5 Gas turbine units can be operated on oil as well as natural gas. The oil opportunity value and market cost are considered to be equal in this evaluation at $4.00 per million Btu. 8.2.4 -Diesel Power Generation Most d1. sel plants in the Railbelt today are on standby status or are operated only for peak load service. Nearly all the continuous duty units were retired in the p~st several years due to high fuel prices. About 65 MW of diesel plant capacity is currently available. The high cost of diesel fuel and low capital cost makes new diesel plants most effective for emergency use. A unit size of 10 MW was selected as appropriate for this type of facility. Diesel fuel t'Osts are the same as oil costs for gas turbines. 8.2.5 -Impact of the Fuel Use Act (a) Background The "Power Plant and Industrial Fuel Use Act of 1978" (FUA), Public Law 95-620, regulates the use of natural gas and petroleum to reduce imports and conserve scarce non-renewable resources. Section 201 of the FUA prohibits the use of petroleum or natural gas as a primary energy source in any new electric power plant and precludes the construction of any new power plant without the capability to use an alternate fuel as a primary energy source. Exemptions may be granted under certain conditions. There are twelve different exemption categories of standards and criteria, any of which may qualify a new power plant for a permanent exemption. These are: (1) {2) ( 3) ( 4) ( 5) (6) ( 7) (8) ( 9) (10) (11) (12) Cogeneration Fuel mixture Emergency purposes Maintenance for reliability of service (short development lead time) Inability to obtain adequate capital State or local requirements Inability to comply with applicable environmental requirements Site limitations Peak load power plants Intermediate load power plants Lack of alternative fuel supply for the first ten years of useful 1 ife Lack of alternative fuel supply at a cost which does not exceed the cost of using imported petroleum. 8-6 (b) FUA and the Railbelt The two Anchorage utilities!# Chugach Electr·ic Association (CEA) and Anchorage Municipal Light and Power Department (AMLPD) have been able to maintain relatively low electric rates to their customers by the use of natural gas from the Cook Inlet region. As reported to the DOE in June of 1980, CEA paid an average of $0.32/MMBtu for gas~ with its cheapest contract supplying its 1 argest p 1 ant with gas at $0 .24/MMBtu. Compared to the U.S. average price of over $2.00/MMBtu, this situation represents an obvious incentive for the continued use of natural gas for electric generation by CEA. Anchorage Municipal reports that its cost for gas is approximately $1.00/MMBtu, which is still significantly lower than the national average utility price.3 The price differences exist because CEA ho 1 ds certain long term contracts at favorable rates. Recent and planned capacity expansions by these two utilities have been directed toward increasing natural gas utilization. AMLPD has recently (1979) installed a 33 MW combined-cycle addition to its George M. Sullivan plant. CEA currently plans to include a 60 MW addition to its Beluga plant for operation as a combined cycle unit. This type of expansion could be considered typical in th~ near term for Anchorage uti 1 iti es. The source and nature of the gas used to fuel future plants could be a critical issue. Several arguments could be raised to keep Cook Inlet gas from being considered. The gas could be proven to be of unmarketable quality or quantity, due to the location of the gas in a remote area, relative to the large gas markets of the lower 48. However, this argument is not valid considering the size of Cook Inlet reserves and the relative cost of gas delivery to the available markets in the lower 48 and overseas. Assuming that new gas-fired generation would be either a gas turbine or gas-fired boiler located in the Anchorage area, there would be no particular capital or time planning constraints and the unit would be actively used to meet the load. Under these assumptions, the exemption categories (1) through (5) would not apply. Categories (6) and (7) require the existence of some state, local or environmental requirement which would preclude the development of the plant using an alternative fuel. At this level of review, no such constraint is foreseen. Site limitations (8) could be the basis for an exemption particularly relative to the coal alternative. To obtain this exemption, it must be shown that alternative fuels are inaccessible due to physical limitations, 3rn spite of the low gas prices currently enjoyed in Anchorage, it is assumed that the cost of natural gas will rise rapidly as soon ~s suitable export facilities now under consideration are developed. Thus, the "opportuniti' cost of $2.00/MMBtu discussed.earlier is considered appropriate for future system comparisons. , ~1 r,j I I _j ~ !! .J ..'"J l I I I I I I I I I I I I I I I I I I I 8-7 transportation facilities are unavailable, handling and storage facilities are unavailable, waste disposal is unavailable or oth~r physical limitations exist. Evidence of the investigation of alternatives and mrthods to overcome the site limitations must be provided to the Economic Regulatory Administration (ERA). To qualify for the exemption for peak load power plants using natural gas (9)~ a petitioner must certify that the plant will be operated solely as a peak load plant. In addition, the EPA or appropriate state administrator must cer~ify that alternative fuel use will contribute to concentration of a pollutant·which would exceed a national air quality standard. This second certification may be difficult since there are few competing uses in the service area which have pushed base air quality parameters up to a high level. Even if this criterion could be met, any plant operating under this exemption would be limited in output to only 1500 hours of generation per" year at design capacity. An exemption for intermediate load power plants is available (10), but only when petroleum is used as the primary energy source. To obtain a 11 lack of alternate fuel supply 11 (11) exemption, the petitioner must demonstrate a good faith effort to obtain an adequate and reliable supply of an alternate fuel and show that such a supply will be available within 10 years of the useful plant life. The petition must show a description of alternatives studied, specific fuel characteristics considered and a list of detailed critetia regarding alternative fuels, sites and generation methods which must be prove, the earliest possible da line for any favored generation means is later than the point at which reserve margins become dangeion would not be available. The final available exemption would be a lack of alternate fuel supply at a cost which does not substantially exceed the cost of using imported petroleum (12). Thus, the actual cost of the natural gas used would not enter into the decision. Alternative coal, hydro or other developments will be compared to a similar plant using imported oil as a cost basis. Under the interim rules, the alternative must be at least 30 percent more expensive if an exemption is to be granted. (c) FUA Summary In short, the Anchorage utilities are subject to the prohibitions of the FUA for development of new sources of power generation. Existing facilities may continue tG use gas, but the use of gas in new facilities under FUA regulations will apparently be restricted to peak load applications. In the event that coal and hydropower resources are undevelopable environmentally or would prove to be much more expensive by comparison than the use of imported petroleum, an exemption might also be possible. 1: I I I I I I I I I I I I I I I I I I 8-8 8.2.6 -Review of Other Potential System Components Other options for power generation exist. Examples include: -Cogeneration options -Fuel cells -Geotherma 1 --Hot Dry Rock --Hydrothermal -Steam Electric -~ Peat-fired -··, Biomass-fired --Synfuel-fired --Distillate-fired -Tidal Power Each of these options will be considered in the "Railbelt Electric Power Alternatives Study 11 to be done by Battelle Memorial Institute, Pacific Northwest Laboratories. Although they have been excluded from the set of major generation facilities used in preliminary generation planning~ it is anticipated that these options may provide some energy in future Railbelt Energy Systems. Tidal power in the Cook Inlet is currently under separate study by Acres for the State of Alaska. Few places in the world lay claim to tida-l ranges as high as those in Cook Inlet. Therefore, the tidal power potential in Cook Inlet is of considerable interest for long term planning possibilities for the Railbelt Region. The tidal power study will determine the most favorable courses of development available, potential contribution to Alaska's energy needs, the costs of such an undertaking and the consequences of proceeding. Results of the tidal power study will become inputs to the Railbelt alternatives study. 8.2.7 -Decentralized Power Generation Facilities The Railbelt alternatives study will include decentralized power generation facilities such as the following: -Solar photovoltaic -So 1 ar therma 1 --Distributed system --Central receivers -Wind turbines -Small hydroelectric power facilities. To a great extent, the distinction between centralized and decentralized systems depends upon the degree of interconnection between one part of the system and another. The value of system interconnect ·.on is addressed later in this chapter. I I I I I I I I I I I I • I I I I 8-9 8.2.8 -Hydroelectric Alternatives to Susitna Power Development Conceptual plans and cost estimates were prepared for ten sites, selected as most suitable for development following a two-phase screening process. Screening of potential sites was based on both total comparative production costs and environmental considerations. Data provided by the U.S. Army Corps of Engineers and the Alaska Power Administration were particularly useful in this analysis. Sites with pi"oduction costs less than 120 mills per kilowatt-hour based on an annual carrying charge of 10.62 percent on capital plus operation and rna intenance were first se 1 ected from the Corps of Engineers or A 1 ask a Power Administration inventory.4 A preliminary regional environmental evaluation was th~n undertaken based on critical enviro·.,mental restrictions (endangered species habitat, wild and scenic rivers, Federal parks. wildlife refuges and major anadromou~ commercial fishing) as an input to the secondary screening. A total of 49 sites passed the primary screening: 12 sites in the 0 -25 MW range, 26 sites in the 25 -100 MW range and 11 sites greater than 100 MW. An additional and preliminary analysis was perfornled ir.:-order to determine transmission cost impacts on feasibility of these 49 sites. Figure 8.1 identifies sites selected in the first phase of the screening process. The second phase included a more comprehensive environmental review of the economically attractive sites within the three capacity categories which had passed the first screening. Considerations related to location, river systen dev~lopment, and proximity to the load centers or to the proposed Anthor·age ... Fairbanks r .tertie vJere also part of the rationale. tw·"-nty-seven sites having low cost~ were ranked internally fer degree of environmental adver~~ impacts~ Of these, fifteen with sup~rior environmental ran~igg were submitted for review by the Sus·itna Hydro Steering Committee. The technical and 8conomic selection factors in this ~creening involved qualitative selection of sites which were cost competitive ano lc.:ated in reach of a load center or transmission line where the capacity could be marketed. Two possible orojects with clEar economic advantages and relatively significant capacity were retained on the selected list in spite of the·~r lov~ environmental ratings. Chulitna and Talkeetna 2 fall in this latter category. The review work being done !nterna~ y a.nd by the Committee is summarized in Section 8.3. Ten selected sites were analyzed through detailed engineer'ing, energy and cost stiJdies. The results of these analyses are presented in Table 8.2. 4Using economic parameters, the ceiling mill rate for screening would be approximately 50 mills per kilowatt hour (see section 8.5.1). 5This cc;mmittee is made up of individuals from va. ious State and Federal agencies concerned with environmental protection. It provides advice and assistance to the Susitna study team. See also Chapter 3. \?· ,) . l1ll'::llo!i I; ~-~'-~ fill• .t.q • • "'' "I ~I ~I ~~ :I ~~ oi I l .. . . .. l --.. • --~~-.. 150° GULF \ ALASKA RAILBEL T .. 0-25 MW 1. Strandline L, 13. Whiskers .. 2. Lower Beluga 14. Co a 1 3. Lower Lake Cr. 15. Chulitna 4. Allison Cr. 16. Ohio 5, Crescent Lake 2 17. Lower Chulitna 6. Grant Lake 18. Cache 7. McClure Bay 19. Greenstone 8. Upper Nellie Juan 20. Talkeetna 2 9, Power Creek 21. Granite Gorge 10. Silver Lake 22. Keetna 11. Solomon Gulch 23. Sheep Craek 12. Tus~umena 24. Skwentna 25. Ta lachul itna, - 146" OF - .. ' ·I -- KE:Y PLAN •"' SCALE-MILES REGION tiNCH EQUALS APPROXIMATELY 40 MILES 25-100 Mrl ,.100 MW 26, Snow 39. Lane 27. Kenai Lower 40. Tokich1tna 28. Gerstle . 41. Yentna 29. Tanana R. . 42. Cathedral .Bluffs 30. Bruskasna 43. Johnson 31. Kanti shna R. 44. Browne 32. Upper Belu~a 45. Junction Ys. 33. Coffee 46. Vachon Is. 34. Gulkana R. 47. Taz.i lna 35. Kl uti na 48. Kenai Lake 36. Bradley Lake 49. Chakachanna 37. Hick's Site 38. Lowe FIGURE 8.1 ~· I I I I I I I I I I I I I I I I I I 8-ll TABLE 8.2 OPERATING AND ECONOMIC PARAMETERS (Ten Selected Hydroelectric Plants, Railbelt, A 1 ask a) Rated Insta 11 ed Annual Capital6 Head Capacity Energy Costs No. Site River Ft. MW GWh $/kW 1 Snow Snow 640 120 300 2475 2 Bruskasna Nenana 210 70 114 4460 3 Keetna Talkeetna 295 110 463 4760 4 Cache Talke~tna 266 75 180 6750 5 Browne Nenana 162 210 360 4990 6 Talkeetna 2 Talkeetna 304 83 245 5080 7 Hicks Matanuska 262 265 246 2700 8 Chakachamna Chakachatna 7q3 485 1938 2870 9 Allison Allison Creek 1170 7.3 34.7 8050 10 Strandline Beluga 710 28 85. 4980 Lake The ten sites are located on the_Railbelt map, Figure 8.1. These sites were made available for the generation planning effort as the better non-Susitna hydro resources which could be implemented within the study period. 8.2.9 -Load Management and Energy Conservation Load management includes those measures taken to reduce peak loads. For example, if all res·idential electric hot water heaters were operated only at night, the daytime peak load could be reduced and the relatively low energy demand now experienced at night would increase correspondingly. Load management dc€s not usually result in total electrical energy savings, but it does offer the opportunity to reduce the requirement to build new generating facilities since those existing would operate for longer periods. Conservation, on the other hand, includes measures taken to reduce actual energy consumption. For example, replacement of old electric appliances with newer more efficient ones could bri1tg about reduction in total energy consumption. 6Annual operating and maintenance cost are to be app 1 i ed at $22/ki~-yr for all hydro facilities listed and existing plants. ?Applied to total investment cost. .. 8-12 Load management measures were not incorporated in the ISER's energy forecasting model. Provisions were made, however, in different components of the model to account for such energy conservation measures as improvement of appliance efficiencies, retrofitting of existing housing stocks and insulation in new construction. In the residential sector the federally-mandated efficiency standards for electrical home appliances were assumed by ISER to be enforced during the period 1981 to 1985 but the target efficiencies were reduced by 10 percent. The energy saving improvement~ resulting from retrofitting were assumed to be confined to single family residences and to occur on the existing housing stock during the period 1980 to 1985. The improvements would be 4 percent saving for Fairbanks, 2 percent for Anchorage and between 4 and 2 percent for Glennallen-Valdez. Mandatory construction or performance standards for new housing was assumed to be enforced in 1981. The effect would be to reduce the heat load in new construction by 5 percent except for mobile homes. In the commercial-industrial ... government sector, the assumed reduction in electricity requirements for new construction would be 5 percent during the period 1985 to 1990 and 10 percent during the period 1990 to 2000. Retrofitting measures in the commercial sector were assumed by ISER to have no impact on electricity consumption. A survey of potential measures under experimentation or in application in other parts of the country indica ted there are apport unities for further reductions in electric energy and peak demand forecast for the Railbelt by implementation of additional programs of intensified conservation and load management measures. In addition to the appliance eff-iciency standards, there are other provisions in the National Energy Conservation Policy Act. It includes a variety of incentives and mandates for energy conservation and alternative energy use by individuals, state g0v.:rnment and business. The r.P.W programs consist of energy audits of residential customers and pubiic buildings, insulation and retrofitting of homes through loan and grant programs, improvement of energy efficiency of schools and hospitals, and use of solar energy. The Public Utilities Regulatory Policies Act (PURPA) of November 9, 1978 requires state public utility commissions to consider certain rate-making standards for utilities if they have sales in excess of 500 mfll ion k i l o\vatt hours. The established standards to be considered are: Rates to reflect cost of service -Abolition of declining block rates -Time-of-day rates -Seasonal r·ates. Both Chugach Electric (CEA) and Municipal Light and Power (ML&P) are affected by the provisions of PURPA regarding rate and service standards for electric utilities. According to the report by the Alaska Center for 1 I I I I 1 I 1 I I I I I I I I I I I I I I I I I I I ,I 8-13 Policy Studies, the Alaska Public Utilities Commission (APUC) intends to deal with the rate and load management considerations called for by PURPA in 1981. The programs of energy conservation and load management measures that could be implemented in addition to those included in the ISER forecast are the following: Energy programs provided for ·in the recent state energy conservation legislation. -Load management concepts now tested by utilities, rate reform to reflect incremental cost of service and load controls. These measures could decrease the growth rate of energy and winter peak projected in the ISER forecast and the forecasts used in generation planning. The impacts would be mainly in the residential sector. The impact of the state energy conservation legislation has been evaluated in the Energy Probe•s study to reduce the amount of electricity needed for space heating by 47 percent, and the total growth rate over the 1980-2010 period in electrical demand from an average of the 3.98 percent per annum (projected by ISER in the moderate forecast) to 3.49 percent per annum. The Energy Probe indicated that electrical energy gro~kh rate could be reduced further to 2.70 percent per annum with a conservation program more stringent than that presently contemplated by the State legislature. In the low forecast case of the generation planning study, an annual growth in electrical energy demand of 2.71 percent was used over the 1980-2010 period. The reduction in electrical energy consumption would be more pronounced with enforcement of energy conservation measures more intensive than those presently in the State legislature. An annual growth rate of 2.1 percent was found as a reasonable low limit for electrical demand in this study. The implementation of load management measures would result in reduction of peak load8 demand. The residential sector was found to be the most affected by the shift of load from peak period to off-peak period. Over the 1980-2010 period, an annual growth rate for peak load of 2.73 percent was used in the low forecast case of the generation planning study. With load management measures such as rate reform and load controls the Brt is important to distinguish between peak load and energy demand. r~ a single day, for example, if twenty-four people turned on a 1000 Watt appliance simultaneously and used if for one hour, the 11 load•' would be 24000 Watts (24kW). Energy consumed would be 24 kilowatt hours (24 kWh). On the other hand, if each turned on his appliance one hour after the other, the load would only be 1000 Watts (1 kW). Energy used would be the same. I I ! 1 ' , •. ~ ·.' I ' ' I, I ·,~~ ,, I 8-14 resultant annual growth rate would be reduced to 2.10 percent. The annual load factor9 for year 2010 would be increased from 62.2 percent in the low forecast to 64.4 percent in the lowest case. Table 8.6.1 gives a comparison of different projections of annual electrical energy, peak load and load factor. TABLE 8.6.1 SUMMARY OF PROJECTIONS OF ELECTRICAL DEMAND FOR THf RAILBELT REGION ISER Projections Generation Planning, Low Lowest Case tlectric Energy tlectric Peak Load tl ectri c Peak Moderate Low Energy Load Factor Energy Load Year GWh GWh GWh MW Percent GWh MW .--·--..... 1980 2789 2789 27J9 514 62.5 2789 514 1985 3565 3414 3158 578 62.4 3092 562 1990 4032 3770 3504 641 62.4 3433 620 1995 5171 4606 43&1 797 62.3 3810 685 2000 6413 5877 5198 952 62.3 4237 756 ;005 7526 6460 5707 1047 62.2 4689 835 2010 8938 7095 6215 1141 62.2 5201 922 Average Annual Growth, Percent 1980-3.96 3.16 2.71 2.73 2.10 2.00 2010 8.3 -Environmental Analysis and Assessment of System Components -' Load Factor Percent 62.5 62.8 63.2 63.5 63.8 64.1 64.4 The environmental analysis deal~ with the problems associated with developing individual power alternatives in light of the existing natural environment, human environment and legal restrictions. These 'environmental' factors had effects on plant siting, ranking and cost. For the two types of alternatives considered (hydro and thermal), two approaches were taken. An environmental assessment for the system as a who 1 e wi 11 be performed for each of the expansion sequences to be generated by the optimum generation planning model. The flow diagram for s:reening individual hydroelectric a~lternatives is shown on Figure 8.2. 9Load factor is the ratio between average load and peak load. If the average load during the year is 62 percent of the peak load that year, the load factor is 62 percent. I -· I I I I II I rJ I I I I I I ' $ ~ $ HUTIAt. · ECDfCitiC SCR.EEXIIIIi {65) SIT£$ PASSlMi £CONC11IC ROUGH SCREENING . INITIAl IHYIRDN.'1EHTA!. SCREEHIHS {46) SIT£$ · PASSING ROUGH SCREEHIHG lOEHTlFICATION OF ECONOMICAllY SUPERIOR S,HES 1n each capacity ~ EHVIROHMENTAL J.--le.9 EVALUATION AltO . RAHKIHG ··--------.. ________ _ (26} SITES ElllUNATED (19)SITES EliHIHATED : ( 24 )ALTERNATE SITES 1------"fJf' hold for reconsid- eration IDENTIFICATION OF ENVJRONHEHTAllT SUPERI~ SUES· ~ (15) REPRESEHTATIYE SITES SELECTED ~ FOR COHSIDERATJO~ . . • ~ (10) SITES e SELECTED FOR $ $ ~ DETAILED IHYESTIGATIOII OGP computer progra~ runs EVALUATE GENERATING PLAHS "----......---- RECOMMEND !'REFERRED FUUS ----- D planned · acthtty process bloct 0 fnput/ output bloc:t ------------ LIST OF (15} , .)£NT TO ST~£RING COMMITTEE SUSITKA. Al1£RNATIYE THER11Al · ALTERNATIVES $ econon:tc consideratfa.- ~ envtrorll'lel1ta1 ~ consideratfoa .. 6 ·co ----·---l £ G E H 0--------- FLOW DIAGRA/1-SCREENING AND SELECTION OF~YDRO ALTERNATIVES FIGURE 8.2 ' -t f; ' I r 1: I) fj '[ ·~ (_, 8-16 8.3.1 -Analysis of Hydropo\'Jer Alternatives The analysis of alternative sites for non-Susitna hydropower development used a staged approach for input of environmental factors. A set of preliminary screening criteria was defined to eliminate the environmentally unacceptable sites. The preliminary list of criteria was then expanded to inc~ ude a 11 important components of the en vi ronmenta 1 setting. The resulting evaluation criteria were scaled based on magnitude and type of impact created, and a matrix was used to rank the sites. (a) Preliminary Screening The preliminary screening criteria were used to .screen the initial list of 65 poterttial hydropower s<ites which had survived a rough economic screen. The purpose was to eliminate those sites which were unquestionably unacceptable from an environmental standpoint. The sites were eliminated from further consideration in this study if they were (1) determined to produce a significant influence within the borders of an 10xisting National Park or a Proclaimed National Monument area, or (2) located on an anadromous fish river where the annual passage exceeds 50,000 and the proposed development was located downstream of the confluence of any mrjor tributary in which a substantial portion of the run spawns, or in a major fishing area. The sites eliminated based on these criteria are listed in Table 8.3. 10At the time of evaluation, the Alaska Lands Bill had not yet been passed by the U.S. Congress. Thus, the determination of impacts of restricted land use was based on the existing legislation, which included the Administration National Monument Proclamation of December 1, .1978 and the Federal Land Policy and Management Act of 1976. The Lands Bi ·n became Pub 1 i c Law 96-487 on December 2, 1980. The resulting land statu~ changes will be evaluated to the extent that they affect the chosen hydropower sites. ! I! I 1 8-17 TABLE 8.3 SITES ELIMINATED BY PRELIMINARY SCREENING Site Criterion Healy Carlo Yanert - 2 Cleave Wood Canyon Tebay Lake Hanagita Gakona Sanford Lake Creek Upper McKinley R~ver Teklanika Crescent Lake Kasilof River Million Dollar Rampart Vachon Island Junction Island Power Creek National Park (Mt. f~cKinley) National Monument (Wrangell-St. Elias National Park) and Major Fishery National Monument (Wrangell-St. Elias National Park) National Monument (Denali National Park) National Monument (Lake Clark National Park) Major Fishery The list of sites rema1n1ng after the preliminary environmental screening was grouped according to cost and capacity. The most costly sites in each of the capacity groups (i.e., small: 0-25 MW; medium; 25-100 MW; large: >100 MW) were eliw.inated. The remaining sites were then examined for comparative environmental impacts and ranked accordingly. (b) Data Survey A survey was performed to locate existing and published sources of environmental data. The 24 reference sources used in preparing the evaluation matrix included publications and maps for which data was collected, prepared and/or adopted by the followir,g agencies: o University of Alaska, Arctic Environmental Information and Data Center o A 1 ask a Department of Fish and Game I I I I I I I I I I I ' I I I I I ' I I I D I I I I I I IJ I a D 8-18 o Alaska Division of Parks o National Park Service o Bureau of Land Management, U.S. Department of Interior o U.S. Geological Survey o Alaska District Corps of Engineers o Joint Federal State Land Use Planning Commission. In addition, representatives of state and federal agencies (iricluding AEIDC, ADNR, AOF&G, ADEC and Alaska Power Administration) were interviewed to provide subjective input to the planning process. (c) Evaluation Criteria and Matrix Eight evaluation criteria were defined in terms of associated concerns, as listed in Table 8.4. TABLE 8.4 EVALUATION CRITERIA Evaluation Criterion Big Game Agricultural Potential Waterfowl, raptors & endangered species Anadromous fish Restricted land uses Wilderness Consideration Cultural, recreation & scientific features Access General Concerns -Protection of wildlife resources -Protection of recreation, commer~ial and subsistence resources -Protection of existing and potential agricultural resources -Protection of wildlife resources -Protection of fisheries -Consideration of legal restrictions to 1 and use -Pta teet ion of wilderness and unique features -Protection of existing and identified potential features -Identification of areas where the greatest change wou 1 d ace ur 8-19 Data relating to each of these criteria was compiled separately and recorded for each site, fanning a data-base matrix. Then, based on this data, a system of sensitivity scaling was developed to represent the relative sensitivity of each environmental resource (by criterion) at each site. (d) Scale Ratings A -Exclusion (used for sites excluded in preliminary screening) B -High Sensitivity C -Moderate Sensitivity D -Low Sensitivity The data was displayed in the Evaluation Matrix as shown in Table 8.5. TABLE 8.5 EVALUATION MATRIX (EXAMPLE) Sites Evaluation Criterion Yentna Bruskasna Healy Anadromous Fisheries B D D Agricultural p0tential B D c Seabirds, raptors c c D & endangered species Big gane B B B Restricted land uses D D A WildernP.ss consideration D D B w/o regard to legal restrict ions Cultural, recreation, & scientific features c B 8 Access c D D Prelimina.ry data regarding technical factors was also recorded for-each potential development. Parameters included installed capacity, development type (dam or diversion), dam height, and new land floodEd by impoundment. I 1 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IJ JJ 8-20 (e) Ranking Process The environmental criteria were assigned mtmerical weights, magnitude of impact increasing with weight. The scale ratings were also assigned numerical values. For each site, the criterion weight was multiplied by the scale rating for each criterion, and the resulting eight products were added for the total site score. The scores were grouped to identify those sites which were good, acceptable and poor from the environmental standpoint. This evaluation was performed for each of the capacity groups to identify acceptable sites in each group. With due recognition of the limited scope and subjective nature of this evaluation, a basic relationship of environmental impact of these projects can be established. As a result of the environmental evaluation, sites were grouped as shown in Table 8.6. TABLE 8.6 Good Acceptable Poor HYDROPOWER SITE ENVIRONMENTAL RATING 0 -25 MW Upper Nellie Juan Tustumena Allison Creek Silver Lake Strandline Lake 11 25 -100 M~l Bruskasna Bradley Lake Snow Lowe Cache 11 Hicks Coffee Keetna Whiskers Talkeetna-2 Lower Chulitna Klutina Upper Beluga Talachulitna Skwentna lllndicates sites with poor economic ratings. >100 MW * Browne * Johnson * Tazlina *Cathedral Bluffs Chakachamna Lane Kenai Lake Tokichitna Yentna ::;, r: 8-21 In the case of the largest capacity group (>100 MW), too few sites were identified as being environmentally acceptable. As a result, several of the less economical sites in this group were reconsidered (Tazlina, Cathedral Bluffs, and Johnson). In one or two cases, environmentally poor sites were kept in consideration because of economic factors (Talkeetna-2, Chulitna)~ Also, several sites identified as being very good environmentally were considered, even though their associated economics were relatively poor (Hicks, Browne, Strandline Lake). These points wil.i be considered in the final environmental evaluation of the sequences. Ten sites from this list were then chosen for detailed development and cost estimates (see Table 8.2). 8.3.2 -Anaiysis of Thermal Plant Ty~~~ The investigation of thermal alternatives for the expan~ion sequences dealt with generic plant types which were not site specific. The un~erlying assumption for input was that environmentally acceptable sites could be found within the Railbelt region. Thus, the concern addressed was the identification of major cost items incurred by environmental protection. The major environmental protection cost component of coal-fired, gas turbine, combined cycle, and diesei units will be that required for air pollution control. To meet the national New Source Performance Standards, coal-fired plants will require installetion of flue gas desulfurization for sulfur control, highly efficient combustion technology for control of nitrogen oxides (NOx) and baghouses for particulate removal. Dry technology (scrubbers), which is also appropriate for ice fog reduction, is recommended by EPA. Gas turbines will require wet control technology such as water or steam injection for control of NOx emissions. Reduction of NOx emissions in diesel unit~ will be achieved by use of fuel injecticn systems. Siting of thermal plants in the Railbelt Region may be limited by the Prevention of Significant Deterioration (PSD) standards for Class I, II, and III airsheds. P'lants located near National Parks which are designated Class I will be subject to the scrutiny of the effects of emissions on visibility and air quality within the park. Class II areas that are not presently in compliance with one or more of the ambient air quality standards (Anchorage and Fairbanks) or that are close to exceeding the PSD increment for the airshed (such as Valdez) may not be acceptable sites for thermal plants. I 1 ] ' I I I I I I I I I I I , •.. ' . I I I I I 12 ~ I a· I a a 1l 1:·:· ,, ' t I ll u ·~ 8-22 Other environmental controls, such as those required for water use and effluent discharge, solid waste disposal, noise control and construction activities, are important in consideration of the Alaskan environment. These factors, although not significant at this time for cost estimating purposes, must be considered in the final evaluation of any plant siting. 8.3.3 -Evaluation of Generation Sequences After the planning sequences are generated, a final evaluation of env~ ronmental impacts wi 11 be performed. Both the system components and the aggregate system will be considered. Evaluations will be largely based on information already gathered, but will more closely consider the technical aspects of the ten hydroelectric sites for which detailed schemes were developed. The impacts created by the selected thermal and hydroelectric developments will be evaluated in light of the existing environmental conditions. 8.4 -Distribution cf Load and Generating Capacities 8.4.1 -System Description The system used as existing capacity in the Railbelt for the generation planning studies includes the capacity of all utilities in the region, including the Alaska Power Administration (APA). Table 8.7 summarizes the information developed from the data research effort. TABLE 8~7 1980 RAiLBELT EXISTING CAPACITY ------~------------·----------------- RAILBELT UTILITY Anchorage Municipal Light & Power Department Chugach Electric Association Golden Valley Electric Association Fairbanks Municipal Utility System Copper Valley Electric Association Homer Electric Association Matanuska Electric Association Seward Electric System Alaska Power Administration TOTAL Installed Capacit~ 215.4 411.0 211.0 67.2 0.9 2.6 5.5 30.0 943.6 ·~ l .. t !11 w} I 'l l ~ ~~ . . ,. 8-23 The total Railbelt installed capacity of 943.6 MW as of 1980 consists of 53 ~nits with the following types of capacity: No. Units Type Capacity (MW) 1 Combined cycle 140.9 2 Hydro 45.0 18 NG gas turbines (Anchorage) 470.5 6 Oil gas turbines (Fairbanks) 168.3 5 Co a 1-fit'·ed steam 54.0 21 Small dies e 1 s 64.9 53 943.6 Only two additional projects are considered to be committed future projects for the Railbelt system. Those will be aeveloped by Chugach Electric Association (CEA) and the U.S. Army Corps of Engineers {COE). CEA is in the process of adding 60 MW of gas-fired combined cycle capacity in Anchorage. The plant will be called Beluga No. 8, and for study purposes, is assumed to be operating on line in January 1982. The COE is currently in the post-authorization planning phase for the Bradley Lake project~ located on the Kenai peninsula. Project formulation is not completed. The project, as input to the planning model, includes 95 MW of installed capacity and 420,000 MWh of annual energy, on the average. For study purposes, the project is scheduled to be on line in 1988. 8.4.3 -Load Representation Load forecasts used for generation planning are represented in detail in Chapter 6. The ener~y and load forecasts developed by ISER and Woodward Clyde Con~ultants include energy projections from self-supplied industrial and military generation sectors. A conservative review of the industrial self suppliers and the military indicates that effectively none of the industrial and only about one-third of the military should be considered as a future load on the system. Table 8.8 illustrates the load and energy forecasts at five year intervals throughout the planning period. I I I I I I I I I I I I I I I I I I f a lJ I 1m ; a f2 l2 ll a a a fl a I ' u a ~ u .. I ' 8-24 TABLE 8.8 LOAD AND ENERGY FORECASTs12 ALASKA RAILBELT AREA Low Forecast Mid Forecast High Forecast YEAR MW GWh MW GWh MW GWh 1980 BASE 514 2789 514 2787 514 2789 1985 578 3158 650 3565 695 3859 1990 641 3503 735 4032 920 5085 1995 797 4351 944 5171 1294 7119 2000 952 5198 1173 6413 1669 9153 2005 1047 5707 1379 7526 2287 12,543 2010 1141 6215 1635 8938 2901 15,933 8.4.4 -Interconnection Capability Early in the study process, some judgment was needed to determine whether it would be appropriate to assume the existence of an interconnected system. Initially, it was determined that a 138 kV line would connect the Anchorage and Fairbanks load centers and would provide the capability of transferring 50 MW of capacity at any given time. Under this limited intertie scenario, capacity would be necessary to ensure reliability in both systems in the 1986-1988 timeframe, in addition to that capacity already committed. Capacity would again be needed in 1993 in both Anchorage and Fairbanks systems. Assumptions for the assessment were considered to be conservative on the side of the non-intertied system. This study indicated that an intertied system is a most cost-effective proposition for both Fairbanks and Anchorage, by an overall cost ratio af as much as 10 to 1 (non-intertie to intertie). 12Adjusted to eliminate industrial self-supplied and two-thirds of the military sector. 8-25 8.5 -Generating Plans With and Without Susitna 8.5.1 -Economic Comparisons The objective of the first phase of generation planning was to identify the most economic public investment in a Susitna hydroelectric project under economic ana~ysis parameters. For this reason, an es!jlation rate of 0 percent and an interest rate of 3 percent were adopted . Incremental or reai fuel cost escalation based upon DOE projections was included. Th·is set of parameters which exclude general inflation is referred to as 11 economic paramete.rs 11 in this study. Only economic parameters were used in the generation planning analysis. More than 80 computer runs were made using General Electric•s Optimum Generation Planning Model (OPG). Essentially, this model permits rapid analysis of a large number of possible future system components and selection of those g~nerating units from time to time in the future which most economically meet forecasted load and energy demands without violating certain reliability, regulatory and environmental criteria. Initially, the medium load forecast was used to establish a base plan. For initial s~t up and testing of the generation planning model, it was found that under interconnected and medium load forecast conditions, the system needed no additional capacity until 1992-3~ At this time, given a full range of exclusively thermal alternatives, the system added 200 MW of coal capacity. The sy~tem needed an additional 575 MW of capacity throughout the remainder of the century (through 2000). The requirement for new units actually significantly exceeded 575 MW since a number of old generating units must be replaced as they reach the end of their useful life during the study period. This preliminary finding provided an indicator of when additional hydroelectric capacity might needed. 13rn effect, adopting an escalation rate of 0 percent permits an evaluation of relative economic values in real terms. For financing purposes, it is necessary to consider probable future escalation. Chapters 13, 16, and 17 deal with finance and marketing issues. I I I I I I I I I I I I I I I I I I ,1~. ~:a .._. I I •• I I I ' I I I 1··. . I I I I I I 3-26 Using the economic parameters, Susitna basin development was found to be less costly over the study period than the best 11 Without Susitna11 system, throughout the spectrum of energy demand growth rates projected by ISER. Figures 8.3 through 8.5 provide representative comparisons of systems with and without Susitna development in terms of system capacity (MW) for each of three forecast ranges. Figure 8.6 illustrates energy demand sat i sf action with and without Sus itna for the mid-range forecast . Benefit-to-cost ratios for various possible Susitna developments were approximately two-to-one from an economic standpoint, with the most favored alternative being that which involved the earliest possible construct ion of a dam at Watana, fo 11 owed by a dam at Devi 1 Canyon. Although it has a less favorable benefit-to-cost ratio, a system involving Wa1:ana Dam and a power tunnel is also economically viable and may be favored from an environmental standpoint. Figure 8.7 illustrates how alternative systems with Susitna compare economically to the most economic, all thermal system without Susitna for the mid-range forecast. The fact that Watana development as a first stage is common to both plans is significant for further analysis. Clearly, Susitna development is economically superior in terms of meeting future generation demand. However, a closer look at the components of the cost comparison shows that the hydroelectric development would be less expensive than operating much of the existing capacity in the Railbelt. Levelized costs of the Watana development, discounting the escalation component of the interest rate, correspond favorably to the fuel costs of non-coal alternatives in 1992. From this economic perspective, it would be beneficial to construct a hydropower plant large enough to displace much of the 1992 capacity. It should be clearly understood that at higher cost of money, which includes inflationary expectations, the cost of Susitna power is not so favorable compared to firing some existing capacity. It remains favorable, however, compared to any other new generation and, once is place, becomes more favorable as the fuels firing existing plants escalate. This perspective indicates that the primary consideration of developing a project at Susitna would be its firm energy generation and not the amount of dependable capacity at the site. A review of the amount of energy generated in the Railbelt region for 1992 reveals that the 4500 GWh required in ISER's mid-range forecast are generated as fo 11 ows: Plant GWh % Total Coal-steam 320 7 Gas-combined turbine 1550 35 combined cycle 1400 31 Oi 1-gas turbine 550 12 diese1s 30 1 Hydro 650 14 4500 100 ' . I I I I 11 MW •• fl IJ. ll .. n ll 2,000r-----~~----~~----~~------T-------~------~------~ TOTAL INSTALLED r,soo CAPACITY .. ~000 LOAOl 500 'J._....... 0~----~~----~~--~~----~------~-------~----~ 1980 1985 1990 1995 2 000 2005 20lil . ~ .t- ' . ... w. .. """' • :.-::--· ---.· ~~..: .-YEAR -----.. ~;..:. !" ---... --. ...-~ .. .. THERMAL .. 2,000r-~----r-------r-------r-------~------~------~------~ '' .. TOTAL INSTALLED CAPACITY •, .. , .. ... . . ... : . .• NATURAL GAS TURBINES '"':. __ .. _....:..... .. _.:::,-· .. ~ .... ·- -~ r j ·- -·- .. .... .. FIGURE £; ~ m .. -----· -~~-. ' . 1 •' t ]· .. ·_ \• ' ' .... , ... "'·" . ·. -. .. · ....... Jl ..• _, ' .. . i. .......... : ... . .... .r . ,. _ ....... .. ...... > ... : ..... _~ ' .. .. . ... .,.::r 2,500 ~:-.t~..,::,_------:r-------T'-------r--------=---.....;·;;.· ___ or-______ ...;, ,. < • 2,500r-------,-------,-------~------~----·--~~------~------~ ·-... -..... .-' ~·.--.......... -. : . . ... '. ·-·-.... . . . ... . ..;,...-. - 0, 11 il IJ 11 . -. .. :; ·-- '{ •. 'io -... "':::::'--- ........ -"J<" ..... ~ .... ----" ,.: ... ... .;.c.~'"~.!. ~ ---. - p, ~-· ' ........ - ·is.:.-:-::!fo f ~-: -.:.... *"" • , __ ....,._ __ ..;.. __ ~ . ;~·~:. ! r~ -· ;.· ' .. . .· r----,~-r~~----~-------T----~----~------~--------~r-----~~ -.......... 8 ------~~ _ .. ..__ ,&"'\"'••, \<"'"\"(' • Q. ·~··-· -....... ' l . .,. 0 0 IC) ·'· ' . ' C\1 .. ,•• .. . .r . . '-. ... .__ ..... : .. ·•· ... ,. ... ... - .·- .I-.e. ·~· .. ·-"' ~ t·.l l I l I ll .11 I n 1;. ' ~ D 'll 11 tJ ll I 'll I J] D D 11 11 IJ . ENERGY (GWli) ENERGY CGWH) IO,OOC ,..-------,..-----~--~--.,....-----.--- COAL 0 L_ __ -J~==~~~~~~--~--~~H~Y~D~R~O~~--j 1980 1985 !990 1995 2000 2005 2010 YEAR THERMAL 10,000 ~----,..----,----~--,..-----,..-----.---- 4,000 1-----+-- NATURAL GAS 2 '000 1----+---TURBINES oL----,19a~o====~s~as~d_,Jsoo~---,J99~5--~2·o~o~o--~2o~o~s---2~0IO YEAR SUSITNA 3AE SYSTEM ENERGY COMPARISON ' MID LOAD FORECAST FIGURE 8.5 I ~~~rn I I t ' I l ;..~ TOTAL SYSTEM 1980 PRESEIVT WORT I-I ($x~~coo) ~\ ~ SUSITNA CAPACITY(Mw} 0 ·-~--·--~---~~---~-.,.....,..,~-..... -"::/ _, 1200 ')Jisu ' . ' : ~ W.4t .'/997 ' . -·-•. 1200 LOW WATANA /992. RAISE DAM 1995 --ADD IS97 -·- DEVIL 2002 1200 JIIBJI "ANA 199'3 A Db .~~~8 ... ~. r;·.""' -·- TUNNEL ' .. 2000 1180 ........ -------·---- i~VIL .zoco 11 Ll n '"""' ~ 0 0 [] tl ~ n :..J ~1 ~ J r~ w 3 (1 ; l ~ 8-32 The total amount of this energy generated from sources with fuel costs more expensive than hydro and coal is 3530 GWh, greater than the amount available from the Watana project. Thus, the entire 800 MW Watana project could be economically absorbed into the system, even though only 200-300 MW of additional capacity is actual iy needed by the system. Further, a small capacity development with a high capacity factor and a low investment cost would prove to be economic~ Disregarding financing considerations, the Railbelt system could economically use Susitna as much and as soon as possible, within the total energy needs of the Railbelt. Continuing this pattern of analysis, the entire additional energy of 2870 GWh generated at Devil Canyon could be absorbed into the system by 2004. Much uf the energy could be used in the system earlier and it would cost incrementally less per unit than operating coal capacity plants by 1998. This conclusion is relatively insensitive to changes in the planning parameters. For example, without escalating the costs of fuel, the relationships between alternatives are close, with combined cycle, combustion turbine and coal-fired capaci:y at 37.3, 43.6 and 37.4 mills, respectively (Although combined cycle plants have been included in this analysis, they have been excluded from future scenario development due to Fuel Use Act conditions.). This constant level of all costs minimizes the value of the constant power cost of the hydroelectric source. Even so, Susitna energy at 27 mills (for Watana alone) and at 20 mills (for Devil Canyon) remains a preference. The analysis is relatively insensitive to the economic interest rate needed. If the interest rate is lowered to 1.5 percent, development costs of the Watana alternative drop, comparing even more favorably to the incremental fuel costs of alternative thermal power, either ne;'! or existing. On the other hand, raising the real interest rate to five percent raises the Watana costs, cutting down on its displacement of existing energy (at 1992 costs), limiting displacement to only oil-fired generation and gas-fired combustion turbines. Even so, it would still be the preferred a 1 tern at i ve for new capacity additions. Several conclusions can be drawn fran this economic comparison. First, under these parameters, the Susitna developments represent beneficial investments. The analysis shows that under mid range forecasts, the Railbelt system could absorb Susitna energy economically, even though exress capacity would exist in the system for several years after Susitna came on 1 ine. When the gen0ration planning model was operated using 7 percent interest rate and 10 percent escalation rate, Susitna developments were favored on the bas is of level i zed costs, even though product ion costs during the first few years of operation with Susitna would exceed those of the best "without Susitna 11 system. The problem of early high costs for a capital ·intensive project is addressed in Chapter 16. fJ c (\ I) . 8-33 Because there is some uncertainty in each of the various possible forecasts, sensitivity of system reliability was tested by assigning probabilities to various forecasts. A probability set which assigned 40 percent probabi 1 ity to the mid-range ISER forecast, 20 percent to high and low ISER forecasts, and 10 percent to the high and low forecasts outs ide the ISER range continued to demonstrate that developme,lt of the Susitna Basin is economically viable. A significant amount of non-Susitna capacity is also added in this scenario. This initial analysis has some severe limitations. Of primary importance, it does not consider the ramifications of obtaining over 70 percent of the Railbelt energy from a single source. Even so, the fact that Susitna could be used to displace certain existing thermal units suggests that a relatively large reserve generating system could be placed in standby for ~mergency use~ thereby reducing reliability concerns. Due to the fuel escalation trends, the project would appear even better economically at later times. In the interim, however, other forms of capacity would be needed, either from another Susitna alternative or from one of the hydro or thermal alternatives. 8.6 -Conclusions Based upon utilization of economic parameters in the generat;;o., planning effort, the Susitna River Basin is favored for all forecasted load and energy demands. Each of five possible Susitna developments is economically viable. Further environmental analysis is required to select the most favored approach, but initial construction of the Watana dam is indicated as appropriate in all but one of the potential development plans. I I I I I •• •• I I I I I I I I I I 'I I .I I , .. ~ . I , I I . i I I " I. I I I II.', r I I I I I· I I I 9-1 9 -SUSITNA HYDROELECTRIC DEVELOPMENT 9.1 -Introduction The work outlined in Chapter 7 involved an extensive study of the alternative dam and tunnel schemes for deve 1 oping the power potential of the Susitna Basin. These studies indicate that the three most promising options involve: (1) development of the Watana and Devil Canyon sites, (2) the Watana site followed by a low dam about 15 miles downstream with a tunnel exiting near Devil Canyon, or, (3) the High Devil Canyon, Vee and Portage Creek sites. These alternative development plans wer~ subjected to more detailed economic analyses in the generation planning studies outlined in Chapter 8. As a resiAlt of these analyses and because of the inherently higher risks, lesser energy, higher costs, and less favorable environmental consequences associated with switching to the alternative High Devil Canyon/Vee option, it has been decided to proceed with the Watana/Devil Canyon development plan. The tunnel option is higher in cost and provides less energy, but it may offer certain environmental advantages. Since Watana is common to both remaining schemes, work at Watana is necessary in any case. Should continuing analysis, particularly in the environmental area, confirm clear advantages for the tunnel, a shift to that plan can be accommodated. As outlined in the results of the generation planning studies in Chapter 8, the most appropriate plan of development involves constructing the full height dam at Watana with a minimum installed capacity of 400 MW initially. The second stage involves adding an additional 400 MW capacity at the Watana site. The third major stage involves constructing the Devil Canyon dam and installing a minimum of 400 MW at that site. It should be stressed that these installed capacities are still approximate and subject to retirement during the 1981 studies. The development described in this chapter corresponds to the plan described above. However:~ the engineering layouts described are preliminary and a considerable amount of additional study is currently underway to complete many of the details associated with these developments. In particular, further studies are being undertaken to firm up the general arrangement of the two dam projects; i.e., to determine the exact location of the dams, the dam types, the number and location of spillways, diversion and power tunnels and powerhouses. Also, the exact dam heights will be determined from more detailed economic studies and additional studies of reservoir operation will be undertaken to determine optimum operating policies. Throughout 1981 the environmental studies will be continued and the required reservoir operational constraints and necessary mitigation measures will be defined and will be incorporated in the design of the project. The river and ice field surveys and computer model studies also will continue with the results incorporated into the engineering studies. i . I ·l l I l l l I l ·r I I l , ! j I ; • . , •I il " I ,I :! ! ·! l ; ,, j ' I ~ ; J ~ ,j I "j l I -I ! ·i - -; I J l I I 'I ~I -H l i ~ ,I l ;j ~ I I il ! 1 I I I. I ·~ ..., f I ~ 9-2 9.2 -Recorrmended Development Plan 9.2.1 -Dams Watana The conceptual design involves a rockfill type dam incorporating a core structure consisting of impervious material on the upstream side and a zone of Jemi-pervious material on the downstream side. Inclined filters are located both upstream and downstream and the core, and filler sections are supported by rockfill shells. At this stage it is assumed that foundations will be excavated to sound bedrock beneath the entire dam. The bulk of the rockfill material will be taken from quarry areas located on the left abutment although some will be recovered from excavations for the various structures. Filter and semi-pervious material will be recovered from the excavated riverbed borrow areas as necessary. Core material will be taken from borrow. The overall maximum height of the dam is approximately 870ft. Allowance has been made for static and dynamic settlement, wave run-up and freeboard. Upstream and downstream slopes ar·e 1:2.25 and 1:2, respectively, and crest width is 50 ft. Shafts and galleries will be provided within the rock foundations for grouting and pressure relief drains. Preliminary engineering layouts were developed for a concrete dam at Watana. The cost of such a development proved to be considerably higher than the fill dam and the concrete dam was dropped from further consideration. A rockfill dam appears to be the most suitable. The possibility of utilizing gravel material instead of blasted rock in the shells will be investigated during 1981. Devil Canyon A thin concrete arch dam, simi 1 ar to that proposed by the USBR ., and a thicker arch dam witt· a ~central integral spillway, are currently being analyzed for gravity~ hydrostatic, temperature and seismic loadings. (See Figures 7.6, 7.7 and 9.1). The preliminary geometry for a two-center arch dam designed around the asymmetric shape of the valley has been laid out, and stress analysis under gravity, hydr·ostatic and temperature loadings is proceeding. Vertical sections through the center of the dam take the form of a cupola li r I •I II ~~ l I I I I I I r ,, ·~ I ~· ~ I • r II l t! If " r It l . I . . I I . . J I • ! t• I : ~ I '" _. . :! .. ~ ~· Ij ~. _, ~, ~· = l!! fj Sl .. ~~ ~ . ,. 7 ,..-/ J! .; I / li / ,_ :..__-------.:T----18 v .. "' • I I I ~ ~ 8 ! t:u,"r.cu"'n l I 8 II I ! I J { I i i . I !l J§ I • . ~ ~ ! .. ' .. s: . 'Q. ! !I .... ~ .. I • .. 0 I i r ~ ":i j! I J 0 ~ . i ; i , ; ! ' --i • -: !I . a 2 I I I I .. It ~ . I I I ( \ 5 I a: <I( I \') 16. 0 % 01( ~ ( _, al :, z !i ~I l ~i .. : .. i I .. ' I I. I g . -~-= L.~ .,-. -u o::- <l: 0:: en z en -::::> J: l-0 I t- zO:: o<t >-=! 2:?: <( c..; Cl) ....J -> IJ.J 0 ..._ . ., ' J • J , J 9-4 with upstream and downstream faces formed by simple vertical curves. The foundation at the center is somewhat thicker than proposed by the USBR with a general increase in area occurring at the more highly stressed sections. The overall maximum height of the dam is approximately 650ft with a crest width of 20 ft. Arart from an integral power intake structure the power facilities will be kept separate from the dam. Shafts and galleries will be provided outside the dam. Provisions were made to facilitate grouting and drainage. Studies are currently underway to confirm the technical feasibility of constructing a thin arch dam and to explore in more detail the costs associated with each type of concrete dam. Because of the relatively small difference in cost between the two dam types fairly detailed general total project arrangements are required for each type before a definitive cost comparison can be undertaken. 9.2.2 -Spillways The reservoirs at Devil Canyon and Watana will be operated in accordance with 11 rule curves 11 defining normal operating water surface levels over a given period. These levels are contained by extreme uppP.r and lower surface elevations for normal operating conditions. If the reservoir level rises above the maximum normal operating level and the excess reservoir inflows cannot be absorbed by the power facilities, this excess flow must be released from the reservoir and discharged downstream. Spi 11 ways are prov i c.led at both sites to ".ccommod ate these re 1 eases. The spillwoys may consist of one or more facilities, each combining a gated control or a simple overflow structure, a discharge chute and some rr2ans of dissipating the energy of the released water downstream of the dam. The combined facilities at each site are designed to contain reservoir level; below an allowable surcharge level for upstream floods routed through the reservoir and corresponding to storms with a frequency of occurrence of 1 in 10,000 years. These flows will be discharged with no significant damage at the site. The discharge capacity of the structures also wiil be checked to ensure the·ir ability to pass flows corresponding to the probable maximum flood (the maximum flood that may occur from a coincidence of extremes of all influencing factors such as precipitation, temperature and snowpack) without overtopping the dam crest. At present, spi 11 ways have been ex ami ned as par-t of the concept of comparing various sites from an economic and energy standpoint and selecting certain sites for further study. To simplify this comparison a conrnon form of spillway has been utilized which will be viable at all sites, but may not represent the most economic arrangement at any one particular site. During 1981 comparisons of various types of spillways at the selected sites wil be made before a particular type is decided upon. ' u ! ·~ u ,tJ 9-5 Watana At its upstream end the spillway consists of a concrete gravity contra 1 structure with five water passages, incorporating agee-crested weirs and vertical lift gates. Downstream of the control structure is an inclined open chute excavated in the rock. The chute is lined with concrete and runs to an intermediate stilling basin where the energy at that point is dissipated in the form of a hydraulic jump. An additional lined chute continues to a downstream sti1ling basin situated close to river level. Possibly more economical spillway systems such as one or more single-chute flip-bucket and plunge-pool arrangements, or a combination of single-chute flip-bucket and plunge pool and stilling basins are currently being studied. Dev i 1 Canyon At Devil Canyon a similar system to Watana has been located on the right abutme~t. It is envisaged that future studies will consider a spillway of restricted capacity discharging over the dam crest with near vertical discharge into a plunge pool, in combination with one or more chutes and flip buckets discharging into a separate downstream plunge pool, or a.lternatively, concrete lined tunnels and flips also discharging into a plunge pool. Spillways may be situated on either or both of the abutments. Should the gravity arch structure be selected it will be possible to discharge over the dam crest via a chute located on the downstream face into a lined stilling basin. 9.2.3 -Power Generating Facilities and Equipment For the preliminary planning purposes, a similar arrangement of the power facilities has been utilized at all sites, including ~~atana and Devil Canyon. The system consists of an upstream approach channel and intake feeding concrete-lined penstocks dropping to an underground powerhouse complex. Concrete-lined tailrace tunnels lead from the powerhouse to the river just downstream of the toe of the dam. I I I I I I I I I I I I I I ., I I I ~.·~·,, . \ < 1 ' "'' J ~.~[.::.~. ; 1,' . jl " f i •I . ' .,!' .. ~· l L~ L· ;; , ' 'Lj 9-6 The intake is a concrete structure founded in a rock cut and situated at the end of the approach channel. Provision is made for drawing off water at different levels within the reservoir in order to control the temperature of water re 1 eased downstream. The present scheme allows for outlets at three levels. The four penstocks are inclined at 55° and lead to steel-lined sections coupled to individual turbines within the under- ground powerhouse. The turbine/generator units, service bay, workshop, switchgear room and some offices are located within the main powerhouse cavern. The turbines and generators are serviced by overhead cranes running the length of the power cavern including the service bay areaw The transformer gallery is located above the power cavern and the draft tube gate galley is just downstream of the power cavern with gates operating in vertical shafts descending to the four draft-tube tunnels. Bus ducts run from the generators via inclined galleries to the transformers and the power cables exit via vertical shafts to the switchyard at the surface. Vehicle access to the power caverns is via unlined tunnels with additional personnel access provided by an elevator shaft to the surface. The control room and administration offices are housed in a separate building at the surface adjacent to the switchyard. The draft tube tunnels terminate in a common manifold. Two tailrace tunnels exit )'~om the manifold and t~rminate in outlet structures located at the river downstream of the dam. These downstream tunnels are lined and provision is made to seal off the tunnels for maintenance by inserting stop logs at their outlets. Watan~ The power facilities described are presently shown with~n the left abutment and are based upon 4 -200 MW turbine/generator units. However, it is possible that the orientation of the jointing in this abutment will prevent the economical excavation of ~he long power caverns. As an alternative, a surface powerhouse on either abutment could be utilized. These alternatives will be examined and the most suitable system selected. Devil Canyon A similar layout to that at Watana is presently shown at Devil Canyon based upon 2 x 200 MW turbine/generator units and located within the right abutment. The intake forms an integral part of the dam, with the upstream end of the penstocks located on the downstream face of the dam. i l ·· .. ·~··'···· ' •, 3 ,, IJ 1 N'~ I :. '' '4 . I . ' ' ~,.f u l I ~ ·1 ~ 9-7 9.2.4 -Access Roads A study is currently underway to determine the most desirable location for an access route and the most economical transportation modes. R&M Consultants are conducting this work as a subcontractor to Acres. Three general corridors have been selecte~ to provide access to potential dam sites. These include a corridor located to the North and another to the South of the Susitna River linking the sites either to Highway 3 near Hurricane, or the railroad near Gold Creek (alternatives 1 and 2) or road access from the Denali Highway to the east of the project sites (alternative 3). Figure 9.2 illustrates these corridors. Using design criteria generally conforming to primary highway design several feasible alignments \'~ithin the selected corridors were sketched on contour maps. From these the route within each corridor showing the most advantageous grade, alignment and length characteristics were selected. These routes allow consideration of a number of transportation alternative plans including allowance for staged upgrading of the road and utilizing rail transportation segments. The design criteria that were used at'e as follows: Criterion Max. grade Max. Curvature Design Loading (construction period) Design Loading (after construction) Roadway 6% 50 80,000 lb Axle and 200,000 lb total HS-20 standard Rail road 2.5% 10° E-50* (standard) The environmental considerations ot each route as well as land ownership constraints are currently being add~essed, in addition to transportation economics. In March, 1981 a series of public workshops will be held to gain public input to the route selection process. It is anticipated that a final decision on the selected route will take place prior to May, 1981, following which further engineering and field studies will be undertaken for the selected route. . , rl. ,, ~ \,.., '_I t). I I .I I I I :J I I l J \~ { ~. ) 1.-1 . . ~ . t <( • z • <( • 1- • <( • ?; •• • '\ .. ~ (~ v . '-.9 ......_ ---~~ ~ ~ c:;t... <1.:: .z \- \..\..1 "J:. U"' 0 I}) ~ l.i\ ttl 0 8 ~ ';;) ·~ tl \.J 0 :::> v ...... t;: ;.,; 7 ~ U:J 1- ;J ~ ~I • ., I ' I I 9-9 9.2~5 -Mitigating Measures In developing the detailed project designs a range of mitigating measures required to minimize the impact on the environment will be incorporated. This is achieved by involving the environmental studies coordinator as a member of the engineering design team. This procedure ensures constant interaction between the engineers and environmentalists and facilitates the identification and design of all necessary mitigation measures. There are t\'JO basic types of mitgation measures that are being developed: Those which are incorporated in the project design· and those which are included in the reservoir operating rules. These are briefly discussed below. Design Features The two major design features currently incorporated include multi-level powe·r intake structures to a 11 ow some temperature contra 1 of re 1 eased water and provision of a downstream re-regulation dam to assist in damping the downstream discharge and water level fluctuations induced by power peaking operations at the dam. During the 1981 studies these two features will be designed in more detail and other features incorporated as necessary. Of particular importance will be the design of the spillweys to minimize the impact of nitrogen super-saturation in the downstream river reaches. Consideration will also be given to developing mitigation measures to limit the impact on the environment during the project construction period. The access roads~ transmission lines and construction and permanent camp facilities will also be designed to incorporate mitigation measures as required. Operating Rules As outlined in Chapter 7, limitations on seasonal and daily reservoir level drawdown, as well as on downstream minimum flow conditions have been imposed. During 1981 more detailed studies will be undertaken to refine these current constraints and to look at detailed operational requirements to adequately control downstream water level fluctuations, water temperature and sediment concentration. 9.2.6 -Construction Schedules At this stage of the study a preliminary assessment of the construction schedules for the Watana and Devil Canyon dams has been made, the main objective being to provide a reasonable estimate of on-line dates for the generation planning studies described in Chapter 8. More detailed construction schedules will be developed during the 1981 studies. 9-10 In developing these preliminary schedules, rough'ly 70 major construction activities were identified and the applicable quantities such as excavation and borrow volumes and volume of concrete were determined. Construction durations were then estimated using historical records as backup and the expertise of senior schedu 1 er-p 1 anners, estimators and de5ign staff. A critical path logic diagram (CPM) was then developed from those activities and the project duration was manually determined. The critical or near critical activity durations were further reviewed and refined as needed. These construction logic diagrams are coded so that they may be incorporated into a computerized system for the more detailed studies to be conducted during 1981. The schedules developed are as follows: (a) Wa.tana Rockfi 11 Dam As shown in Figure 9.3, it is expected to take approximately 11 years to complete construction of the Watana d~n from the start of an access road at Hwy. #3 to the testing and commissioning of all the generating units. Principal components of the schedule include approximately 2-1/2 years for site and local access, -1-1/2 years for river diversion and most of the remaining time for foundation preparation and embankment placement. This period compares to the 10 years estimated in the COE 1979 report. Only about six months per year can be used for fill placement due to snow and temoerature conditions. Fill placement is estimated at approximately 2.3 million cubic yards per month with a total volume placement of 61 million cubic yards. This is in general agreement with the 1979 COE report which estimates approximately 2.4 million cubic yards per month placement over a five month annual placement period. It is expected that the river can be impounded as construction proceeds so as to minimize the time lag between the completion of the dam embankment and the testing and commissioning of the first power unit. The schedule shows the earliest date power production from the Watana dam could start would be early 1993. This is based on starting construction of the access road in 1983 with start of construction at the site early in 1985 as soon as the FERC license is received. Should it not be possible to start construction of the access road pr·ior to receipt of the FERC 1 icense, alternate methods of site access could be developed. One such method would be to bring in equipment required for initial site access and diversion tunnel construction overland from the Denali highway during the winter months. An alternative method would involve constructing an airstrip and flying the necessary equipment and camp facilities in. This would allow paralleling the permanent access road construction period with the initial on-site construction and, although more costly, could reduce the total construction period by up to 2-1/2 years. 'I I I ·I :I ~I I I J J I I l I I I I I I (: I en c 0 ·-d -:::J .: t:.) u -... ca iil ua -----· • 14 I I I I I I I I ' ' ' - :E: ~ ct: z ~ < 3 a: s: L!.J _J ;:::) Cl LJ.J :I: u U') z. 0 ...-t 1-u ::::::;) 0:: I- V) z 0 u >-0:: ct: ::z: -:E: ...... -1 LJ.J 0:: 0... I I I I I I I I I I I . I I -: I! lr 9-12 (b) Devil Canyon Gravity Arch Dam As shown in Figure 9 .4, it wi 11 take approximately 6-1/2 years to complete the dam from the time of access to the site to the testing and commissioning of the power units. This is slightly shorter than the schedule in the COE 1979 Report which indicates an eight year schedule. The key elements in determining the entire project duration are the construction of diversion tunnels, cofferdams, the excavation and preparation of the foundation and the p 1 acement of the concrete dam. For purposes of estimating activity durations, it is assumed that embankment and curtain grouting will be done through vertical access shafts on each embankment with several horizontal tunnels being provided through the dam. It is assumed that access to the Devil Canyon site can easily be made available due to the proximity of the road to the Watana site. If this is not the case, at least 15 months should be added to the front end of the Devil Canyon schedule in order to construct a road from Hwy. #3. The attached figures represent an 11 early start" schedule and the majority of effort was expended in determining the "critical path 11 which controls project duration. The 11 non-critical" items should be. scheduled not merely to minimize construction period, but also to take into account resource availability and fi11ancial and climatic aspects. The 11 0ptimization" of the schedule will be performed during 1981. It is expected that the project schedules will be refined as the following aspects are developed: -reconciliation and refinement of major construction activity quantities -detailing and refinement of foundation preparation and grouting requirements refinement of reservoir filling rates -detailing of major structural components incorporation of additional information based upon ongoing field studies and development of client and project requirements. I I •' ... , I I I I I I II ' ' II n ~ II fl u4 ll ~ ll L{ u ________ _J! ' -=? 1') ---·--. . ·~ (ct -~ ~ ~·~ ~~----------------------~-~--~----------- ~_A I'( .... ' .., ~ ~~.~~------------ ' " \' . ' ----- ::"~------·· - ~ rt) t"\ ' ------'" -- nt 4-----f\ ' .. ....... .. , . .....J " ..... "' ~ ~ .:: ~ ' ~ ' ~ "' "-J• ~: ·~~ :::r ~ I I I I I I I I I I u u u I 0 I u u u 9.2.7 -Contract Package and Contracting Policies The following paragraphs describe preliminary ideas on possible contract packages and policies. Detailed planning of these activities will be undertaken during 1981/82. Contracting Policies The basic contracting policies are intended to ensure satisfactory completion on schedule and at the lowest cost compatible with the maximum possible protection of capital and revenue. In addition, they will require contractors, suppliers and vendors to perform work or furnish materials, equipment, plant and services on a fixed price or a fixed unit price basis wherever possible. Cost plus contracts would be avoided whenever possible. Contractors, suppliers and vendors would be required to assume reasonable business risks including, but not limited to, material, construction equipment charges, labor utilization and productivity, normal job risks and working conditions in the project area. The basic contracting policies will be influenced by the remoteness and climate of the project area, the size of the project and the distances involved in transportation and communication. To enforce these basic policies, the following contracting practices are being reviewed: - A maximum degree of interest should be generated and maintained in the work by contractors, suppliers and vendors to encourage from qualified bidders the greatest possible response to invitations to tender. To assist in securing this objective, individual items of work will be arranged in contract packages to ensure the most competitive bidding and maximum Alaskan involvement. -Tenders for work on the most economic and realistic basis will be secured by (i) providing as much prebidding information as possible to contractors, suppliers and vendors who may be selected to tender; (ii) scheduling work as necessary to obtain information and site data to improve the accuracy of subsequent tendering; (iii) providing access to the project to facilitate site inspection, which will be, in most cases, a requirement for the qualified contractors who desire to submit bids. i IJ ll -:j 9-15 -The largest possible portion of contracts should be awarded on a fixed-price basis. Where quantities cannot be determined with sufficient accuracy at the time of bidding, fixed unit price contracts will be employed. -Provide conditions and safeguards for performance and reliability through carefully developed contracts and specifications, and by effective adrr.inistration of construction. -Provide community and camp services which are comparable, within practical limitations, to normal living conditions in centers of employment. The contracting policies and practices will be reflected in contract provisions which address numerous aspects such as procurement, escalation, taxes, liquidated damages, advance and mobilization payments, progress payments, schedules, bonding, performance guaranties, warranties, insurable risks and unknown conditions, transportation, car services and accommodations, master labor agreement, preference commitments, default provisions, subcontracts and assignments, safety, patent indemnity, etc. Contract Packages It is anticipated that the major contract packages would include access roads, camps, civil works including dam, spillway, powerhouse and tunnels, generators and turbines, electrical and mechanical equipment, and transmission lines and substations. Breakdown of these packages further to increase competition among qualified biddet•s will be studied in further detai 1. · 9.2.8 -Cost Estimates In preparing the preliminary cost estimate for the alternative Susitna developments the same basic format as used by the Corps of Engineers for the Watana and Devil Canyon Dam sites was followed. Some simplifications were made to reduce the number of items. Quantities were taken off the conceptual engineering layouts for all the major items such as earth and rock excavations, earthfill, rockfill and mass concrete that would significantly affect the total estimate. Unit costs were developed from experience with similar dams and applied to the quantity take-offs to determine the direct costs for the various alternatives. Special allowance was made for construction under Alaskan conditions. Consideration was given as necessary to changes in unit costs due to changes in construction methods and large differences in quantitites from one site to the other. I I I I I I I I I I I I I I I I I I I I I I I I I I ll m IJ IJ ll IJ ll I IJ ll 11/ 9-16 In addition to the direct cost, the total project cost includes an allowance for construction camps and catering, 20 percent for contingencies and 12 percent for engineering and administiation. Table 9.1 shows preliminary costs for a Watana-Devil Canyon development in January 1980 dollars. The cost assumptions used in developing the estimates for the alternative sites are preliminary, and a more detailed quantity take-off and estimates will be made in the engineering studies conducted during 1981. TABLE 9.1 SUMMARY OF COST ESTIMATES IN $1000 Item Development Watana 800 MW Devil Canyon 400 MW Lands and Damages Reservoir Dams and Diversion Powerhouse Roads and Bridges Recreation Facilities Buildings and Grounds Permanent Operating Equipment Camp and Catering Subtotal Contingency 20% Engineering & Administration 12% Total Costs in 1980 Dollars Allowance for Re-regulation Dam Cost Escalated to Online Datal and AFDc2 Incorporated Online Date Total Cost 32,295 13,770 888,021 205,360 100,926 1,000 4,000 3,000 160,464 1,408,836 281,767 169,060 1,859,663 100,000 1,959,663 Jan 1993 $ 5,400,000 1costs have been escalated at 7% p.a. 2Allowance for funds during construction. 4,926 1,566 437,954 107,238 47,670 1,000 4,000 3,000 75,081 -----682,435 136,487 81~892 900,814 Jan 2000 $ 3,800,000 ~: ll; "'' ' l Di ~ '] -""~ 9-17 During 1981, construction methods, scheduling and cost studies will be further developed and expanded to prepare updated, comprehensive, construction type cost estimates for the recommended Susitna scheme for inclusion in the FERC license application. The accuracy of the construction costs will be improved by application of updated information including site costs of labor, materials and equipment, full installation procedures for project components, construction methodology for major structures such as the dam, spillway and powerhouse, and site development requirements for access, power, transport and support facilities. The cost estimates will reflect some of the unique features including a relatively inexperienced local labor force, unusual environmental/weather constraints, high level of government surveillance and interaction, low equipment productivity during cold weather and high transportation costs for materials and spare parts. 9.2.j -Program of Expenditures Currently an S-shaped cash-flow curve is assumed to represent distribution of expenditures during the construction period. definitive expenditure program will be derived after detailed estimates and schedules are prepared. 9.2~10 -Analysis of Risks and Assessment of Proj~ct ContingeQ._c_i_e_s _____ _ the A more cost A comprehensive risk analysis will be undertaken during 1981/82 to demonstrate that the selected approach to development of the Susitna basin potential can be undertaken without excessive risk exposure for any of the parties involved and to ensure that sufficient contingencies have been incorporated in the project cost estimates. Currently, checklists of the various types Qf risks are being compiled. The types of risks include those associated ~ith natural phenomena such as floods and earthquakes. Magnitudes of these events have been evaluated for a specified acceptably low risks of occurrence (i.e., on the order of an annual probability of one ten thousandth of one percent) and the project will be desig.ned to accommodate these events with principal repairable damage. Other natural phenomena such as unforeseen geotechnical problems encountered during construction (poor bedrock quality, extreme permafrost regions~ etc.), and unanticipated poor weather conditions which delay I I I I I I I I I I I I I I I I I )'. I I I I I I I I ll IJ 11 ll ll IJ u I ll u IJ 9-18 construction cannot always be predicted accurately. Judgment and past experience with similar projects will be used to assess the magnitude of these risks. The consequences of such events occurring will be assessed in terms of increased capital cost and incorporated directly in the project cost estimate or included in contingency items. Risks associated with possible labor problems during construction and the potential impact on capital costs will be dealt with in a similar way. There are other risks that are associated with overestimating or underestimating project power and energy yields. This could be due to inaccuracies associated with estimating the mean annual flow at the site because of sampling error associated with the 30 years of data which is available. It could also be due to certain unforeseen constraints which may have to be placed on operating the reservoirs to satisfy certain environmental considerations. Detailed sensitivity analyses which involve ~ssessing the changes in energy yield due to these types of considerations will be carried out to determine the potential impacts of these aspects. Institutional type risks; i.e., those associated with obtaining the necessary licenses and permits as well as the financial risks associated with obtaining funds to permit construction of the project will also be investigated. 9.3 -Review of Transmission Development Plan 9.3.1 -Present System The two major load centers of the Railbelt region are the Anchorage-Cook Inlet area and the Fairbanks-Tanana Valley area. At present, these two areas operate independently. Figures 9.5 and 9.6 show the single-line diagram for each area. The Alaska Power Authority h1s presently under study a proposed 138 kV intertie connection between the two areas. Commonwealth Associates, Inc. are undertaking the study and will recommend the transmission line corridor and voltage between Willow and Healy. The approximate route is shown on Figure 9.7. Once a large project such as Susitna comes on-line an extensive new transmission system linking the dam site to both Anchorage and Fairbanks will be required. APA has indicated that this new system should be located in the same corridor as the currently planned intertie between Healy and Willow. I I I I I I I I I I I ' ' I fj • {j • ·fj • J J J -- I g - ---------------------·---- i -u ' I ' a ..... ___ c.-_ -9 I I J I I I I I r i f I 9-19 L----~---(a·ta----I J l I I 1~~ I <..~-' ! • ... i J I : ) : J I r I I I I I ! ' r r I I • I l I J I I --~· 1·: I i::l I I I • I J I I I I I I I I I J I I I . r . I ·-· J I I I J r' t4 0 0 0 0 [J [j 0 a a a J I D s .. r;:c J ~~ ... w ~$: j3 .,..,... :; :.0 !'! :! » ~ .. =::1 s. l ... ;~ e-~;c -~ s Q ~ 2 > N ... .. ... § 9-20 %: 0 ->-,_ ..... :: ....Ju ...Jc <V') >V't -< -I.I.Jt.) c_ ...Jc:: c,_ ~u ..... ...J 1.1.1 -~ ;2---------' 0. TI .W 0 ' f::;t J [j?J 0 \u \j ~ ' ~ 0 0 0 --4 0 0 0 --•• -tl -l < ~ 0 z ~ \:] lu -J .. -- ·. --tl ll g .. -21 0 c ·~ ... ~ l 0 0 0 0 ~· u 0 0 J D J 9-22 The following sections briefly outline the current status of work on the new transmission line. 9.3.2 -Susitna Transmission Studies Electrical System Studies Studies to date have focused on ultimate transmission requirements to handle total installed capacity of 1400 MW. Transmission design capabilities to Anchorage and Fairbanks are assumed to be 1250 and 350 MW respectively. To meet the foregoing conditions with single contingency outages, two 230-kV circuits are needed to Fairbanks as a minimum. Transmission to Anchorage can be three-345 kV or two-500 kV uncompensated circuits or alternatively, two-345 kV circuits with series compensation. Attempts have been made to utilize the planned 138 kV interconnector for emergency support. Connections are possible which under normal conditions would ensure appr\priate load sharing, but the lower voltage system cannot be utilized as more than second contingency backup. Load flow ~nalyses are still to be done for the intermediate site capacities of 800 MW and 400 MW, as well as all transient stability checks. Steps that have been considered to ensure adequate transmission reliability are summarized as follows: (a) Parallel circuits are used to minimize the effect of outages. (b) As an economic alternative to additional circuit(s) intermediate switching stations are considered. (c) Extensive VAR generation will probably be proposed for each load area to achieve economic line loadings and to provide acceptable terminal conditions. (d) Series compensation is being considered as a means of increasing the loud carrying capability of each circuit. Transmission Line Corridor Selection Previous reports by IECO and the Corps of Engineers for the Rai lbelt area were reviewed and the information obtained was used in a prescreening study to eliminate some of the less attractive corridors and to identify corridors that required further study. These were i dent ifi ed on USGS maps. of 1:250,000 scale and subjected to further screening. Activities based I , ~ II •! '1 11 J il ! ll j Jt 1<.\ ! ! I ~ '1 J I' J 'i I- I I IJ I ll II II I! 9-23 on costs, environmental considerations, land use, and power-system related aspects (such as the number of intermediate load points to be served). Based on the results of this work, the three corridors required to transmit power from the sites to Fairbanks and Anchorage were selected and identified on USGS maps of scale 1:63,360. One corridor is located between Anchorage, Willow and Palmer, the second between the dam sites and the intertie near Gold Creek and the third between Healy and Fairbanks. The center lines of th2 preliminary routes have also been plotted on these maps. In arriving at the final route selection, potential design problems peculiar to cold climates such as muskeg conditions, permafrost conditions and damage to footings by frost heave will be taken into account. To assist in corridor identification, Acres personnel were engaged in field reconnaissance trips of the proposed corridor via helicopter and surface transportation. Several meetings were held with various utilities and Retherford Associates, who are fami 1 i ar with the prob 1 ems encountered in design, construction and maintenance of the existing transmission lines. · Some aerial photographs of the transmission line corridors were taken by Acres subcontractors and others were purchased from available sources of high-altitude photography. These photographs and the land status maps were carefully examined and used to locate the primary center lines of the transmission line routes. Transmission Line Hardware A study is now underway to select the most suitable type of tower that can meet the environmental and design requirements. Utilities and manufacturers will be consulted to designate a conductor that meets electrical requirements, mechanical strength and economic considerations. To improve the transmission system reliability, the following measures will be considered. (a) Hinged, guyed transmission towers to counteract the effects of earth movements caused by permafrost and seasonal soil changes. (b) Use of design codes for heavy loading or heavy wind on bare conductor. (c) Line sectionalizing, series capacitors, and static vars generation to improve steady-state and trans; ..... 1t ttansmi ssion capability. (d) Oscillation damping of bundled conductors by proper design of spacers and dampers. I I I I I I I I I I I I I I I I I I .J J at 0 9-24 (e) Two single-circuit lines to increase reliability. (f) Provision for helicopter operation and maintenance in areas where there are no access roads. (g) Small storage areas along the line to store towers and equipment for emergency repairs. (h) Avoidance of broken terrain and steep slopes to prevent line damage from mud, rock or snow slides. (i) Routing at elevations below 4000 ft to avoid severe wind and in-cloud icing conditions. 9.3.3 -Cost Estimate Since a recommended Susitna development, and hence a transmission system suitable for this development, is not available at this time, the estimate produced by R. W. Retherford Associates (R.W.R.A.) may be useful for planning purposes. The transmission system configuration assumed by R.W.R.A. in their Economic Feasibility Study Report of December 1979 is generally the configuration proposed for the Susitna Hydroelectric Development. This particular configuration and estimate is referred to as Case II in the R.W.R.A. report. The following transmission line voltages and lengths were used: 345 kV, 2 single circuits, Anchorage-Devil Canyon 230 kV, 2 single circuits, Devil Canyon-Fairbanks 230 kV, 2 single circuits, Watana-Devi1 Canyon 155 mi 1 es 189 miles 27 miles. The following estimate has been escalated at a rate of 10 percent per year. The cost is quoted in January 1980 dollars. Transmission Line $ 157,006,000 Substations 43,464,000 Control and Communications 4,000,00q_ Subtotal Construction Costs 204,470,000 Engineering and Construction Supervision (12%) 24,536,000 Contingency (20%) 40,894,000 TOTAL $ 269,900,000 1'1 ......... ] ) ~ ~·.' ~ jl·: I . c;;;J . I ' ·=:J Jl: '· JJ 9-25 9.3.5 -Analysis of Risks Some of the risks inherent in a project of this type have been identified at this stage. A more detailed assessment of these risks will be undertaken as the studies progress. A staged development plan could result in a design risk for choosing the most economical transmission line voltage. The voltage for an ultimate 1600 MW development may not be optimum for a s~0ged development of 400 and 800 MW. This will be examined when the recommended plan is known. In a harsh winter climate, construction schedules must be carefully determined to assure the on-line dates. This may be addressed by easily assembled transmission line towers, or tower preassembly at a local base camp with final erection at the tower site. Construction schedule and methods carry a certain amount of risk and will be thoroughly investigated when the design reaches the detail stage. 9.4 -Logistics, Transportation and Construction Facility Requirements During the study period all field activities in the upper Susitna Basin and at the Watana and Devil Canyon sites are being conducted from the Watana base camp. In January 1980 a study was made to determine the comparative economics of constructing an airstrip at the site during the first year of the study or utilizing only helicopter transportation to the site. At that time a decision was made to operate only with helicopters during the first year and reevaluate the economics of airstrip construction prior to the second year of operation. During 1980 it was less costly to operate with helicopters than with fixed-wing aircraft during the study period. This is due mainly to the capital cost of the runway which is of the order on a million dollars. In 1980, contracts were signed with two helicopter companies: Akland Helicopters of Talkeetna and ERA Helicopters of Anchorage to supply aircraft to the project. The total number of aircraft at the site varied from one at the beginning of the year to six during the summer peak and down to one again in December. Up to five Bell 2068 Jet Ranger helicopters were used to move personnel to various field locations as well as to bring personnel and supplies from Talkeetna to the base camp. Heavy lifting of drill rigs and fuel was accomplished using a Bell 205A helicopter. From September to December the 2068's were replaced by a slightly larger A-Star helicopter which has greater lifting and passenger capacity. I I I I I I I I I I I I I I 1 I l1 " ' \; , ~J r]" '" '~ 9-26 All helicopter activities are scheduled daily from the base camp. Acres has arranged for warehouse and expediting services in Talkeetna to receive, hold and load shipments to the site. During construction of the power plants and dams at either site on the Susitna, an access road will ~e constructed at an early stage to facilitate moving equipment and manpower to the site. Additionally, an airstrip wi 11 be required prior to completion of the road and some of the early equipment may be brought in overland during the winter months. This airstrip will be used to bring personnel and supplies to the site during the entire construction period and will provide a cost effective way of moving construction management staff to and from the site. A significant construction camp and related support facilities will be required at either a central location or at each site during construction. The camp housing units and other temporary structures will probably be constructed on site or assembled using pre-manufactured modules. Such a camp also may have individual mobile homes for supervisory staff, which can be removed from the site following construction. ·f ·I m I I I I "' li I '1". ':I I 'I I .ll 10-1 10 -ENVIRONMENTAL PROGRAM 10.1 -Approach to Environmental Studies 10.1.1 -Introduction In the development of any major project, careful environmental planning must be incorporated throughout the feasibility and design stage. To meet this objective the environmental studies include a program with the the following major components: -capability to address the major environmental concerns including those expressed by government agencies and the general public -environmental representation on the design team to ensure that environmental compatibility is considered along with economic viability and technical feasibility as one of the design objectives. The basic approach of the environment a 1 program is shown on the flow chart in Figure 10.1. The Plan of Study outlines in detail the Phqse I component of these studies. The philosophy of a phased approach was adopted to promote project efficiency. Phase I studies are directed towards an Qssessment of the major questions relating to a Susitna development. Many of the biological components require 3-5 years of study before impacts can be fully identified and detailed mitigation plans developed. By the end of Phase I studies, a clear understanding of potential impacts will be gained and the practicality of potential mitigation measures will be identified. This will establish the areas of concentration for Phase II studies, provide APA with the input required to decide if it should proceed with FERC licensing application, and allow government licensing agencies to assess the basic environmental acceptability of the recommended Susitna development. 10.1.2 -Review and Coordination A major goal of the environmental studies is to ensure coordination among the various environmental subtasks and promote review by government resource agencies and the general public. Public input and review is outlined in Chapter 14. To promote review by government resource agencies, a Susitna Hydro Steering Committee has been established with representation from ADEC, ADF&G, DNR, USGS, NMFS, HCRS, USF&W and AEIDC. To date this committee has had input into the review of FERC requirements vs State and other Federal requirements, the evaluation of development options outside the Susitna Basin and the scope of the existing studies. In addition, the committee has reviewed procedure manuals for the vari :s environmental study components. Throughout the remainder of the stun ... ., this coordination and interaction will continue. • ~- I I II :. ~:PROJECT -, .:·;~·DESIGN , . > :=' ·~··DESIGN . CRITERIA .... -MITIGATION . . -: -. MITIGATION 'INPUT __ o_E_S-lG_N_.P,...RO-GR_A_M ___ , . DEVELOP PROCEDURES . ~· ' PHASE D .· D.ICT'A •. Ml4 ·'!~ COLLECTION EXTER.\'AL REVIEW PHASE I PHASE II . -. . .,rl ,~fi ·_ . . ~ ~~~ ·,,~ ~, . ' FIGURE 10.1 'I I 'I I I I !11 11 I'';.., "\' ' I ~! ·m ll 10-3 Environmental Monitoring A full time environmental representative was stationed at the Watana Base Camp throughout the field sampling season to keep the environmental impact of surface-disturbing and all other field activities to a min imumQ In addition APA has employed a native representative to ensure that requirements under BLM permits are observed and that native lands are not inappropriately entered. 10.1.3 -Mitigation Planning At this stage an effort is underway to avoid or minimize impacts by providing environmental input into the development selection process. To date this has resulted in the preliminary establishment of guidelines for downstream flows, reservoir pool evaluation and reservoir drawdown. As part of the tunne 1 studies, alternative schemes have been compared on environmental grounds. The most acceptable tunnel scheme has bee~ compared to the COE Devil Canyon Dam development. As part of the development selection studies various dam sites and staging sequences have been investigated. Each of these is being reviewed from an environmental viewpoint to ensure the incorporation of environmental compatibility into the development selection recommendations. Following development selection, impact assessment and mitigation planning will be directed towards the chosen scheme. As additional environmental baseline data becomes available environmental design criteria will be modified to minimize impacts where possible. By June, 1982 the identification of major probable impacts from the selected development will lead to a detailed outline of the design approach and incorporation of the mitigation options to minimize, reduce, rectify or compensate for predicted impacts. To assist in impact prediction and mitigation planning Acres has established an external review panel and a wildlife mitigation task force (which includes members from State and Federal resource agencies). Fisheries experts Milo Bell and Dr. Clint Atkinson and wildlife expert Richard Taber are included on the study team. As a prime source of government agency review of impact prediction and mitigation planning Acres will consult with the members of the Steering committee to review development plans as they are prepared. 10.2 -Specific Environmental Studies 10.2.1 -Introduction ----- Environmental studies are divided into 9 specific study components. These are outlined in Table 10.1 which identifies the topl'c, prircipal study investigators and basic components of the scope. Th~ scvpe of these studies is de~cribed in detail in the February 1980 Plan of Study. ·Ill ! ·! I! I ~ ' I :1 li ; ~~. l ' : ..,...,; ~ Under each component heading, this report presents information on (a) major concerns and how the program is designed to address these concer~s, (b) modifications that have been incorporated (if any), (c) present status of these studies, (d) areas where mitigation is being considered and (e) relationship of Phase I to Phase II studies. The socioeconomic component of the environmental studies is reviewed in Chapter 11. Most environmental components commenced fie1·; studies in the spring of 1980 with the first annual reports to be prepared by April 1981. Nothing from the information collected to date indicates that any unexpected major environmental consequence would result from a Susitna development; hC1wever, it is premature to present an assessment of impacts and measures that would be required to ameliorate these impacts. 10.2.2 -Fisheries A major concern with any development on the Susitna River is the effect it could have on the fisheries resources. As with any large hydroelectric development, alterations of the normal flow regimes and the physical and chemical water characteristics are likely to occu~. Studies are directed towards predicting the effects these alternatives will have on the fisheries habitat and the resultant benefits and disadvantages associated witll these effects. The primary objectives of the fish ecology studies are to (1) describe the fisheries resources of the Susitna River, (2) incorporate basic measures to protect or enhance the fisheries resources into the procedures for project design and development and selection, (3) assess the impact of development and operation of the selected Susitna Hydroelectric Project on the fisheries and (4) propose additional mitigation measures as required to minimize or com pen sate for adverse impacts. The extent of fisheries habitat and its utilization in the winter months has been identified as an essential :omponent of the fisheries studies for vkl ich there is little existing information. Thus. to allow for incorporation into the June 1982 submittal, the winter fisheries program was accelerated by one year and commenced in October 1980. The responsibility for describing the existing fisheries resources of the Susitna River has been assigned by a direct Reimbursable Services Agreement (RSA) to the A 1 ask a Department of Fish and Game. Des ·fgn development will be met hy Acres with input from TES. Impact prediction and mitigation p 1 ann i ng wi 11 be met by TES with input from Mi 1 o Be 11, Dr. Cl int Atkinson and fisheries resources management agencies. ADF&G commenced their 1980-81 winter field program in November 19RO. Due to staff and resource constraints some delays have been experienced. However, the winter sampling program was in ful1 operation by February 1, 1981. Adult anadromous studies are scheduled to begin in the spring. A detailed instream work plan is being prepared for completion by April 1, 1981. Seve1·al fisheries impact issue'. for which m;tigation will be considered potential are outlined in Table 10.2. 1 1 I I I I I I I I I I I I I r c Study Component -.· ;~. Fisheries 2. Wildlife 3. Land Use 4. Archaeological 5. Recreation 6. Plant Ecology 7. Corridor Selection TABLE 10~1 -ENVIRONMENTAL STUDIES Principal Investigat~ons Tom Trem -· AOF&G Bob Williams -TES Clint Atkinson -Consultant Milo Be~l -Consultant K. Schneider -AOF&G E. Reed -TES R. Taber -Consultant A. Jubenville-U. of A A. Anderson -TES E. J. Dixon, Jr. -U. of A. A. Jubenville-U. of A. -U. of A. J. McMullen -TES J. Barnes -TES C. Baumgartner -TES Basic Components of t.he Scope -determine the relative abundance and distribution of adult and juvenile anadromous and selected resident fish populations in the Susitna River -determine spacial and seasonal habitat requirements of these species -determine the impact of a Susitna development on this fisheries resource -describe any mitigation required -determine species distribution and relative abundance -develop understanding of species distribution and habitat type -determine predator relationships that exist -determine the impact of a Susitna development on this wildlife resource -describe any mitigation required -evaluate past, present and future land-use trends -identify major changes in land use that would result with the development of a Susitna project -describe any required mitigation -identify the archaeological and historical resources of the project study area -propose mitigation measures to lessen the impact of ground-disturbing preconstruction and construction activities -to prepare a detailed master area plan that will optimize public recreational use of the project lands and waters -map and characterize the vegetation cover/habitat types occurring in the study area -predict impacts that will result from the proposed facilities -input into the selection of an environmentally sound Susitna transmission line corridor -input into the selection of an envi~onmentally sound access route -assessment of the selected route ~ 11 IJ 10-6 As with most of the components of the environmental program, Phase II st1:.1dies are required before impacts can be fully assessed and detailed mitigation plans developed. However, during Phase I, using existing information, data co 11 ected between November 1980 and December 1981, a review of probable changes resulting from the selected project and with fishet'ies impact mitigation on other hydroelectric development, we will be ab 1 e to identify most probab 1 e impacts. In addition we wi 11 incorporate environmental constraints into our design criteria to avoid many of these impacts and recommend the basis of further mitigation which will require quantification during Phase II studies. 10.2.3 -Wildlife Susit_ J. wildlife studies have been broken down into the following components: big game, furbearers, birds and non-game mammals. Extensive interaction is being implemented between wildlife studies and the following complementary studies: plant ecology, recreation planning, land use analysis, socio-economic analysis, access road analysis and design development. The objectives are to define the types and extent of wildlife habitats in the study area, to determine the utilization of these habitats and to assess potential project impacts. In combination with this, mitigation measures to eliminate, reduce or compensate for potential impacts will be investigated. Potential avenues of impacts on big game species to be studied are shown in Figure 10-2. I I I I I I I I I I I •• I I I -" _;. I 1-u ~ :E 1-1-1-frlu frl Q;~ a: ~:e 5 --I I I J \ \ \ \ I z Q \ (J) ~ (I) w 0; (.) . -' ' ~ ' !.; ::::>. (J) . - '· .. ;: 0 a:· 0: 0 CD . -· .· >-z ,_. (/) "• <( > ta :E -:::> '1-0: :r: !:i <( . -• .. .... ..J ~ i= z liJ -:. # 1--·:. . -, ... ·~· .... 0 .~· ... -: .. _-: . . -; ,.,. . .. . .. . .. ~. " .... - •-. .. .. I'.' -... -._ ~ .. ..... •• !_._ __ _ . . ... , ' ·.•· . ,. . .;;,.. .. -. ' . .. """' ..... ""' . ~ ........... ., '· .. .•. .. . . . ,, . , . -... · .. ":,._ .... -~ .......... ._ . ~ . ' --··-- '11::: •• , i ( ' ! i I 10-8 TABLE 10.2 -POTENTIAL FISHERIES IMPACT ISSUES BY PROJECT STAGE Project Stages(a) CC, CD, RD, 0 CD, 0 CD CD, 0 RD, 0 CD, RD, 0 CD, RD, 0 RD 0 0 0 0 Potential Impact Issues Changes in the water quality Alteration of the temperature structure of the stream Possibility of excessive dissolved gas (nitrogen and oxygen) concentrations caused by plunging flows Changes in the chemical and physical conditions in spawning areas of anadromous fish Impact of temperature structure of reservoir on reservoir management and downstream conditions Reduction of turbidity downstream during the summer, resulting in increased predation Winter turbidity changes in the reservoir and downstream (including potential problem of silt trapped in layers because of density differences) Increase in nutrients in the reservoir and downstream from leaching Changing water quality conditions under the ice as a result of operation Development of new ice-free area with increased predation and small fish accumulation Development of frazil ice downstream Changed ice thickness downstream (because of increased winter flows) affecting temperature and downstream movement of fish ~ ' ' ' , I l ~ 10-9 TABLE 10.2 -POTENTIAL FISHERIES IMPACT ISSUES BY PROJECT STAGE (Cont.) Project Stages CD, 0 0 CD 0 CD, 0 0 CD, RD, 0 CD, RD, 0 CD, RD, 0 RD, 0 CD, 0 CD, RD, 0 CD, 0 CD, RD (a) (a) Project stages: Potential Impact Issues Summer and winter flow changes and the impact on fish reproduction, growth, and predation as well as critical flows for transportation (including access to tributaries and sloughs) Effect on present type of fish colelction devices Extension of upstream anadromous fishery (if Watana is constructed f·irstJ Bank scour caused by piping effect of increased flows under the ice Bed scour as affected by changing flows and ice Potential for increased production by the addition of new spawning areas and new rearing areas Potential loss of many present productive areas FoY'mat ion (and management) of new 1 akes Changes in tributary stream access for fish Changes in personal use fishery Potential stranding and exposure of redds due to diet variation Changes in the habitats of resident fish populaitons Changes in the stream channel in terms of cr~ation, alterat·iJn, or elimination of habitat Loss of existing fishery in impoundment area CC -Construct ion of the cofferdam and river divers ion CD -Construction of the dam and reservoir filling time RD -Development of limnological conditions and fishery management in the reservoir after filling 0 -Operational stage including start-up I f \: . s:l<T;. ~-: F'"'i ' 1 t • ' .. l ' ' . !I ! .1 : 1 v : f I f ' ' 10-10 Big game studies are being conducted by ADF&G under the direction of Dr. Karl Schneider. Specific study components include (a) caribou herd identity, migration patterns and habitat use, (b) black and brown/grizzly bear studies, (c) moose studies, (d) upstream wolf studies, (e) wolverine studies and (f) sheep studies. (a) Caribou Studies In addition to the overall big game objectives the caribou studies include delineation of calving areas, estimation of numbers and composition of "subherds", determination of migratory routes and timing of movements. Particular emphasis is being placed on evaluating potential impacts of the proposed impoundment(s) on movements and subherd i so 1 at ion. Techniques being used to pursue these objectives include radio-collaring and subsequent aerial tracking of caribou from the main Nelchina herd and susp~cted subherds. A modified version of the aerial photo-direct count-extrapolation (APDCE) caribou census technique is being used to estimate numbers of animals. During 1980 the main Nelchina herd was followed from the winter range in the Lake Louise Flats-Gakona-Chistochina River drainages to the calving grounds·in the northern foothills of the Talkeetna Mountains. Calving was observed to take place between Kosina and Oshetna Rivers, an area that has been used at least since the mid-1950's. Throughout the summer the herd continued to use the northern Talkeetna Mountains, ranging between Caribou Creek to the southeast and Fog Lakes to the north. Herd composition sampling and radiotracking flights were continued in the fall and winter. {b) Black and Brown/Grizzly Bear Studies Radio-collaring with subsequent aerial tracking is the primary technique for assessing bear populations in the study area. An intensive effort in Phase I studies is to assess impoundment impacts on black bear denning habitats and to assess the extent and utilization of bear habitat surrounding the impoundment area. Following the summer tagging program functioning radio collars remained on 11 brown bears and 16 black bears. Periodic aerial tracking is continuing to monitor the movement of these collared specimens. Point locations are being plotted on aerial photos and overlaid on vegetation maps to provide for habitat selectivity analysis. (c) Moose Studies Emphasis during the summer and early fall of the. 1980 studies was on moose summering and rutting areas through radio relocations of ~ollared moose. Sig"'lificant efforts are being made to relate moose distribution, f' 1 I ; ) ~ i l I ( . ' ·; ~ . I ' ! 10-11 to both vegetation type and snow cover. A total of 70 moose have been radio-collared in the Upper Susitna Basin and 10 downstream. Animal/habitat type data is continuing to be analyzed and a map overlay system is being devised to expedite resighting information. (d) Wolf Studies By the fall of 1980 th·ree wolf packs had been identified in the study area -the Watana pack, Susitna-Tyone pack and the Goose Creek pack. Pack members were fitted with radio collars and tracked to collect data on wolf movements. Scats were collected to assess food habits and den site characteristics were described. Additional packs in the study area were collared in November. (e) Wolverine Studies Four wolverines were radio-collared and tracked during the summer and fall of 1980. Of the 61 relocations of these animals most were in alpine areas. Eight additional wolverine were collared in November. Radio-tracking and habitat utilization studies are continuing. (f) Sheep A summer aerial survey of sheep numbers and distribution in the Susitna area was conducted with results compared to historic data previously collected by ADF&G. Efforts are continuing to locate sheep throughout the winter months. (g) Fisheries studies Furbearer studies are being conducted under the direction of Dr. Philip Gipson of the University of Alaska. The specific objectives of these studies are to determine the general abundance of key species in the study area, assess habitat preference of each species, analyze seasonal use of habitats and project the probable impacts of a Susitna development on these species. Species being studied include red fox, coyote, lynx, mink, pine marten, river otter, short-tailed weasel, least weasel, muskrat and beaver. (h) Bird and non-game mammal studies Bird and non-game mammal studies are being conducted under the direction of Dr. B. Kessel, University of Alaska. An extensive bird study is being conducted on a large portion of the Upper Susitna Basin to determine the presence of possibly unexpected species or unexpected concentrations of sp~cies. Intensive census sites have been located in the upland and ~2tland habitats to provide data on bird species composition and density in each of the most extensive habitats of the region. Non-game mammals, hares, voles and mice are being surveyed to provide information on these import ant prey species. Resu 1 ts of the first year program wi 11 be available in March 1981. -"- "" -·"!] ..• 1 TABLE 10.4 -SUMMARY OF PRESENT AND FUTURE LAND MANAGEMENT ACTIVITIES IN THE PROPOSED SUSITNA HYDROELECTRIC PROJECT AREA Agency/Landowner Bureau of Land Management .. State of Alaska Matanuska-Susitna Borough Native (Cook Inlet Region Inc.) and several villages Current Management Protection of natural environment. No activities involved other than fire control and the issuing of some special use permits. Land use planning being undertaken. Planning for the disposal of state lands that are immediately adjacent to the west side of project area (north and south of Chulitna). Borough has no lands in the project area. Project area does fall within the borough's boundaries and is part of the borough's Talkeetna Mountain Special Use District. None, lands currently being transferred to individual village~. Future Management Direction Future management wi 11 be guided by 11 Southcentral Planning Area Management Framework Pl an 11 and a "Easement Management Pl an 11 • State will select lands in project area not selected by the Natives. Management planning on these lands will not begin before 1983. By Ordinance No. 79-35 creating the Talkeetna Mountains Special Use District~ the borough can exercise planning and zoning authority over private lands within its boundary. Management p 1 ann i ng not yet underway. ~ 0 I I-' N -''>c l -·-~ .. J 10-13 10.2.3 -Land Use Analysis Land use analysis studies are being directed by Dr. A. Jubenville of the University of Alaska. The primary objectives of these studies are to evaluate past, present and future land-use trends, describe present and future resource management programs and identify the major changes in land use that would result from the development of a Susitna project. Land-use analysis has been done in two phases: (1) agency/landowner interview and (2) oral history of the area. The format for the interviews is shown on Table 10.3. A summary of present and future land management activities in the proposed Susitna Hydroelectric Project area is shown on Table 10.4. These interviews conducted in the spring of 1980 indicated little resource management planning had been done or was proposed for the foreseeable future. The ANCSA and state selections have produced a mosaic of land management objectives. A primary land-use concern relating to a Susitna development is access. Increased access would bring more opportunity and more pressure to explo·it existing land/resource values. This could force a change in land use and life style of the people who have used, and are still using, the area. The extent of this change and its effect on land use will be investigated in more detail in continuing studies. TABLE 10.3 -THE INTERVIEW PROCESS-MANAGEMENT AGENCIES I. Introduction (see Part 1, Table II-2) II. How Agency Relates to Current Land Use in the Area A. Status of the resources for \~ich the agency has responsibility B. Current monitoring activities C. Special use permits if any D ~ Prob 1 em areas III. Future Plans for Area A. Planning documents B. Other indications of present or future planning IV. Agency Long Term Goals for the Area V. Agency's Perception of the Impacts that the Proposed Susitna Hydroelectric Project would have in its own Future Programs VI. Background of Informant A. Position with agency B. Time with agency VII. Agency Suggestions on Ways in which the Susitna Hydroelectric Project Could be Most Compatible with Agency Goals and Interests I I I I I I I -1 I I I I I •• I r t , r~ ~~ l ~- 1· ,, I a, 10~14 The oral history was done in two phases: interviewing and ground-truthing. People, Table 10.5, who had developed long-standing relationships with the Susitna Basin were interviewed using the format as shown in Table 10.6. The use of the 1 and by time period and geographic zone was sum'";larized and a list of possible artifacts to be verified in the field was prepared. Aerial truthing was done by helicopter for the lesser important artifacts and ground-truthing was conducted for artifacts deemed to be important to the particular locale. A photo file of all artifacts has been developed. TABLE 10.5 -ORAL HISTORY INTERVIEW INFORMATION Interviewee Mike Fisher Cliff Hudson Minnie Swanda Ed Wick Dorothy Jones Verna & Carrol Close Roberta Sheldon JoffirL reland Mrs. Ken Oldham Location Talkeetna Talkeetna Talkeetna Talkeetna Talkeetna Palmer Talkeetna Talkeetna Anchorage Reason for Being Interviewed Air taxi pilot who has spent many flight hours in the Upper Susitna River Basin; local Talkeetna resident. Long-time Talkeetna resident; 40 year owner and pilot of Hudson's Air Taxi operation. Widow of master guide Frank Swanda; 46 year Talkeetna resident. Local Talkeetna resident; assists Mahay•s River Boat Service. President Talkeetna Historical Society; Representative-elect of Mat-Su Borough Assembly. 27 year Talkeetna Roadhouse owners. Partner in Sheldon Air Service; Talkeetna resident. Alaskan sourdough; year-round resident of Murder Lake; southwest of Stephan Lake. Past co-builder; co-owner of High Lake Lodge; guide; bush pilot; author. ·~ I J I 1 ~ ~ ~ { ~ i l ~ I 1 p i I J ·1 ' I ' { I i ~ { TABLE 10.5 -ORAL HISTORY INTERVIEW INFORMATION (Cont.) Interviewee Location Mrs. Frenchy Anchorage Lam~.-Jreux Tom Mercer TLlkeetna James Moran Fairbanks Mrs. Oscar Vogel Anchorage Jake Tansy Cantwell Cleo McMahon Gakona Jim & Vonnie Cantwell Grimes Bob Toby/ Glennallen Warren Ballard Chuck McMahon Gakona Andy Runyon Palmer Butch Potterville Glennallen Reason for Being Interviewed Hunter; trapper; wife and mother of big game guides. Bush pilot; dog musher; President of Denali Wilderness Treks (recreation outfitters). Pilot; partner in Tsusena Lake Lodge. Hunter; trapper; 20 year StephanLake resident; widow of 40 year trapper, master guide in Upper Susitna River Basin Native hunter and long~time trapper in Susitna River Basin. 40 year air taxi owner and pilot/hunter and aerial trapper in Upper Susitna River Basin. Pilot; owner of Adventures Unlimited Lodge, Denali Highway. Hunters; research and management game biologists in Upper Susitna River Basin. Upper Susitna R~ver Basin pi 1 ot; hunter; trapper and fisherman. Long-time air taxi pilot; hunter; Clarena Lake trapper. Upper Susitna River Basin sportfish biologist. I I I I I I ' I I I .I I I .I I .I J I I a1 ' J a: If " D; ' ' Jl Il D:' I .. I0-16 TABLE 10.5 -ORAL HISTORY INTERVIEW INFORMATION (Cont.) Interviewee Paul Holland Pete Hagglund Dennis Brown Don Lee Les & Helen To lefson Kathy Sullivan Dave Johnson Jeff Weltzin Judy Simco Location Palmer Fairbanks Talkeetna Talkeetna Talkeetna Talkeetna Denali State Park Fairbanks Anchorage Reason for Being Interviewed Owner-manager Evergreen Lodge; Lake Louise/boated from Lake Louise to Talkeetna by way of Susitna River. Pilot and President of Alaska Central Air; partner in Tsusena Lake Lodge. President Akland Air Service; helicopter pilot. Manager of Stephan Lake Lodge; air taxi pilot; hunting outfitter. Father was an original settler in Talkeetna area; subsistence trappers and hunters; long-time Talkeetna residents. Owner of Geneti Expeditions (mountaineering and recreational outfitter, Talkeetna) Denali State Park Manager; familiar with recreational use in Upper Susitna River Basin. Backpacks into the Devil Cnayon area on numerous occasions. Hunter, trapper; widow of trapper Elmer Simco. ~ I ~ ~ ,, I I l I i I ' I I I i ~ l I q I TABLE 10.6 -THE INTERVIEW PROCESS -ORAL HISTORY I. Introduction A. Who are we B. Explanation of the project C. What we want D. What we will do with the information E. Does the person think he can help F. Ask for permission to record conversation--avoid use of the word ;, interview" II. Background of the informant A. Relationships to and interests in project area 1. Length of time involved with project area 2. Seasons of year 3. Means of access III. Knowledge of land uses in the area (use map) A. How was project used? B. What resources were utilized, where? 10-17 C. Majc~ changes that have taken place in the project area, when? why? IV. Who else m1ght we contact? A. Name, address and occupation B. Relationship to the area I I I .&1 :I =I .I ~·I 'I ~ 1 I :J .I .I "J J J J 11 I D 11 It ll ll D ll IJ ~ IJ IJ tl fl n ll 10:-:18 10.2.4 -Cultu~al Resource Investigation Dr. E. J. Dixon, Jr. is the principal investigator for the Susitna Cultural Resource Investigations. The objectives of this program are to identify archaeological, historical and paleontological resources in the project area, to test and evaluate these resources, and to propose mitigation measures and lessen the impact of ground disturbing activities. To meet these objectives a five-step cultur-al program has been started. (1) Preparation of field studies (2) Reconnaissance level archaeological survey of project area (3) Intensive testing of archaeological and historical sites (4) Analysis and final report preparation (5) Curation of cultural and paleontological materials A Federal Antiquities permit and State of Alaska permit have been obtained. An extensive literature review of available documents that pertain to the history, prehistory, ethnography, geology, flora and fauna of the study area has been completed. The data base has been synthesized into a regional and local cultural chronology. Air photcs of the study area were examined and their interpretation focused on identifying probable areas containing cultural resources. This data assisted in selecting the 60 sampling locales for the 1980 field season. All known historical and archaeological sites have been plotted on 1:63,360 USGS maps. Archaeological sites that could be relocated in the Watana Dam area were tagged with the appropriate state number. A procedures manual/research design document was developed and received a positive review from State and Federal agencies. Archaeological sampling was conducted at the sampling locales selected for reconnaissance level survey during the 1980 field season. In addition, bore holes, seismic lines, borrow ares, helicopter landing zones, and other engineering related surveys received recommendations for archaeological clearance. Intensive testing of sites located during the 1980 field season is scheduled for the summer of 1981. Based on the analysis of this data, significance will be determined applying National Register criteria and mitigation measures to avoid or lessen impact. 10.2.5 -Recrea~j,on Planning In addition to assessing the recreational aspects under wildlife, land use and socioeconomic components of the study, Dr. Jubenville of the University of Al~ska is coordinating the preparation of a Recreation Plan for development of the total project lands and waters as required under FERC licensing requirements. This plan will provide the most socially 10-19 desirable mix of public recreation opportunities within the limits of the project resources. It will accomplish the following: (1) provide a variety of activities and levels of development consistent with the quality of the recreational experiences to be offered; and a measure of opinions of the potential uses through surveys and public meetings to determine th~ kinds of exper·iences and appropriate levels of development desired (2) analyze the environmental setting and recmr.;nended developments (associated with the access transportation system, the water impoundment a.nd other resource uses) that wi 11 be consistent with the environmental limitations of the area (3) balance the development of facilities with the ~..apacity of the area resources to sustain th~ resultant use (4) identify and incorporate unique natural features into the plan to appropriately preserve, display or interpret such features (5) establish planning guidelines and objectives consistent with those of the agency ultimately responsible for managing the public use of the land and water resources, the Mat-Su Borough governmental requirements and, where feasible, the requ·irements of the other landowners · (6) prov1de for coordination with recreation agencies including Alaska Division of Parks and HCRS (7) assure the compatibility of the plan with the total hydroelectric operation and other public uses, including existing u~es, of project resources. Phase I studies, through an analysis of the resource and public input, will develop a recreation plan designed to meet the FERC license requirements. Phase II studies wi~l provide an expansion and detailifig of this recreation p 1 an. The fo 11 owing steps have been conducted to date; -an exten;;ive 'literature review to identify and make use cf existing pertinent sources of information -collectio, and analysis of resource data identified in the literature review evaluation of aerial photography and topography maps for potential recreation areas. (Field eva1uation was conducted to assess these potential sites further) an analysis to relate proposed rlevelopments to requirements of potentia.l managing agenc·~es and the institutional constraints under I I ' ••• f. I ~. I I I I I I .I J .I J J I 11 IJ ll tl ll ll ll D 11 ll ll 11; i which they operate. (This interaction will continue throughout the Phase I studies) 10-20 -preparation of five concept plans which reflect the relative levels of development of access and facilities (Figures 10.3 to 10.6). These concept plans have been incorporated into a questionnaire and circulated to residents in the Anchorage-Fairbanks area to determine the preferred concept and how various types of users respond to access and facility development. Response to this questionnaire is expected to be complete by February 1981. A total package on the selected concept plan will b; available by April 1981. This will undergo review and reevaluation by the planning team, government agencies and potential users. Based on the results of this revif-1W and a final fieid check to determine feasibility, o. revised concept plan will be prepared in consideration of potential use, aceess and potential impacts. In the fall of 1981 the concept plan will be made available for agency review and public comment at community me~tings. By December 1981 a final recreation plan will be available. 10.2.6 -f]ant Ecology Plant ecology studies are being conducted under the direction of Mr. J. D. McKendrick, U~ of A. The objective o-r· the plant ecology study is to map and characterize the vegetation cover/habitat types ~.:curring in the areas to be affected by the proposed Susitna development and to predict impacts that will result from the proposed facilities. High-altitude infrared photography and LANDSAT imagery were used for the vegetation mapping. The map scal9s for the areas of coverage were 1:250,000 for the entire upper basin; 1:63,360 for an area 10 to 12 miles on either side of the river from Devil Canyon to the Mclaren River, floodplain below Talkeetna, and associated facility corridors; and 1:24,000 for the impoundment areas, floodplain betwen Devil Canyon and Talkeetna, and selected samp.ling areas below Talkeetna. Distinct tones and textures on the photographs were delineated and classified according to probable vegetation. During the field season, 74 sites were visited and actual vegetation classes determined for areas delineated on the photographs. Reconnaissance level surveys were made of each vegetation unit for the purpose of describing vegetal and site characteristics. Two hundred thirty species of terrestrial vascular vegetation in 123 genera and 49 families were identified. Nineteen types of vegetation were surveyed. Surveys were also made for vascular aquatic plants and potential endangered and threatened species. Pr·incipal vegetation types in the area of h1tmdation are closed mixed conifer and deciduous forest, closed and open conifer forest, tall shrubland and open and closed shrubland. Losses of vegetation/habitat fJ ll ll IJ n u D rt tl D (] (l . f] D lJ This appro::rh cc,uld L~· u:.~·d in the C:\'<.:nt tnat pub1i::: :1cccss by ro;id to the Su~itna reservoir area!; is re.snictc:d or not p~rmint:d at all. Jn ihis case::, development will probably Lc limited to a visitor inforrn:1tion center on the Parks Highway. Access by float plane \vould likely be extended to include the reservoirs. Access by canoe, kayak, and ·~iverboat via the upper Susitna, Maclaren, and Tyone rivers would continue. Land use \\'ithin the project area would probably be much the same as at present with management limited to fish and game management and the regu1a6on of mining activities. f::·;·:·:~·;3 Elevation over 4000 fl . . 10-2 QUESTIONS: FOR OFFICE USE. ON 1. Do you fi_~d this. plan to be (check one)-Not acceptable? . 0 . · · -Acceptaole? 0 2. ·. · · · -Acceptable with modifications? 0 If any modif1cations (addition.~ or deletions) are suggested, mark the loca- tic:>n with an "X" and number them_. Bdefly descnoe the proposed modific- ations by number: .. APPROACH 11 A11 -A f~INIMALLY IJEVELOPED. AND HANAGED WILDERNESS .. FIGURE 10.3 ll ll .E D IJ D IJ l1 rJ [J fJ u· 10-22 In the evt-nt thar accc.:ss to both rt~ervoirs is possiLk, the area cou]d be managed as a wilderness rccrc:nion area, with development limited to minima} intetpretive sen•ices, primitive campgrounds, and sixnple boat ramps at both damsites. These ramps would facilitate access by boat to the reservoir shorelines and adjacent areas for car~ping, ·hunting, fi~hing, and other ~ackcountry activi_ties. As in Appro~ch_"An, a visitor ct:nter would be b11llt on the Parks H1ghway. Jnformat1on would be prov1ded on the Denah H1ghway should access be available at this location (see access map). A tour boat service would be offered at 'the DeviJ Canyon damsite for day tou;s of i:he reservoir. tr::J Elevation over 4000 It •· 0 0 ...... 10 --- QUESTIONS: FOR OFFICE USE o; 1. 2. . Do you find this-plan to be (check'one)-Not acceptable? 0 · · -Acceptable? . 0 -Acceptable with modifications? 0 . Jf any modifications (additions or deletions) are suggested, mark the loca- tion with an "X" and number them. Briefly describe the proposed modific- ations by number: · ----------------~------·------------------------------------------~ . APPROACH "B" -LIMITED ACCESS HILDERNESS . FIGURE 10.4 IJ· ll ~ I] IJ 11 [J [J u One pos~ihlc approach to more extensive rc:cn.-::"L:onal development is to offer highly dcvc:loped f:1cihues at 10"'"2: the \\':n;ma damsitc and only minimal int~rpreri .. c services at the Devil Canyon damsitt:. 1n addition to the services offered at both rest:rvoirs in Approach "B", there would be greater development at the \Vatana damsite to accommodate increased visitor use. Simple back country campsites would be provided at selected locations around the \Vatana reservoir, with add1tional improvements being made at the mouth of Jay Creek. ·More intensive resource management would be necessary around the \Vatana reservoir but the rc.:m.aining project area woul~ still be managed as wilderness. As in Approaches "A" and "B", visitor infor- mation would be available at highway entrance(s}. I·:·:·:<J Elevatson over 4000 !l 0 Km 0 QUESTIONS: · L Do you find th~UJlan to be (check one)-Not acceptable? 0 . -Acceptable? . . 0 -Accel?table with modifica~ions? 0 2. If any modifications {additions or deletions) are suggested, mark the loca- tion with an ux, and number them. Briefly describe the proposed modific- ations by number: . •: . APPROACH "C"-WATANA.RESERVOIR DEVELOPMENT ..· .. · ~.,,1,.,· FOR OFFICE USE C FIGURE 10.5 IJ 10-24 In this appro.lch highly developed facilities would be offered at the Devil Canyon reservoir and damsite and IJ u [} [] JJ u (] u E . only minimal fac'lities at the Watana damsite. Tile Devil Canyon area would be developed and managed intensively to provide a diversity of recreational opportunities, while the Watana reservoir area could be developed and managed in a manner that would maintain its wilderness character. f:·:·:·=·~·:) Elel!ation over 4000 IL .o 0 QUESTIONS: FOR OFF1CE USE ONL1 1. Do you find this plan to be (check one)-Not acceptable? 0 · . · · -Acceptable? · 0 2. r · . . ~Acceptable with !J10difications? 0 •. If any modifications (additions or deletions) are suggested, mark the 1oca-· · tion with an "X" and number them. Briefly describe the proposed modific-· ations by number: APPROACH "D" -DEVIL CANYON RESERVOIR DEVELOPMENT FIGURE 10.6 (] ~ l1 .·ll u fJ [] [] ffl tW IJ u 10-25 in the area of proposed haul roads and borrow areas will probably consist largely of low shrubland and mat and cushion tundra. The 1:250,000 scale map of the entire basin is complete~ with the 1:63,360 and 1:24,000 scale maps nearing completion. Additional field verification will occur in the 1981 field season. A table showing the acreage of each vegetation type and percent of total study ar·ea acreage is being prepared. Yet to be completed are the vegetation maps for the succession studies which basically will be the production of vegetation cover/habitat maps from current and variously-aged aerial photographs, a comparison of vegetation changes over time and an investigation of the relationships of these changes to hydrological and other physical factors. 10~2.7 -Corridor Selections Two major corridor selections will be assessed environmentally- Transmission Line and Access Road. These studies will ue interrelated and will receive a major input from investigation in other stwdy components; e.g., recreation planning~ fisheries, wildlife, plant ecology land use and socioeconomics. Transmission-line and road~access studies are being coordinated by J. Barnes (TES) and C. Baumgartner (TES) respectively. Corridor selection will be done by the following process: -conduct 1 iterature search for pertinent data sources -obtain aerial photography and land-based photography for the study area routing analysis -receive input from other study components regarding information relevant to corridor selection and assessment -provide environmental input into the selection of alternat;ve and preferred corridors -conduct constraint avoidance routing analysis -provide input into the selection of the primary corridor(s) and define criteria for establishing and conducting final design and location analysis -prepare, for input into the environmental report, a description of direct and indirect impacts associated with the selected corridor(s). . ,, ·-.·.--·-.·.··--... ·--]· ; ~··,: :;·. 0 ' ·. "·:: 10-26 During Phase II, environmental input will be incorporated into further corridor refinement. Subsequent to the commencement of our studies, the Alaska legislature decided to proceed with a transmission intertie study from Healy to Willow, independent of a Susitna development. This contract was awarded to Common we a 1 th and Associates. As a result, present transmission corridor studies concentrate on selection of a corridor from the Susitna project to the intertie and selection of corridors from Healy to Fairbanks and from Willow to Anchorage. To date, previous reports have been reviewed and general reconnaissance studies conducted as input to the preliminary screening activities. Corridors selected for further study have been identified and are teing reviewed for }.fteliminary route selection. I I I I I li I I I ~ I I I I I I I I I I I I I I I I I I I I CHAPTER 11 Chapter 11, Analysis of Socioeconomic Impacts, was developed by a subcontractor, and will be furnished in the next edition after extensive re vi e\"J by Acres . I I I I I I I I I I I' I I I I I ;I I I 12 -Analysis of Economic Feasibi1ity and Net Economic Benefits 12.1 -Introduction The evaluation of the viability of the alternative Susitna River Basin ddvelopments is conducted in terms of economic parameters as opposed to ·::-in&ncial parameters. While both perspectives deal with the profitability (or viability) of a project, the financial analysis is concerned with the·profit of the corporation and share-holders owning the facility, whereas the economic analysis addresses the costs and benefits to society assoicated with the operation of the facility. The economic parameters are applied to a project-specific analysis as well as the generation planning analysis. The essential difference in the two approaches is that the former deals with the life-cycle costs over the economic life of the hydro project but excludes the system c0sts. The generation planning analysis includes a detailed evaluation of system costs based on an optimized oepration schedule. 12.2 -Methodol.Q_[l 12-1 The analysis of the net economic benefits of the Susitna Hydroelectric Project is to be developed within the frame-work of the traditional cost benefit methodology. The general procedure for a hydro project is to compare the total costs associated with the project (construction, operating, maintenance, transmission~ etc.) with the benefits of the hydro scheme. The benefits are defined as the avoided costs of providing the equivalent energy and power from the next best alternative generating source. In this case, the costs associated with a coal-fired thermal station are taken as the gross benefits of the hydro project. To compare the economic merits of the proposed schemes it is necessary to reduce the cash flow streams for costs and benefits to a single measure in time. Two measures are appropriate: present value and intern a'! rate of return (IRR). Both are based on discounted cash flow methods -the first produces a value given a discount rate; the second is the discount rate which equates the discounted benefits and costs. The discount rate used in the present value calculation is the real cost of capital assumed for this study. This rate is 3 percent per year. 1 ... , j ' • l If·! .• ' l l ;.1 ·~' l·; I .... ~ •• 1, 12.3 -Base Case Analysis 12.3.1 -Direct Costs and Benefits Project Specific Analysis (a) Hxdro Costs -The hydro costs are based on a three-stage development on the Susitna River. The capital costs and basic construction and operating characteristics for each stage are: STAGE I J! 111 Watana 1 Watana 2 Devi 1 Canyon Capital Cost {$1980 millions) 1740 150 900 First Construction Year 1985 1993 1993 Last Construction Year 1992 1995 1999 Construction Period (years) 8 3 7 Installed Capacity (MW) 400 400 400 First Operating Year 1993 1996 2000 Economic Life (years) 60 60 60 Operating Cost ($/MW) 8000 8000 8000 Average Annual Energy (GWh) 2990 262 2975 (b) The capital cost for each stage is distributed o;er the relevant constructioh period based on a sinusoida curve. The future value of the construction expenditure stream in the last year of·construction is computed using a three percent rea1 discount rate and annualized over the 60-year economic life, again at three percent. The total hydro cost in any year is the sum of the annualized costs for the stages in operation in that yea~ plus the operation cost during the year. T~ermal Costs (Benefits of liydro) .-The t~ermal .alternative consists of three coal-fired steam generat1ng stat1ons s1zed to match the hydro capacity increments and operated to duplicate the hydro energy production schedule. The economic life of a thermal station is given as 30 years; therefore, replacement facilities are required. These are casted at 80 percent of the original station cost. Operating and fuel costs are based on energy production with an annual real fuel cost escalator of 2.93 percent to the year 2005. The thermal station characteristics are: 12-2 'I •• I I I I I I I I I I I I I I I I I I I I I I ~ I . - 1 .. J ·* l• .. l; I .. . I cr~pi't.~l Cl>St fS19BG millions} Yirst Constru~tion Y~ar :Bc-onomic Life ·-. Op~r~ti:n9 .cc:~s.t. {S/m~h) }'ue l Co::: t. { S i Giih; tfi 1 }.'-c.n, .... ...-; .... -.ent "'._ ,_ .. --I,. ft.i-"'•• C' Z'~" co~t ; ~ .... 9SO \-t-.1. millions} ~~~ re+ A ... :.J ..... c.-.,., ,;:L-. ,~.,..,.r •.h.::... ~.l. 1: -~.0 fr..~r Re:plncemsnt Last ~ to u as construction P~riod (veursi .... First Operat.intJ 'lo~t 12-3 t·~·GL '""';.~ "'L ·~ ,. 11 lll "' 920 920 o~o _, ~ .. 1381 ~ {Hl~ ... .,. :-• t.; "-OJii .LJ~ '; [•9 2 .!.:I 1995 '\ {t \J t= ..L--·-· 6 6 6 40fi 4{10 400 l."99J 1996 2000 ..... ,.. 30 ""1-0 ,_}\,!' .. 2990 ,i6~ :-..n .... s ,(..,f 6SOO 6500 ~flo. 0 ~"·::>0 ""-¥.,07~ .J..& J 12015 i20'l.S ... . ?':tfi • J I ?J& 736 201? 2020 i~iG 2022 2{)25 iQ2g f, 6 {t 2023 iti26 2030 i ~ ~ -~ -1 I i --i l I q ~ 1 I J ·I·~ > " "I I ,, I I I I I -~ I ~1 12-4 As in the hydro case, capital costs are annualized over the economic life at three percent real discount rate. System Planning Anal~sis (to be supplied later, based on Chapter 8-Generation Expansion Plan). 12.3.2 -Indirect Costs and Benefits -environmental effects -recreational effects (to be supplied later) 12.3o3 -Results Project Specific Analysis The planning horizon selected for this analysis is 1980 to 2082 inclusive. This time period includes the full economic life of the first hydro stage, 57 years of Stage II and 53 years of Stage III. The annual cash flow over the planning horizon is detailed in Table 12-1. The annual costs of the thermal alternative are never lower than 1~ose of the hydro scheme. The present value costs (at a three percent discount rate) of thermal are more than twice the hydro cost. The present value cost of hydro is $2,152.9 million and of thermal $5,732,5 million. The resultant benefit-cost ratio at the three percent discount rate is 2.66. The 1980 unit cost of power (in 1980 real dollars) required to cover production costs for the hydro station is $0.020 per kWh while the thermal cost is $0.053 per kWh. Both are computed at the real discount rate of three percent. The internal rate of return (IRR) associated with the hydro development is based on the actual cash flow stream for the hydro and the thermal station (not the annualized costs). The IRR computed in the project specific analysis is 14.59 percent. At this discount rate the presen~ value of the hydro cost equals the present value of the benefits (i.e., the thermal costs). Table 12-2 shows the net cash flow streams used to calculate the internal rate of return. SystemgPlanning Analysis As shown in Chapter 8, a 1200 MW Susitna development would provide an estimated benefit-c(')st ratio of 2.1 and a present value net benefit of $2.3 billion (in 1980 real dollars) vis-a-vis the next best (Susitna exclusive) expansion sequence. Table 12-3 summarizes several indicators I I I I I I I I I I I I I I I I I I ~ I I I I I I I I I I I I I I I ,I 'I I I of economic viability obtained from the project-specific and system-planning analyses. 12.3.4 -Risk Analysis Project-Specific Analysis 12-5 The effect of various alternative discount rates is illustrated in Figure 12-1. This figure also clearly illustrates the position of the internal rate of r&turn. Further risk analysis will test the impacts of altern~tive capital costs and fuel escalation rates on the economic viability of the project. System-Planning Analysis (to be supplied later) 12.4 -Alternative Basin Developments (to be supplied later) S. DIENER .. li . . j n . ll . ·-.· [ 12-6 m·rr·t 12·1 j f~ ·L; . --.-:..._ ..... _,....-..... ._,1·-r . • :J ..,. <J ~--..:. 1 - SUW·~:F~ OF AlU~Uhl:! ~~D COSTS {$ million~) ~---~- :~-~-L . I . : ·f 4 . . . ·1 . I. • ~ !: I : . ~ -.. I .,. -.. ;:. J. '" l--·-~!. ;~ •fr .. ' .. ., .. 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J. • I 101& 120 .. ~~5? ~15 6 t 95~1 2t>l6 :12G.S~S2 34$ .. ~5-23 20,1 120&5352 ~45.9S23 I 2vle 120,~~5.2 3•~D.g5'3 20J9 l20.S352 S~S .. ~S23 fi I { ' , __ } .1- '·l· -<, ,,_ •:: ' .,. :t ~ ' ~J I -- "l. I·: ~~ -,. .;~ ' I ~-< ..; ;. l9!Hl l98l 1~87 1988 19Bfl 1990 ~ ~91 1992 1991 1994 199.5 1996 ~~tj"'l ~.,.-~ 1il:1B ...,.._. _ .. 2017 2018 2-019 2020 202l 2(;22 ?fl2'l ..... ~,.,. 2024 2025 2026 2021 20~8 2029 0 0 0 0 0 !j c ....,... ~1\ .-:~~-tv ~~~ .,6 ..l,.,t:;t,.)J' 2 ,.,_ 1 ,_ tHJ..,. ... "i -, r,.c. ~ .l. ..;\,•v • 0,. lt96.,7t. so~.t' 2~0~14 179 .. S6 2SO.,J.i , .. , j-~ .i~..). ti _, ,-~ r. ~ -..'" .JV n .. uo (l,Q{l {LQO O~!lfi o.oo 0~00 zo:;.o-2052 o.~ 0 0 0 0 0 ..... u ·~ v. D r'\ v • .n .. 0 0 52:-:55 54.0SJ 55~68 150.37 lS.4.1fJ 15~ .. 78 7t v 21./5 13£.2' 29B. 16 413~25 ~13.25 _298.76 ll6'!2~ 21~75 ~5 .. S9 't q·~ , ~ .... ~~ .. .;.,. ""<i:' ,&.-4..,.-.~-1: .£. 2 ::.-~.o ql"; Jl!. ... v 206 ... 10 100.89 1GtS6 o.no 0.00 o.oo {L. 00 0.[)(} o"on J o.no 0 0 0 !i 0 n .. 0 0 0 0 D o· 3 .. 20 3.20 ~ ?1\ ~ .... \; 6 .. 40 t\,.40 6.40 6 .. 40 9~60 9~fin 9~60 9-r~O 9.{:0 u "!-. ...... -bv -259.89 -13:3.11 7 .. 8f; 1701145 zs~.s9 Jv311o-t fL'..,. 5 """' 1 I" 3 l f.a" J4 1{)4.31 -,,r .... t)" ..!:f.£ .. ~4 4Jl,. 04 4.30.97 409.77 3~~y 5~. 3-2!1.55 ~09.17 ~09r.77 J.OSYJS 2Qfi_B.(i I fl ll 8,000 a 7,000 8 6,000 fl n 5,000 ii 4,000 II Present Worth of Real Costs in 1980 (S Milfion) il 3,000 i1 2,000 I ,I 1,000 • • • • II • • • I I • • I • • I I I I • s • • • I • • • I • • • • • • • • Thermal Cost . • • • • • • • • • • • ~ • • • • • • • • • • • • • • • • .. ~ • • • •• • • 41 ••• •• •• """' ··. --.... . ...... __ ... Internal Rate of Return= 14.59% Thermal -Hydro .......... .. --...... .... ~~ ~.,..,.. ~-"':':----...... ---.... ftt·····=-··· I I I I fl I [I . ~ 0~---------~--~~~~~~~---- •. -1,000 Ret"f Discount Rate (%) PROJECT SPECIFIC ECONOMIC ANALYSIS: PRESENT WORTH OF COSTS AS A FUNCTION OF REAL DISCOUNT RATES FIGURE 12. 1 2 .. P :r.·e ~O!n t "''O·!t"i;h {it:~) of 1:' ~a.ll. C<.la t~'i: ~n 1980 (Smilllo~) l. l'l'i Q :f t.u':lt. bfr! ne £ it :s ( $mi .ll i(."~fl.) ·4.. /int.e~·o.al ~•!lite of R~t\:tr:n. ( tr(R) 5 .. Benefit-cost. (i~C). :r"tio :t.. 1'1 .. A .. d.(H':U:rte.s "ru::tt. .app.tl~c~V.bt~'" .. P~oi~ct-SpGcifie nnoJ: ys :f r.Y $0 .. 021) r• r~ ... ~'' .,),..1 3,580 !S,.B5l 2" Al,l f.:t.~tu:t·e~~ ~r~ bas·E~d on :t:~~tJJl. (int:.lJ.'J.1:.lQ:n .. ~.!JI<:lju!l',!:1;:.-:;~·;Jl do·J.llAtrs • . 3.. ~t'\11 figrlP.;r•et,:; ~XC:ti!;t>t t'h11~ liRlR ~r~ L~a~r~·d. t)n .:t :J r.~~l~<.~i~'tlt. Jl.'"'CJ'!,~l (.~1fH~"t:t~H1.t :tJ~lt.:.~.?.. 4.. Unit co·s:t ,fAS"UX'q·$ r:epr~se.n.t. ti1~ c~~·.n;:;t.nnt . .r~,;.t-l. pa-:i.<;:.r:-.r~(H1JK'~d t.o ~if·en ... ~·t"~t .. e ~Jr :l pexw::~ent rata of r~tt1.~r.a,. ~l -~· .' .L..,J. ~····•·.· J~· .. · ' i! 8 ~ l.3 .. 1 I I I I I I I I I I I I ALA~:~ POWER AUTHORITY SUSIT~A HYDROELECTRJC PROJECT PROJECT OVERVIEW REPORT Chapter 13 -Power and Energy Marketing 13.1 -Introduction JANUARY 21, 1981 DRAFT FOR DISCUSSIO~ 1 Task 11.01 Susitna Hydroelectric Power Project is being planned to provide electrical power supply to the Railbelt Region of Central Alaska. The region encompasses the two major urban areas of Alaska, Anchorage and Fairbanks, and a nudber of othar comr.tunities with sr.taller but significant dt:!tiland. f'.ilitary installations in the Railbelt r~present an appreciable proportion of present and potential electrical consumption though they meet much of this from on-base generating capacity, some of it linked with district heating facilities in a cogeneration mode. The region would be one of the preferred locations of new industries to be established in Alaska during the rest of this century. Certain current industrial users of electrical power have their own generating plant and it is likely that this practice will continue and apply to at least some new industria 1 cons liners. Existing electricity supply is furnished by eight electrical utilities, by the Alaska Power Adr.~inistration, by defence agencies of the Federal Government with on-base generation plant within military installation facilities, and from power generating units 1 inked with some industria 1 plants. The sources of supply and ACRES AMERICAN INCORPORATED 0 I·) v,l -~ --I I I 'I --I I \ -'r, I I I ALASt:A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANuARY 21, 1981 DRAFT FOR DISCUSSIUk 2 their generating capacity havE been described in some detail in Chapter ___ and details set out in Tables _,_, and This chapter of the Project Overview concerns marketing strategies and arrang~ents that ~ight be appropriate for the Susitna Project. The further tabulation of sources of generated electrical ~ower, provided herein, (Table 11.1) sets out, for each utility, its principal cons~1ption characteristics. These could bear on the nature of purchase/sale arrangements for portions of the substantial hydroelectric power and energy, output which would become availaole if Susitna was to be built. Earlier chapter~ indicate the general ~agnitude of p~anned growth in electricity de~and for the Project. Susitna is being prudently scheduled to meet both sensible and economic construction procedures. It will accommodate existing demand and future increments in the Railbelt's prograQ to harness renewable energy for electric power generation. Power and energy marketing studies can only reasonably be undertaken in detai 1 once likely energy costs and d~~and charges have been established for the new ?reject. Current econoh.ic analysis, technical optimization and financing feasibiltiy studies are based mainly on average cost rates determined from predictions of cost trends for energy fr~ other possible generating sources. blended-in with the output from existing capacity. Once generally optimal plans have beer determined on this basis, the project features and financial aspects will be subject to detailed opti~ization and adjustment to reflect the several constraints whi~h apply. ACRES AMERICAN INCORPORATED I I I I I I I ,. I :t I I I I I ,I I I I . (; I I I I I I I I I I I ALASI:A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 21, 1981 DRAFT FOR DISCUSSIO~ 3 Particular constraints which stem from, or have an influence on, power and energy marketing aspects of the project include: o Issues arising from cost and scheduled performance during the project construction and operation: -Relatively high capital cost of major hydroelectric power facilities; -Impact of schedule prior to initial power output frrnn the project's first stage; -Staging of the project to meet an optimum construction schedule and/or optimum overall cost; Issues of reliabi~ity of power and energy delivery to points of load demand. o Issues arising frohl the capital intensive nature of the proJect and danand on investors: Impact of initially high debt service costs on costs of power; -Availability of initial and senior debt funding at reasonable rates and at te~s acceptable to the institutional lenders; ACRES AMt:RICAN INCORPORATED ,. n :u m ,. == m :a 5 ,.. z z n 0 :a , 0 :u ~ m a ~ •.,.,·~-,_,h_._-r . . . ·' ~~~~~~:..~ ,---~-·* ' ., ,.,-~:.., ~ 1< l"-~""~-11'-~ l. ..... '7 ·~ -""'.~;,. ~ '~ ·.-~ .. ~ .. ~~~ •• -. :~' !' •• ~· •• ~: ~ ......... TABLE 13.1 -Railbelt Utilities Providing Market PQ!~~ti~ . -· Installed Predominant Tax Engage in Provide Energy Output Capacity Type of Status Wholesale Wholesale and capacity 1ikely MW Generation re: IRS Purchase of Supplies to be displaced by Sec. 103 E 1 ectricity Susitna Utility In A~chorage-Cook Inlet Area Anchorage Municipal light and Power 195.9 seer Exempt * * Chugach Electric Association 411 SCCT Non-Exempt * * * Hatanuska Electric Association 1.1 Diesel Non-Exempt * * Homer Electric Association 2.6 seer Non-Exempt * * Se~ard Electric System 5.5 Diese"', Non-Exempt * * Alaska Power Administration 30.0 Hydro Non-Exempt * National Defense 49.B ST Non-Exempt Industrial -Ker.ai 25.0 seer Non-Exempt 1 In Fairbanks -Tanana Area Fairbanks Municipal Utility System* 67.2 scertsr Exempt * Golden Valley Electric Asscciation* 211.2 SCCT/Oiesel Non-Exempt * National Defense* 70.5 sr Non-Exempt ln Glenallen/Valdez Area Copper Valley Electric Association 17.6 seer Non-Exempt * * Pooling Arrangments in force ---, .. '1. lfJ J1 li 1} ALASt:A POWER AUTHORITY SUS1TNA HYDRO£LECTRIC PROJECT JANU~RY 21, 1981 DRAFT FOR DISCUSSION 4 Conditions and covenants anbedded in bond agreements which may affect mini~u~ revenue or interest coverage; Impact and the method of handling project cost overruns or other aberrations in the base plan for its development; Influence of tax legislation particularly as it relates to tax exempt status of potential purchasers of energy and output. o Issues arising from outside influences: -Regulatory influences including those stemming from allowable rate base and rate of return for utility purchasers of the output; Influence of cost escalation on operating, rna i ntenance and repl acernent costs; Possibilities of lessened cost escalation, both in fuel charges, and capital costs of construction in Alaska, including alternative energy generation sources; Possibility of significant change in power and energy demand from that assumed in the planning scenarios. ACRES AMERICAN INCORPORATED ~ 1·~ .... · 1 ' ],, 1~'.1 ! ,, J { J ' ALASI~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISC~SSlON 5 The influence of factors such as the foregoing on the Cost of Service is examined in this chapter, which also deals in a preliminary fashion with supply contr~.;t arrangements that might well apply to the ouput frolil the Susitna Hydroelectric Project. 13.2 -Cost of Service Susitna Hydroelectric Project, as contemplated in earlier studies and now under consideration in the current Plan of Study, has an installed capacity and energy outputs which are large in c~parison to the Railbelt Syste~ as· a whole. Susitna's impact on the System, in its first year of operation could be particulary sigJ,ificant. Capital intensive projects, such as hydroelectric develo~ents, tend to have higher capital costs and lower operation and maintenance (0 & M) costs than competitive projects. Traditional approaches of econcr.Ji c analysis have tended to view energy costs from hydroelectric developments as being fixed, or reasonably steady, for every year of the project's life; or, even, where output is reasonably constant, for ev~ry unit of electric~l energy output produced. The cost of service attributed to the investment cost element of the energy price would comprise the required (or allowable) rate of return, plus the sinking fund depredation. It would remain sensibly constant for the lif,e of the p1i:!nt, say 50 years. Variants of this basic approach lilay be adopted to allow f~r regular inflation year by year, or for temporary departures frOiil the trend. but these do not alter the fundamental principles at work which have a major effect on the resulting calculations of cost of service. ACRES AMERICAN INCORPORATED 1 I I I I I I I I I I I I I ·~ I I I I ·~ ij ·~ ,. '•"'1\ 1\ ' t 1 tl l ] " , ' ALASf:n POWER At;THOR lTY SUSITNA HYDROELECTRIC PROJECT JANJARY 21, 1981 DRAFT FOR DISCUSSIO~ 6 Application of this approach in the case of Susitna could result in a tariff for electric power and energy supply which might be initially 50 to 60 percent higher than the lowest cost fuel burning alternative. Fuel cost trends on which the study is predicated are expected to continue to rise sharply at rates substantially hig~er than the general inflation rate. Indications point to electricity supplies from such thermal power generating sources m~tching, and then exceeding, the cost of output from Susitna four or five years aftPr initial operation. Beyond that time, overall Railbelt System costs for a relatively wide range of alternative scenarios will certainly benefit from a hydroelectric power addition of the scale of plants appropriate TOr Susitna River develop- rnent. One issue in this context is whether strictly conventional cost of service approaches continue to be applicable, once a major hydroelectric installation is added to an essentially thennal power generating system. lt is a matter of question whether this produces an acceptable and realistic picture, or whether there is the freedo~ to find novel means of financing the hydroelectric project, or of charging for its output. The effor!s r.1ade in marketing and financing stt.Jc'ies, so far in the project study have been applied both to conventional analysis, using annual fixed capital cost, and also by reference to associated charges linked with other economic and financial parameters agreed between the APA and the study team. In additions we have studied variants which would lead to gradual incre~.Jents ;,,,posed by a Susitna Project on the overall system cost. No conclusion can yet be reached as to whether the conventional approach would meet system needs and cons~.lers• long term electricity cost pr~ference. It is clear however that acceptable financing ACRES AMERICAN INCORPORATED I ALASl:A PO~ER AUTHORl TY SUSlTNA liYOROELECTRlC PROJECT JANUARY 1St 198. DRAFT FOR DISCUSSIO~ 7 structures can be conceived to meet the needs of eith2r approach to a Susitna Project supplying the :ail belt system, starting at some date in the middle of the next decade. l.n considering major hyc··-,oelectric project energy supply costs, it has been traditionally accepted that operation and maintenance charges are relatively low and have only a minor ililpact on annual charges canpared to capital investment. In the past, lilajor hydroelectric projects have been coouoitted to financing and construction on an essentially fixed tariff, with no provision for escalation of any kind. Under prevailing conditions of relatively high inflation, it is desirable that fixed cost approaches to contract pricing should be strictly avoided. 0 & M costs of the general level of 3 percent of annual revenues can, with escalation of 7 percent persisting for say 10 years, absorb 10 percent of fixed price contract revenues by the end of that period. So some distinct cost escalation allowance for power and energy supply from hydroelectric sources needs to be applied, in step with general inflationary trends. Once gradual upward escalation of 0 & M charges to system cost of service for hydroelectric facilities has been accepted, careful consideration should then be devot~d to the econ~ic, political, accounting and financing implications of extending that principle to other more substantial components of supply price. Should that ultimately prove unacceptable, it would still be necessary to absorb any cost of service burdens which result from inescapable elements of increased operating expense, that are not offset by adjustments in the tariff structure. Some opportunity for rate stabilization does arise, and this has been tested successfully in some of the preliminary financial analysis models. ACRES AMERICAN INCORPORATED 1 l I ... .I I I I I I ~ I I I I [1 '"-'"'"'t £1 ,, ll ' l"l' J;}~ If J I ALASt~A POWER AUTHOR lTY SUSlTNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFi FOR DISCUSSION 8 The financial cost analyses produced to date have thrown into clear focus the issues of relatively high capital cost charges, and potential deficits in early years of hydroelectric power plant operation. Projects as big as Susitna require a robust financial structure which can f.leet a wide variety of syste1:1 contingenies • As time goes on, these could alter the differential between system cost of service and project cost of service. Such influences might include unforeseen overruns on capital cost, or less-than-forecast escalations in prices and alternative fuel costs. The situation appears to call t r a readily adjustable set of financial and political criteria matched to the needs of the State as a whole, against which options for Susitna can be consistently judged. 13.3 -Supply Contract Arrangements The Alaska Power Authority, in undertaking Susitna hydroelectric power development, would, within 20 to 25 years, beco1:1e wholesale supplier of 50 to 80 percent of the electrical needs of the Railbelt. This contrasts with 1980 when a small percentage vf thP. total supply was puchased under wholesale inter-utility arranger.~e·1ts; the major transactions being: (1) Alaska Power Admini! .ration to Chugach Electric Association (CEA), Anchorage Municipal Light and Power (AML&P). and Matanuska Electric Association (MEA); AND ACRES AMERICAN INCORPORATED ·~ ~~ l J l·l 1 i -·I l f "1 Il l J 'I 1, l it ~~ 1 i I j ,j ~ ~ ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1~81 DRAFT FOR DISCUSSION (2) CEA to Homer Electtic Association (HEA), Seward t:1.:.:~nt: Syster.~ (SES) and MEA. 9 These wholesale transactions comprised less than 10 percent of the electricity supplies in the Railbelt in 1980. It will be apparent, furthermore, that if Susitna hydroelectric power and energy deliveries were to be r.1ade by APA in the late 1990's and the early part of the next century these would displace a substantial amount of the energy output from generating plant presently owned by the purcha.:;ing uti.lities. Power systan studies point up the wisdor.~ of transferring much of this plant to standby and peakins duty. At the stage of the Susitna studies, reached at the end of 1980, only lir.1ited consideration had been given to the supply contract aspect of the marketing of power and energy output. This consideration mostly concerned the interrela- tionship of r.~arketing output~ revenue generation, revenue assurance, and financing. As the study proceeds~ and firm estimates of relative costs are established, a more incisive examination will be made of the marketing interaction between the APA and its potential purchasing customers. A significant aspect of the marketing study will continue to be the maJor financing consideration~ That is, the possibility of exemption from federal income tax of interest on obligations issued by the APA. Such exenption does not apply to interest on "industrial develojlTlent bonds 11 for public power projects with a broad service area, unless certain tests are satisfactorily met. Such tests ~uld preclude bonds issued by the APA frt:Xil tax exemption, if they ACRES AMERICAN INCORPORATED 1 I I I I I I " I I I I I I I I ~~ -1· ·t: j II I ill I ! IJ: ! ) ' l ~ 1 11 IJ ' ll ALASI~A POWER AUTHORITY JANUARY 15, 1981 SUSITNA HYDROELECTRIC PROJECT DRAFT FOR DISCUSSION 10 were industrial development bonds for a project: (1) where more chan 25 percent of the bond proceeds were to be used in a trade or business carried on by a "non-exer.1pt person" (i.e. 11 the trade or business test"); and (2) where the payment of more than 25 percent of the principal or ~nterest on the bonds is securec by property used in a trade or business, or by payment~ in respect of such property. This is the 11 Security interest test 11 • Both the 11 trade or business testn and the "security interest test" (set out in a much abbreviated foro. here) must be satisfied in order for obligaticns to be industrial develop- ment bonds. Exempt persons would include state or local government units or an organization exempt from tax under the pertinent section of the lRS Code. Non-public, profit-making enterprises, as well as the federal government and its agencies, etc, are nonexeupt persons. Certain other rules, not bearing strictly on the supply/mar~eting issue, would require t" be met to qualify a proJect in relation to tax exempt bond issues. The strategies to be considered to. meet the opportunity for tax exanpt bond financing for the Susitna Project have not yet been explored pending the (now avail~ble) access to the bond financing advice from managing underwriters. The significance of supply contract arr~ngements in that context could be very important. Component costs of delivery energy, and future upwaru •tariations, would be prime considerations in supply contracts arranged with utility customers served from Susitna. Other important issues would be: ACRES AMERICAN INCORPORATED t l u rl ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT o Term of contracts o Firmness of negotiated tariff o Credit worthiness of p~rticipants o Assurance of supply and provisions for non-performance o Guarantees and penalties o Force majeure conditions of contract JANUARY 21, 1981 DRAFT FOR DISCUSSION 11 o Conditions and covenants required by senior debt bond holders o Trea~ent of potential new industrial users o Impact of regulatory authorities on purchasers operations o Costs and benefits accruing to prospective purchasin3 participants o Possibility of two-part tariff arrang~ents, and the need for separate provisions for demand/energy, wheeling and reserve charges. For large energy projects, such as a hydroelectric development on the Susitna River, the necessary assurance of adequate revenue income can be derived from a clear indication of real d~and, and from the form of contract established with the purchasers. Contracts with municipalities, cooperatives, industrial cons~ers and with federal government agencies would represent vitally important assurances to senior debt lenders. Such contracts could take several forms, suggested by our financial advisors, as follows: {1) Take-or-eay Obligations -These require users of project output to c~.~it a defined payment for the life of the contract, regardless of the level of project output or a user's need for power. They effectively obligate the users to provide funds that can be used for debt service. ACRES AMERICAN INCORPORATED I I I 'I. I I I I I I I ·I .J} -~ D [} 0 0 r-; : r u ALASI:J.. POWER MITHOR I TY SUSITNJ.. HVl)~OELECTRIC PROJECT JANUARY 21, 1981 DRAFT FOR DISCUSSION 12 (2) Take-and-pay Obligations -These require users to pay only for the project output which is available to them. They do not ensure that funds would be available for debt service if the project suffers an extended outage. (3) Minimum Payment Obligations ·• Users are contractually obligated to make only a minimum payment in the event they are unablel or unwilling, to receive all of the contracted-for output. The minimum payment obligation provides for debt service in the event of project outage, while reducing the burden of project credit support on the various obligors to an amount less than that which would be payable with the pruject fully operable. The unconditional nattlre of the ~inimum pa~ent obligatior.s~ combined with the credit strength of project customers, comprise the ultimate source for project credit-worthiness in the eyes of lenders. (4) Step-up Provisions -Most projects having sponsoring customers whose credit-worthiness is somewhat disparate include some measure of protection against the risk of individual customers default in their power sales contracts. This protection takes the form Oi a specified percentage step-up for the non-defaulting customers. In such cases, upon the failure of any customer to make payQent, the share of all other customers not in default under the contractural support agreement is subJect to an automatic increase. (5) Cost of Service T~-A cost of service contract requires each customer to pay its share of the costs in return for a contracted share of the project output. These contracts are sometimes written with two kinds of ACREfl AMERICAN INCORPORATED ALASr.A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJ£CT JANUARY 15, 19Sl DRAFT FOR D1SCUSSIUN 13 charges, one covering fixed cost and the other covering variable cost. This type of contract can, in the extreme, be written as a finm commi~~~nt obligation giving the project's lenders protection in all events, ~hether or not the product or service is delivered. (6} Tolling Agreement -Under a tolling agreement, the project levies tollin~ charges for processing a product, in this case, stored water. The tolling charge payable by each participant is generally equal to its share of total expenses incurred by the project but, at a minir;'lu;;, will be equal to fixed charges including debt service. This array of contracts can be designed in various ways to apportion the risks among the parties according to the needs of the individual project under consideration. Since the Project output may become, at some point, subject to price regulation, or regulatory constraint, it is desirable for APA and the Project Study Te~ to have prior discussions with governmental and regulatory agencies which can possibly have an influence on the Project revenue output~ In the meantime the financial analyses which are being carried out recognize the general nature of regulation requirements, but are obviously not being proposed under c1ny assuo1ption that these will exert undur constraints. ACRES AMERICAN INCORPORATED I ·I I I I I ·I I ~~. I I I ·I ll I I •• .\'1 I ~ I I I I :I I I I I I I I I I a I I I u 14-1 14 -PUBLIC PARTICIPATION PROGRAM 14.1 -Introduction No development of the Susitna River Basin can be accomplished without producing important changes within the State of Alaska. The prospects of long term economic benefits and of reducing national dependence upon non-renewable energy sources must necessarily be weighed against the implications of permanently altering an important ecosystem and of introducing social change in communities throughout the Railbelt. From the start of the Susitna Study the interests, concerns, and opinions of the public have been important factors in the decision making process. Thus, a major effort is being made to encourage pub 1 i c invo 1 vement and to see to it that Sl''":h invo 1 vement does in fact influence the course of the work. The Public Participation Program is conducted by APA. The Director of Public Participation (DPP) is a key member of the APA staff. The DPP is responsible to the Executive Director for designing and implementing all aspects of the Public Participation Program. From time to time, the Acres Project Team is called upon to make presentations and to assist in responding to questions and concerns, but responsibility for' the program appropriately rests with APA. This chapter describes the nature and objectives of the Public Participation Program and recounts results which have been achieved 'i:o date. 14.2 -The Program In the traditional sense, typical public information programs focus upon the public's right to know what is happening when an important action may affect the future. APA's program ventures beyond this traditional approach and seeks to establish interaction with the public, providing a two-way communication process. Thus, emphasis is placed on 11 participation 11 rather than simply 11 information.11 Major objectives include: o To distribute information to the public concerning the issues, problems, alternative choices, opportunities and impacts regarding the plans and decisions to be·made on the Susitna Hydroelectric Project. o To solicit informat·ion frcm the public about values, attitudes and opinions bearing upon the plans and decisions to be made. c~.~~· ' . ·, o To ensure that information provided by the public is fully and carefully considered along with technical, economic and environmental data otherwise collected and analyzed in the planning and decision-making process. To achieve these objectives, the program provides for a r-egular series of publicized information ~~events" as well as a continuing aggressive effort to encourage interest in the Susitna Project. 14.2.1 -Community Meetings Four community meetings were held in April, 1980, to provide the public· an opportunity to comment on the adequacy of the Plan of Study and to contribute opinions and concerns for consideration by APA: All comments and questions were recorded and organized in a manner which facilitates recovery. Two rrore sets of community meetings are planned and will be conducted in three or four Railbelt locations before a 'license application is filed with the Federal Energy Regulatory Commissison ( FERC) . Attendance at the first four meetings, by community, was as follows: 0 Fairbanks 70 0 Talkeetna -31 0 Wasilla -42 0 Anchorage -109 In tota'l, there were 182 comments received on the adequacy of the Plan of Stud:,'. These are recorded in a summar·y report entitled "A Report o.n the first series of community meetings on the feasibility studies for the Susitna Hyd·roelectric Project and other power alternatives .11 This same report also lists (by task) the 165 questions asked at all four meetings. The report was distributed to the 252 people who attended meetings, public libraries within the Railbelt area, commercial fishing groups, public-interest groups, recreation groups, business groups, media, sportsmen's groups, environmental groups, energy groups, mining groups, State and F~deral agencies, Acres and all Acres subcontractors, the Office of the Governor, Battelle (who was later selected to conduct the energy alternatives study) and individuals upon request. A packet was provided for participants. In addition to the report, a permanent record of all proceedings is available by verbatim transcripts. 14.2.2 -Workshops From time to time during the course of the study, workshops are conducted to permit members of the Acres study team and APA staff to discuss and I I I •• I I I I I I I I c, ·; l I I I I i, \ j l I I l l I t } I i i l j '~ t I r I I I I I I I I I m I I I I I •. a I I II u .. 8 MAJOR CONCERNS The: foUowin1 ati:&S received the most comments durin& the table top diJawiom: IS commcnll &ayinJ Plan of Study adequate. 29 commenu sa yin a alternatives study not adequate iiftd why. 2.5 suuestions for eneray wurc:es that should be considt:red in alternatives study. 17 suuestiozu for ~'riout consideration of dec:mtralized alternatives. 17 .commenu dcsaibina what the socioeconomic studies should address. 11 cnmments iugacsting a level of effort on studies on fuh. wildlife and planu. 8 couunenu desaibina concerns about transmission studies. a suu:stions for &c:ttinJ information to the public. L\BLE TOP DISCUSSION SUMMARY Thl.l chart summarizes the total nul" ~--r of table top cnmmcnts rcc:cived on the adequacy oi the Plan of Study. lof 'leaf commenu total PIRn "'' StU<iv 29 !6111! ---·-·--1 Tuk 1: Power Studies !!4 <-6'11 Task 2: Surveys and Site Faciliti.:s none ..().. Task 3: HydroloJY 7 4'11 Tuk 4: Seismic 4 2,., Task 5: Oeotcclmic:al none ..().. Tuk 6: DcsipJ Dc'Yelopment l ~ .. Task 7: Enviroruneiltal 30 17'11 Task 1: Transmission 8 4'11 Tuk 9: Con.ruuction Casu and Schedules none ..().. Tuk 10: Ucensina none ..().. Task U: Ma;kctin& utd F"mancin1 4 2 .. Task 12: ~.1bl.ie Participation .....!!. _!!t TOTALS 13% 100'i't THE 8 MOST ASKED QUESTIONS Written questions were asked most often in the followins areas (listed in rank order): 27 questions expressing concern for completeness of altcmativ~ litudy 13 questions on adequacy of cncriY forca.sts 11 questions on objectivity of those conductinr. the alternatives l>tudy 10 questions on the decision ,naking process and the timing of decisions 10 questions on construction costs and Jchcdules 8 -iUr:stions on marketing and financing ofSu1itna 7 questions on access roads to danuite~ 7 questions on local hire in feuibility studies QUESTION AND ANS\VER SUMMARY This chart shows how many qucstionli were asked about each TASK in the: Plan of Study. I of 1ft of questiolll total asked questions Plan uf Study .5 3111t Task 1: Power Studiea 19 48'1t Task 2: Surveys and She FaciUtlea 9 61ft Task 3: Hydrology l 1'111 Task 4: Sebmic 1 4'11 Task .5: Geotechnical . l 1'1t Task 6~ Design Development 7 411!1 Task 7: EnvironmentMl 9 61ft Task 8: Trllllsmission 5 3'11 Task 9: Construction Costs and Schedule~ 13 8'11 Task 10: L!.. • .::: ... mJ 1 leu than! .. Task 11: Markcdng and Flnandns • 5'11t Taslc 12: PublicPartlcipatloo 6 4" Miscellaneous 1% 7'11 TOTALS 165 100r.'l SUMMARY RESULTS OF APRIL COMMUNITY MEETINGS FIGURE 14.1 I I I I I I I I I I I I u I coordinate important issues with State and Federal agencies and other organizations. These sessions ar·e open to the public and announcements are made in advance to encourage attendance by interested parties. . Attendees observe the proceedings and their comments are solicited, usually at the end of the inter-agency meeting. 14-4 Two workshops were held iri Anchorage. The first, concerning load forecasting, electrical energy forecasting and conservation, was attended by 25 people. The second, concerning an overview of the FERC licehsing process and specific license requirements for Susitna, was attended by two people. At the first meeting more information was desired on conservation, load forecasting and end-use data, but the workshop was reported to meet most people•s needs and the language was clear and understandable. The second meeting was considered not to have furnished the two attendees with clear information on the FERC licensing process. Audio tapes permanently stored in the Public Participation Office provide a record of each workshop. 14.2.3 -Action System A unique aspect of the program involves a specially designPd 11 action system.11 Recognizing the importance of feedback in encouraging public interest, the act ion system provides a veh ic 1 e whereby every comment or ~yestion is given careful consideration and a personal response is provided. To minimize the burden of letter writing, forms · are widely distributed for use by the public, although the forms are not a prerequisite for processing written comments. Forty-six letters were received through the Action system in 1980. Each letter averaged three issues, so that 156 questions and comments received responses. Of the 46 letters, 19 contained questions or comments about the alternatives study, and copies were forwarded directly to Fran Ulmer in the Office of the Governor for a response. This rendered the alternatives study the top-priority item in 1980. The second priority included questions and comments on the environmental studies (including life style, industrialization and local hire issues), and the third priority included questions and comments on the public participation program. Talkeetna by far sent the most questions and comments (about half of the total 156). Figure 14. shows the Assistant Public Participation Officer and the Acres representative reviewing Action responses. I I I I I I I IJ I I I I B I n I I I ll WORKSHOP NOTICE 4-5 FIGURE 14.2 I I I I I I I I I I I I I I I I I I a 14-6 ACTION FORM FIGURE 14.3 I I I I I •• I II I I I I I I I I I I 11 . · ' .. '. ' ... : .. { rJ ..... ·~ ' '-:.. • ~ > ....... .,.; ASSISTANT PUBLIC PARTICIPATION OFFICER AND ACRES REPRESENTATIVE FIGURE 14. 14-7 m 11 ll ll n 11 D n D E D 14-8 14.2.4 -Newsletters One eight-page newsletter entitled "The Susitna Hydro Studies" was produced in November 1980 at a cost per issue of 27 cents. Contents included articles on the following subjects: -Energy decision facing Railbelt -Social and economic impacts -Susitna vicinity map and background information -Energy alternatives study -Energy needs expected to double -Tunnel option -Earthquake studies - W i 1 d 1 if e and srn a 11 mamma 1 stud i es Hydrology studies Susitna fish studies -Potential recreation sites -Bird studies -How to be involved -Public comment changes study plan Of 30,000 printed copies of the newsletter, 27,000 copies were distributed by direct mail. The newsletter presents objective information on the progress of the Susitna hydroelectric studies so that readers may draw their own conclusions based on accurate information. 14.2.5 9 Mailing Lists The Public Participation Office has compiled and currently uses three mailing lists. The first is a list of special-interest organizations, including members the organizations identified as needing information. The list was originally obtained by telephoning known special-interest organizations. Each organization contacted was asked to identify other special-interest groups. Finally, a list of 46 organizations including about 225 individuals was developed in February and March. This list is continually being expanded as new groups are identified. The list of organizations is generally considered to be representative of the pro, con, and neutral special-interest groups. It is divided into categories: commercial fishing groups, sportmen's groups (mostly fishing, some game), general public interest groups, environmental groups, recreation groups, energy groups, business groups, and mining groups. The following information was recorded for each organization after interviewing as many as five people within the organization: • .,,, .. j ;j - ,:j 1 I i l I l I I II I ll D D m ll n l a Q o anticipated level of interest in studies 0 0 0 0 names, addresses, and phone numbers of contact people (staff, key officers, newsletter editor and others identified as particularly interested in the studies) type of m~~b~rship, number and distribution (community, state-wide, nat ionzd) information about organization 1 s newsletter, including circulation, when published and deadlines for submitting articles any other information that would be helpful to the Public Participation Office in working with the organization. 14-9 Contact with these groups has been person-to-person, by telephone and by mail. Mailings are generally notices of meetings or information about the study. Information was sent when it became available or when growing concern or considerable interest developed in a particular aspect of the study. A future mailing would be developed to answer questions or clarify concerns being raised. The following list of special-interest groups was developed by the Public Participation Office in February and March, 1980. Beside each group is shown the level of interest that each group expressed in following the progress of t.he Susitna studies. The DPP uses this to determine the content and frequency of communications with the groups. 0 0 Sportsmen's Groups (Mostly fishing interests, some game) 1. Alaska Sports Fishing Association 2. Eagle River Sportsmen's Game Preservation Society 3. Izaac Walton League of America 4. Tanana Valley Sportsmen Association 5. Real Alaska Coalition 6. Alaska Sportsmen's Council Commercial Fishing Group,s 1. Cook Inlet Aquaculture Association 2. Commercial Fisherman of Cook's Inlet 3. Cook Inlet Fisherman's Fund 4. North Pacific Fisherman's Association 5. Kenai Peninsula Fishermen's Cooperative 6. Cook Inlet Fishermen's Assoication 7. West Side Set Netters -High -Moderately High -High -Uncertain ~ Moderate ... High -High -High High -High No response yet -High -No response yet I I I I I I I I I I I I I I 14·-10 e I 0 General Public Interest Groups I 1. State League of Women Voters -Moderate 2. League of Women Voters -Anchorage -Low 3~ League of Women Voters -Fairbanks -Low I 4. Federation of Community Councils -Anchorage -Low 5. AkPIRG -Moderately high 6. Talkeetna Community Education Program E 7. Wasilla Community Education Program Environmental Groups 0 n 1. Alaska Chapter -Sierra Club -High 2. Sierra Club -Anchorage/Alaska Office -Moderate 3. Sierra Club-Knik Chapter (Anchorage) -High m 4. Sierra Club -Denali Chapter (Fairbanks) -High 5. Alaska Conservation Society -Statewide/ -High Fairbanks n 6. Alaska Conservation Society -Anchorage Jroup -Moderate 7. Kenai Peninsula Conservation Society -Low 8. Alaska Center for the Environment -High m 9. Fairbanks Environmental Center -High 10. National Audubon Society -Alaska Regional -Low Office 11. Arctic Audubon Society -Fairbanks -None u 12. Anchorage Audubon Society -Low 13. Friends of the Earth -Moderate 14. Green peace -Low n 15. Denali Citizen•s Council -High 16. Trustees for Alaska -Moderate to Moderately high IJ 17. National Wildlife Federation -Low (through. trustees) 0 Recreation Groups Jl 1. Mountaineering Club of'' K~ aska -Moderate 2. Kn i k Kanoers and Kayakers -High ll 0 Energy Groups D 1. Alaskans for Alternative Energy -High 2. Alaska Rural Electric Coop Association -High 0 Business Groups G 1. Susitna Power Now -High 2. Resource Development Council/Pacific -Moderately high IJ Legal Found at ion 3. Commonwealth North -Moderate 4. Devil Canyon Corporation -High ll 0 Mininl Grou~s 1. A askainers Assoc· ~~ion -Moderate u ' D ' Q D ' 0 Q ~ J • ' The second mailing list compiled and used by the Public Participation Program is computerized. About 7000 names are on this list, which is continually being expanded. This list will be used primarily to mail newsletters giving project updates. It caul d be used for other purposes as well. The method of compiling the mailing list is as follows: 14-11 1. Inserts were placed with the Anchorage Municipality's utility bill in February, 1980. Ten percent were returned, with individuals asking to be placed on the mailing list. 2. Coupons were available in the Matanuska Electric Association's publication Ruralite in July, 1980 to solicit responses fran the Fairbanks area. 3. Coupons for interested persons to send to the Public Participation Office were included in the November, 1980 newsletter which had a distribution of 27,000 households in the Fairbanks, Anchorage, Valdez, Glenallen, (and points in between), Railbelt between Anchorage and Fairbanks, and the Kenai Peninsula. have been returned so far. 4. Names are continually added to the 1 i st in the following ways: -All persons submitting items to the Action System are added to the mailing list. Organizations and individuals identified as needing information are added to the mailing list. -Persons who attend works hops and community meetings are automatically added to the mailing l~s~. The third type of mailing list does not include the names of individuals. It is rather a listing of 6000 boxholders and star route boxholders in the communities listed below. Talkeetna Willow Unsevelli Gakona Delta Junction Big Delta Richard son !~.2.6 -Planned Activities Cantwell McKinley Park Copper Center Sutton Tons ina Sourdough Trapper Creek Healy Glenallen Valdez Chickaloon Rapids A second newsletter in February, 1981 is anticipated, prior to the third set of wor·kshops the firs;: week of March, 1981. It will discuss '"ecreation., road access and possible Susitna designs within the basin. I 1 1 I I •• I I I I I I I I I I I I I D (] n ~ B D ~ u A third set of workshops the week of March 2-5, 1981 is planned in Fairbanks, Talkeetna, Anchorage and Glenallen. These will be the first workshops held outside Anchorage. Recreation and road access will be discussed. 14-12 A second set of community meetings is planned for May, 1981 to provide information about the preferred development plan within the Susitna River Basin and to obtain feedback about the progress of the feasibility studies. A third newsletter will be published in summer, 1981 discussing the status of the Susitna feasibility studies to date. Some kind of activity is planned (e.g., a workshop, television show or newsletter) to discuss the seismic studies. This is anticipated for the first 6-9 months of 1981. A third and final set of community meetings is anticipated for spring, 1982 prior to a State decision on proceeding with a license application to FERC. The timing will be coordinated with a set of meetings po3sibly conducted by Battelle on the results of their alternatives study. Other workshops and newsletters will be scheduled as needed and appropriate. 14.3 Public Concerns C-ommunity meetings, workshops, information exchange and the action system have produced a comprehensive profile of frequently mentioned concerns and comments. In accordance with the objectives outlined in paragraph 14.2, specific and important changes have occurred as a result of pub 1 ic part i ci pat ion. Succeeding sections in this paragraph summarize comments made. Actual changes to the planning process are addressed in paragraph 14.4. 14.3.1 -Interests Expressed at the April Community Meetings Figure 14.1, reproduced fran the report of the April meetings, notes concerns, questions, and discussion areas. Of particular note is the heavy emphasis on the determination of future energy needs (forecasts) and of how such needs might be satisfied in future (alternatives). 14.3.2 -Public Concerns As Expressed Through the Action System a. Summary of Letters _Received Through the Action System in 1980. The Act ion System was introduced to the pub 1 ic during the week of meetings in April, 1980. Initially the system was designed to accommodate suggest ions by the pub 1 ic for changes and add it ions to the Plan of Study. All items submitted to the system are reviewed by ~{ i! '1": ~~ :; ;1 i (! -~c J I ~ I' I l i. J. 1 I I I I ' I ' I I J I i ~ ~ I 14-13 the Alaska Power Authority and Acres American, Inc., and receive a written response. Most of the items submitted, however, have been questions or expressions of opinions regarding values. Therefore, in addition to ·its original purpose to accommodate suggestions for changes and add it ions to the Plan of Study, the Act ion system has also become a method for monitoring, recording, and responding to questions and concerns raised by the public outside the format of the workshops and community meetings. The three largest areas of concern expressed through letters received in 1980 were, in order: 1. the alternatives study 2. environmental studies 3. public participation Talkeetna residents by far sent in the most questions and comments. Almost half of all questions and comments came from Talkeetna in 1980 (72 out of 156 total questions and comments). The largest concerns in Talkeetna were environmental (including lifestyle questions and local hire and concern for industrialization). Almost all concerns expressed from the Kenai Peninsula in 1980 were about the potenti~ impacts of Susitna development on the commercial fishing industry. In all other communities (Anchorage, Fairbanks, and the Matanuska Valley), the top concern expressed in 1980 was for the alternatives study. Fairbanks also had a high number of questions and comments on environmental issues and public participation. The questions and comments are broken down by communities as fo 11 ows: Community Talkeetna Fairbanks Anchorage Mat Valley Kenai Peninsula Opinion & Questions 33 12 3 9 0 Opinions & Questions 39 29 27 4 12 The total individual questions and comments were 156. Total 72 41 30 13 12 The letters 1"ece i ved are broken down by communities as fo 11 ows: Talkeetna 14 Fairbanks 15 Anchorage 11 Mat Valley 4 Kenai Peninsula 2 Total 46 1 I I I .I .J I I .I I ·" '~; ' \~·', " . J J 11 I I 11 ' 1 IJ jQ l i I .. ) ·! n * . < n .... , IJ D u ' . 0 c. Questions and comments received through the Action system organized by Tasks are: Task 1 (alternatives study, future electrical needs) Task 2 (surveying, the Watana base camp) Task 3 (river studies, hydrology) Task 4 (earthquake studies, seismic studies) Task 5 (drilling, geotechnical) Task 6 (dam design, size of reservoirs) Task 7 (environmental) Task 8 (transmission lines) Task 9 (costs, schedules) Task 10 (FERC licensing) Task 11 (marketing the power; financing) Task 12 (public participation) Task 13 (plan of study) In addition, comments were made in the following areas: Industrialization Local Hire Decision Local Life Style Miscellaneous Tot a 1 Comments: 7 4 1 3 7 . 156 4% 3% 1% 2% 4% 42 27% 3 2% 2 1% 2 1% 1 1% 2 1% 35 22% 4 3% 3 2% 1 1% 6 4% 23 15% 10 6% Cpmparison of Public Concerns (as expressed through the April meetings and through the 1980 Action letters). 14-14 The level of concern for the alternatives study (as expressed through the Action system letters) was lower (in actual percentage) than that expressed at the community meetings in April (27 percent as opposed to 46 percent), but was still the greatest concern. About an equal levei of concern was expressed for environmental issues at both the community meetings and in the Action letter, (meetings 17 percent and Action letters 22 percent). Public participation was the third largest concern in both the letters and the community meetings. Responses to Letters Letters received through the Action system averaged three questions and/or comments. The average response to these letters was a page-and-a-half, single-spaced. Sometimes, a longer response was necessary, as in the case of Roberta Sheldon's letter from T~1 keetna. That response was seven pages long, single-spaced. More than one resource person was usually required for an adequate answer. Three staff members from Acres American, Inc. were involved in writing responses and seven members of APA. :i ' ~ '1 ~ ~ J I l I l j ~ ' i I I I I I I I I j l ·~ ) 14-15 I An attempt was made to make the letters friendly and not bureaucratic. For example: "Those conducting the studies agree that lifestyle, quality of life~ environmental impact, etc. are important. For that reason, substantial study resources are being spent on those kinds of studies. (See enclosed newsletter, pages two and eight.) "Lifestyle is considered to be so important that an additional study (sociocultural) will be done to assess the impacts of construction and the Susitna project on the current lifestyles of people who live in the immediate vicinity of the proposed dam sites. This study, which was added because of the concerns expressed by you and others frorr, Talkeetna, will begin in 1981. It will be coordinated with studies currently in the process on the identification and analysis of socioeconomic conditions. (See page eight of newsletter.)11 And, another example: 11 I have been waiting to send you this report and it just came off the press. You have been wanting information about the pros and cons of Susitna hydroelectric development, so that you may form your own opinions. Good for you! 11 An attempt was a 1 so made to educate the pub 1 i c. For instance, in the response to the 19 letters on the alternatives studies, enough information was included so that the person knew what changes had been made, why, how two separate studies would relate, and where to go for fo 11 ow"'"' up. An excerpt from that letter: "The attach~ comments on a~ ternatives to Susitna hydroelectric development, that you submitted to the Alaska Power Authority through the Action system, have been forwa~ded to Fran Ulmer, chairperson of the Railbelt Energy Alternatives Policy Review Cc ,r.·tttee. This committee will be providing policy direction to the Susitna alternatives study that Battelle Northwest Laboratories is conducting. As you may know, the 1980 legislature decided that the alternatives study for Susitna should be completed in such a way that there would be no question of its objectivity. Therefore, the legislature directed that an independent firm be selected to conduct the alternatives study itself (Battelle was chosen) and that Acres American, Inc. continue its work on studying the feasibility of Susitna. 1 1 r~~ I I ~· I .I .I ~· J I 14-16 The Office of the Governor is managing the feasibility study of alternatives. The Alaska Power Authority is managing the feasibility study of Susitna. The results of both studies will help determine whether or not the State should develop hydroelectric power on the Susitna River and/or pursue other energy alternatives. Since the State of Alaska will make a decision by April 1982 whether to file a license application for Susitna hydroelectric, Battelle is directed to complete their alternatives study well in advance of this date to permit an informed decision. Since Acres will not conduct the alternatives study, we directed them not to respond to your Action request. It did not make much sense to use to have them respond to your comments, if they were not going to be conducting the study. We thought it better to hold your Action request until the consultant was se 1 ected ... 11 d. Questions~on Alternatives Study When the Alternatives study was turned over to the Office of the Governor in July, 1980, that made it necessary for questions about the alternatives study to be turned over to that office also. Unfortunately, some people using the Action system for the first time, may have felt that the buck was being passed from the Public Participation Office, referring them to another state office. That possibility, however, was handled by giving specific names in the response letter to which people could refer. This was done in almost a 11 cases. In tot a 1, 19 1 etters were sent to Fran Ulmer in the Office of the Governor. e. Response Time The average response time for letters received through the Action system was five months due to some initial problems in setting up the system. By the end of 1980, however, the system was in~act, and many letters that were received in December, 1980, were also answered in December, 1980. Of the 46 letters received, only four remain unan~Nered. Now that the system is in place, it is expected that most files will be closed in a matter of six weeks. 14.3.3 -Special Interest Groups Certain special interest groups holding widely divergent views on the Susitna Project were particularly active during 1980. Table 14.1 summarizes this activity. - TABLE 14.1 SPECIAL INTEREST GROUP SUMMARY ORGANIZATION OBJECTIVE MEMBERSIHP ACTIVITIES REACTION TO PUBLIC PARTICIPATION PROGRAM COMMENTS ON STUDY PROCESS COMMENTS ON SUSITNA PROJECT SUSITNA POWER NOW Assure that Susitna becomes a reality. 1000 Newsletter, brochure, articles, displays, meetings, public appearances Generally favorable. Suggest more time for questions at public meetings o How can land be acquired? o How should project be funded? o What permits are needed? o What obstacles are there? o Would provide low- cost energy. o Would reduce winter ice fog in Fairbanks. o .1-kluld provide renew- able energy. o WOuld offer employ- ment opportunities. o Major recreation facility is possible. o Opportunity exists for major fish hatchery. o Stabilized flow could improve opportunity for agriculture downstream. o Large project is less costly than many small ones. o Second dam can be staged to meet demand, so project FAIRBANKS ENVIRONMENTAL CENTER Preservation of Arctic and Interior Alaska environment. Wise resource management. 400 Comments on POS, bulletins, letters, articles, displays, brochures, public appearances Generally favorable. Advance workshops prior to public meetings and more time for answers sought. Des it·e more information on activity and progress. o Supports conducting detailed Susitna study and proper independent alternatives study. o Concerned that proponents may short-circuit detailed studies. o Regional hydro projects could cost less o Inexpensive energy could lead 'i:o waste or ineffi- cient use. o N'"'ed;; should be met by choosing sources that minimize social and environ- mental effects. o Susitna Basin is a prolific & accessible hunting area. A project there could disturb this situation. o Cook Inlet fisheries should not be hurt. o Concern about earthquake potential¥ o forecasts may be wrong. Notes that consumption has decreased in Fairbanks area. o Major project could set the stage for centralized facil Hies. b.-. wir pro\ more;__ · ene~y,han ~eed~d. - ALASKA CENTER FOR THE ENVIRONMENT Educate Alaskans on environmental issues. Encourage public to participate in decision making. 500 Comments on POS, monthly publication, articles, discussion sessions, letters, pub 1 ic appearances, study groups Generally favorable. ACE encourages citizens to participate. o Supports high funding level for alternatives study. RAILBELT U'l. pTIES Generation and dis- tribution of electric power and energy. Eight utility systems Review POS, letters, articles, public appearances Golden Valley and Matanuska Electric Associations were generally canp 1 irnentary about the program. o Chugach Electric Association (largest utility) did not comment on the study. o Many concerns were expressed about forecasting methodo- logy. o Issue is long-tenn and o Chugach Electric Asso- complex. ACE will sustain ciation has not a long-term participation offered support of a in the study process. Susitna Project. o There is a lack of knowledge o Those utilities which about implications of the have commented con- project. Public should be tend Susitna is educated. needed as an economic o Alternative energy futures & relatively benign should be promoted. alternative to petro- o Concerned that excess elec-leum dependence. tric energy may lead to o Tom Stahr, Anchorage forced usage for space Municipal Light and heating or promote growth Power Department, of heavy industry. noted: o Impact on Cook In let -Hydroe lectr i(! energy fisheries is important. is clean. o Centralized vs. decentr·a--less environmental lized power systems are a harm than coal. concern. Energy future -Susitna would be should reflect unique efficient electrical Alaska lifestyle. energy source. --- -Project could elimi- nate dependence on 1etro • 'for · · · ~t ionTS"Pace ~ ' -·'-' __ , , ... ,~~· ~ . . . • . . , • • . • ' . f)J . . . • • ,l 0 ' r1 i l u 0 i n LJ n 1 ·~ u n J 1 u 0 0 0 i/ u n ' u 14-18 14.4 -Major Changes that have Occurred from Public Concerns A concern for what the public had to say in regard to energy development in the Railbelt area of Alaska prompted APA to make changes in the Susitna Plan of Study in 1980. The first edition of the Plan of Study was published in February 1980. It was distributed to over 250 persons, including libraries, State and Federal agencies, groups and organizations, and individuals. In September, 1980, a revised Plan of Study was published and again widely distributed. This revised version contains a complete description of the changes and is available through public libraries. This section summarizes those changes and discusses the events that precipitated them. a. Commissioning a Separate Alternatives Study b. The main conclusion fran the April 1980 community meetings was that there was a need for greater en ph as is on a study devoted to alternative energy sources. Many people were concerned that the scope of work as outlined in the February 1980 Plan of Study unduly favored the Susitna project, and that more time and more money was needed to look at alternatives. A moderate amount of concern was also expressed about the ability of Acres to conduct an objective assessment of alternatives to Susitna. In May a report to the legislature by Arlen R. Tussing and Associates, Inc., reemphasized the need for an expanded alternatives study. The Power Authority responded by instructing Acres to expand the scope of work on alternatives. An additional $1.365 million was requested and funded by the 1 egis 1 ature for the expanded work, and an additional year of study was added. In June the legislature also determined that an independent consulting firm should conduct the alternatives study, and Batelle Northwest Laboratories was subsequently chosen to do t:~is. Addition of a Sociocultural Study A sociocultural study was added to the revised Plan of Study as a result of concerns expressed at the Power Authority's community meeting in Talkeetna last spring. The concern was articulated by one speaker this way: "When the Plan of Study speaks of social or human impacts, it consistently labels this •socioeconomic'. When it speaks of cultural impact, it does so in terms of archaeology and historical investigation." 11 I feel that it is desir~.ble and timely that the plan recognize the existence of that concept which is sociocultural, in a contemporary sense. 11 14-19 As a result of this comment and simi 1 at' comments ex pres sed by others from the area, APA concluded that a study should be made of the effect that construct ion of Sus itna might have on the 1 ife style of the people who live in the immediat·e dam-site vicinity. The study will begin in 1981 and will be coordinated with Frank Orth & Associates' work on the identification c~d analysis of socioeconomic conditions. c. Additional Studies of Alternative Susitna Developments There were two events that precipitated an increased level of study on alternative Susitna developments. One was a concern expressed by the pub 1 ic at community meetings for "excess power 11 from Sus itna. The Fairbanks Environmental Center referred to it as "cheap blocks of power" or "gluts of power" in their written materials. There is a percept ion ·chat excessive power waul d be produced from Sus itna and that it would encourage industrialization, particularly heavy industry such as ~uminum smelting. In June, 1980, ISER's report was published entitled "Electric Power- Consumption for the Railbelt: a Projection of Requirements." These projections indicate that future lower load growth would be lower than ~mat was previously indicated by the Corps of Engineers studies. This meant that the current Corps scheme (dams at both Devil Canyon and Watana) needed to be t'eassessed and a more detai 1 ed study of alternative lower levels of development needed to be considered. Specifically, the additional studies added were: -additional work on investigating the tunnel alternative to Devil Canyon dam -additional work exploring the possiblity of smaller hydro facilities at the Watana and Devil Canyon sites than what the Corps recommended -additional work to broaden the scope of work previously identified to consider staged development within the Susitna basin ~ work to provide cost information and characteristics of the most likely fossil-fueled generating resources in the Railbelt and cost and characteristics of other hydro projects competitive with Susitna (of the same size) and other hydro projects non-competitive with Susitna (of a smaller size) -environmental screening of proposed thermal, hydro and tidal generating facilities work to determine the effects of load management and conservation on power needs. I I ~ ~ ~ ~ ~ ~ ~ l ,. ~ ~ '' 1 ~ rw ll J r !~:: ,, ~ r . ! • \ ! l ' I ~ l l l I l I l l { I l I ! l ! . ,I - , "n 01 .. ·I·; .-,.-. r ' < ~ . 1' ' '< I D ll IJ I ll IJ u ll ll ll ll ll ll a D. ll ll D 15-1 15 -LICENSING AND PERMITTING PROCEDURES 15.1 -Introduction Regulatory requirements at Federal, State and local levels tend to be voiuminous, complex, and time consuming for any major power development. The Susitna Hydroelectric Project is no exception. Indeed, the licensing and permitting process lies on the critical path toward project initiation for the first several years. Even so, no major regulatory barriers which would preclude development have been identified to date. The most critical permits for which application must be made are the Federal Energy Regulatory Commission (FERC) license; the U.S. Army Corps of Engineers permit for work in navigable waters; the U.S. Environmental Protection Agency (EPA) permit; and the State of Alaska Water Quality Certification, Coastal Zone Consistency Certification and Anadromous Fish Protection Permit. These requirements and a number of others are discussed within this Chapter. In broad terms, three distinct phases will pertain for satisfaction of regulatory requirements: (1) Upon completion of the detailed feasibility study, the license application will be submitted to the FERC. At the same time, application will be made to the U.S. Army Corps of Engineers and a set of applications necessary for initial project implementation will be filed with the State of Alaska and with the Matanuska~Susitna Borough. (2) Near the end of the FERC processing and decision period, a second group of State and local permit applications will be submitted. In the aggregate, these permits are necessary so that actual construction activities can proceed. During the construction period, individual contractors will make application for permits generally dealing with personnel and processes. (3) As the project nears completion, a third set of applications will be necessary. This latter group deals with regulation of operation of the completed project. Table 15.1 provides a partial list of regulatory requirements which must be satisfied if the project is ultimately constructed and operated. 15.2 -Federal EnerQY Regulatory Commission (FERC) The most significant regulatory requirement for development of the Susitna project is the FERC license. Indeed, most of the investigations and documentation necessary to support all other permit applications will be prepared and assembled initially to meet FERC needs. 1 I ~ j ~ I l i ' 1 I ~ ' ~ I I I I I ,, ~ f 15.2.1 -FERC Role The FERC is an independent Federal commission which is 1dministratively part of the U.S. Department of Energy. Under the provisions of the Federal Power Act, FERC is authorized to regulate hydroelectric power development within the United States. TABLE 15.1 LIST OF PROJECT LICENSES, PERMITS AND CERTIFICATES Federal o Federal Energy Regulatory License -Major Hydroelectric Project o Corps of Engineers Permits o Bureau of Land Management -Land Use Permit o National Pollution Discharge Elimination System Permit o Notice of Airspace Obstruction State o Coastal Management Certificate of Consistency o Water Rights Permit o Water Quality Certificate o Right-of-Way Easements (and other Land Use permits as identified) o Highway Encroachments Permit o Anadromous Fish Protection Permit o Dam Safety Permit o Fire and Safety Plans Check o Burning Permits o Water and Sewer Plan Review Local o Talkeetna Mountain Special Use District Permit FERC, in reviewing an application for a project license~ is responsible for assuring that the proposed development is sound in all respects. Basically, the Commission is concerned that thorough study and coordination between technical and environmental aspects of development takes place in the planning stages and continues trl:oughout project development, that the design concepts are technically sound and environmentally acceptable and that completion of the project is financially possible. The license application will be prepared as part of the feasibility study, as set forth in the POS. 15-2 I I J I 1 ~I ~· ,I ,I _I J J ~· .J J ~-' ~· J J 11 11 11 I} ll 6 ll D ll ll ll ll ll D [J rl D 15-3 The FERC also has an interest in the detailed design and construction phases of the project, which will follow the feasibility study phase. However, the major interaction between the FERC and the project is limited to satisfying the requirements for the FERC license, and the design and construction phases will not substantially add to the body of information required for the license. 15.2.2 -Application Requirements As specified in the Code of Federal Regulations Title 18, Chapters 4.40-4.41, the license application will consist of the application proper and several exhibits in report format. The exhibits wi 11 constitute the large part of the application document, which may contain as many as 1500 pages. Each exhibit will report on specific aspects of the project study, such as land rights, recreation plans, design development plans, environmental impacts, financial ability, and the like. On January 23, 1981, the Commission approved proposed rules which revise the format of the application. The comment period for the rules is closed on March 27, 1981, and final rules should be issued another two to six months thereafter. Thus, it is likely that the Susitna application will take a form consistent with the new regulations. The application will be submitted on or about June 30, 1982, should the project proceed (Refer to Fig 15.1). This date will mark the completion of the project feasibility study (with the exception of studies requiring continued monitoring) and the beginning of the formal FERC licensing process. 15.2.3 ~ Relationship to POS Statea in the Plan of Study as the three primary objectives for the Susitna Hydroelectric Project are the following: (i) Establish technical, economic and financial feasibility of the Susitna Project to meet future power needs of the Railbelt Region of the State of Alaska. (ii) Evaluate the environmental consequences of designing and constructing the Susitna Project. (iii) File a completed license application with the Federal Ener~y Regulatory Commission. These objec~ives are not separable. The first two involve the scientific investigation and engineering development necessary to establish project feasibility and will provide th~ substance of the application document. The license application requires that complete project conceptual plans be clear1y documented and made av~ilable fnr review. More importantly, Activity Study Determination to Proceed 18 June 1981 Feasibility StudyiLicense Prep ---- Monitoring and Field Investigations--- Detailed Design Federal Regulation FERC Licensing (Major Project) Corps of Engineers Penni t EPA-NPDES Permit FAA Notice (Airspace Obstruction) BLM-Land Use State Requlation Master Application-Project Naster Application ... Con~truction Local Regulation M-S Borough -To .. k. Mtn. Spec i a 1 Use (Project) M-S Borough -Tak~ Mtn. Special Use (Construction) Legend C -Complete H -Hearing P -Preliminary Finding I -Issue S -Submit M -Meeting i -Initial Pre-construction Stage Month • M • s 30 June 1982 I ·c l -s • Is •ns •M s ,, • M I~ • M 5 'r •r .____. H I • X LICENSIN£ SCHEDULE 42 June 1983 . . a ~H • R p 54 June 1984 l . ~ c • p • s ._. s M • ~ -... s --M 66 June 1985 I i .~ I ·~ ~ • I .. i • 78 June 1986 FIGURE 15.1 IE I i 1~ 1& j ,I D u ll D ll 11 'D ~ D c fJ 15-5 it requires that coordination with governmental agencies and special interest groups take place early in the planning stages, when input and ideas will have the greatest positive effect. 15.2.4 -Participants The five following groups are involved in the FERC licensing process: (1) (2) (3) (4) (5) Study Team -Under the management of the Alaska Power Authority, the Acres American team of scientific and technical specialists is divided into task forces which are responsible for specific disciplines within the study. Various tasks include the responsibility for preparation of exhibits. Within the study team, one task is dedicated solely to the development of the license application and compliance with the FERC regulations. Federal Energy Regulatory Commission -ihe FERC provides inp~t to the application preparation through the regulations previously cited and through consultation with study team members regarding the application of those regulations to the Susitna Project. Other Federal, State and Local Agencies-Other governmental agencies are involved in the process in several capacities: -All interested agencies have an opportunity to provide input to the project planning stages. Consultation and use of agency input must be documented by the study team. Several agencies, particularly those concerned with preservation of environmental resources, must provide written statements for inclusion in the application document. -The Coastal Zone Management Program Certificate of Compliance and the Water Quality Certificate (both issued by Alaskan State Agencies) must be received by the applicant before the FERC license is granted. The Public Sector -Input from the public sector will identify problems and issues to be resolved prior to the initiation of the licensing process. External Review Board -An external review board will be given the opportun1ty to comment on the final document. Chapter 18 discusses the role of this organization. 15.2.5 -Regulatory Review The submittal of the FERC license application marks the end of the study period and the beginning of the regulatory review of the project, as shown schematically in Figure 15.2. The post-application process consists of the following activities. The following numbered statements correspond with activities on Figure 15.2: I IJ D D D IJ Input from coordination with agencies Prepare LIcense ~~-----..1 Appl !cation ~ (0) Application at FERC l docketed ~ (2) Comply with (1) FERC Staff review ~ Is Def I c ency Letter Application N01-------complete1 · ~YES (3) Apgllcatton notice Additional Information ----g.:::.~_te-1 ~+s-~-~-d-~t_g_!_~_t_r_I_-_____ f_r_an __ a--;ptpl fcant as necessary ,... agencies _ + ; ~ (4) FERC staff {5) EIS preparation anal)sis ~ERC staff (6) Agency review and comment (7) Hearing?--YES---.. NO Prehearlng conference Ora I tearing I F i na I br i ef s filed~ Admin. judge For Appeal, remedy decision ---intervenor~ prob I em or HOLD..-NO+-( 8) {9) (10) 1 abando1 Water Oua I Jty For app I I cant Certlffcate 1 and CZM Cart. issued? ..,.~f----..:....,. _____________ _. t YES Staff power memo- randum issued ~ Commission order drafled Commlss ion order issued ~ Accept or Raffle ref I le? + Accept + Construct Project Rehearing .,. process FERC LICENSING PROCESS FIGURE 15.2 m ll ~ ~· IJ E I' J E 6 u u ~~ 1 1,~ l lJ .j JE I] D JD 1 !{ •! l1 IJ 15-7 (0) APPLICATION DOCKETED AT FERC The Federal Energy Re~ulatory Commission is officially in receipt of the document. (1) FERC STAFF REVIEW The FERC staff reviews the license application for completeness and consistency with requirements. (2) DEFICIENCY CORRECTION If deficiencies are located in the initial application, the app'licant is so informed. The applicant then must correct all deficiencies and resubmit the application. (3) APPLICATION NOTICE PUBLISHED AND DISTRIBUTED When the application is deemed complete by FERC staff, public notice of the application is made. Notice of application is distributed to other Federal, State and local agencies and published in the Federal Register. The following three activities take place concurrently: (4) ANALYSIS Th~ FERC staff performs an independent analysis of the license application. (5) PREPARATION OF EIS (6) ( 7) (8) ( 9) The Environmental Impact Statement for the project is prepared by the FERC staff. It is based primarily on data provided by the applicant in the license application. AGENCY REVIEW AND COMMENT Representatives of agencies and special interest groups, as well as individuals, have the opportunity to review the application and submit their comments on the project proposal. By the end of this period, opponents seeking intervenor status must have submitted their petitions. HEARING DECISION After the activities in (4), (5) and {6) are complete, a decision is made on whether to ho 1 d a pub 1 ic hearing. If intervenors with specific issues are allowed, a hearing will be held. For a project as large as development of the Susitna Basin, it may reasonably be anticipated that a hearing will be required. WATER QUALITY CERTIFICATE AND CZM CERTIFICATE ISSUED Before the FERC issues the license, the applicant must prove receipt of water quality and CZM certificates, signifying compliance with State standards. COMMISSION ORDER ISSUED After the hearing process is complete, the FERC can issue the license with standard and special conditions~ The applicant then has 30 days to accept the conditions in the license or file for a rehearing, which may result in a repetition of the hearing process. I 15-8 (10) FINAL LICENSE ACCEPTED The final license provides authority to the licensee to operate and maintain the project for a period up to 50 years under specified conditions, and gives the licensee the right to exercise power of eminent domain in acquiring project land and water rights. For a major license action such as the Susitna Project, the FERC licensing time will take from 18 to 24 months. The addition of the hearing process would add about one year to t~e processing time. Since a hearing can be expected on a project of the magnitude of Susitna, the expected time for licensing is 30 to 36 months. For planning purposes, it .has been assumed that a license will be awarded early in 1985 if feasibility is shown and the application is filed in June 1982. 15.2.6 -Potential Delays Three types of problems can cause delays in the FERC licensing process: those which relate to noncompliance with regulations, those which relate to deficiencies in the feasibility study and those involving issues not detected before initiation of the regulatory process. Insofar as compliance with regulations is concerned, a licensing manager in the Acres organization conducts a continuing review of regulatory requirements, informs team leaders of their responsibilities relative to the license application and coordinates review of the application for final production. This process is designed to keep defects in the application to a minimum. To assure that the feasibility study is adequate in terms of data, conceptual design of project components, impact assessments and mitigation plans, the study has been extensively coordinated. From the start, the POS was reviewed with interested groups to solicit inputs for additional areas of coverage which may have been overlooked. In some cases, State agencies are directly involved in the development of the scope of work. Additionally, the FERC staff has been consulted to assess the completeness of the study scope. The intent of these efforts is, of course, to assure that all aspects of the study are covered in necessary detail. The third type of problem, and the most difficult to avoid, is the discovery of issues during the licensing process. Examples include a heretofore unknown seismic condition or discovery of a rare or endangered species in the project area. When such an issue is disclosed, the licensing process will be delayed until it is resolved. An active program of open forum planning has been established. This includes the advisory group program, the public participation program and the previously discussed interagency coordination. Through these programs, issues of concern are identified, weighted and addressed as early as possible in the feasibility study. .I I I I I I ~' J J I .I u IJ IJ ju ,j u l lu fJ 15-9 15.3 -Other Federal Requirements Although the FERC will assume the position as lead agency in the regulatory process, several other Federal agencies have a regulatory interest in the Susitna Project. These are the U.S. Army Corps of Engineers (Corps), the U.S. Environmental Protection Agency (EPA), the Department of Transportation (DOT), the Federal Railroad Administration (FRA), the Federal Aviation Administration (FAA) and the Department of Interior, Bureau of Land Management (BLM). 15.3.1 -U.S. Army Corps of Engineers Permit Next to the FERC, the U.S. Army Corps of Engineers performs the 1most comprehensive review of the project for its permitting program. Activities requiring permits fall typically under three categories: (1) Dams and dikes in navigable waters of the United States (2) (3) Structures or work in or affecting navigable waters of the United States o~scharge of dredged or fill materials into waters of the United States · The Susitna Project will come under all of these areas of jurisdiction, but only one permit action is required. Corps permits in the State of Alaska lie within the jurisdiction of the Alaska District Engineer. Acting under the authority delegated by the Secretary of the Army, he may issue a permit authorizing the work unless it is found to have an adverse impact on the public interest. The public interest is determined by a proposal•s consistency with state plans and interests, its effect on navigation, fish and wildlife, water quality, economics, conservation, aesthetics, recreation, water supply, flood damage prevention, impacts on the ecosystem and, in general, the needs and welfare of the people. To some extent, this jurisdiction overlaps that of the FERC. The application package for the Corps permit consists of a two-page application form and a set of detailed drawings describing the project. Dam design drawings will also be included irt the application as required under provisions of the Dam Safety Act. It is expected that the Corps will review plans identical in level of detail to those submitted with the FERC application. It is possible that the Corps will reserve the right to review final plans and specification drawings after detailed design is completed. 1 The Corps permitting program is authorized by Sections 9 and 10 of the Rivers and Harbors Acts of 1899 and Section 404 of the Federal Water Pollution Control Act Jlmendments of 1972 (P.L. 92-500). Regulations are found in Title 33 of the Code of Federal Regulations, Pmrts 320-329. I ! ~ J ~ I I 1 I ' I I I ' ~ I] f] I] I] J] JJ ij ·~ ~ 1 I 15-10 1 Preparation of the application for the Corps permit will proceed concurrently with the FERC license application, uti.lizing the information developed for that document. Submittal of the Corps application is planned for approximately the same time as submittal of the FERC application although coinciding submittal dates are not actually required (see Figure 15.1). This process will generally parallel the FERC process, with some variations. The primary difference is that the Corps permit may be issued as much as a full yea.r before the FERC license. The Corps will most likely delay issuing the permit until the Environmental Impact Statement is completed by the FERC. At this time the Corps is in the process of rule-making to establish nationwide permits which could possibly exempt the Susitna project from the existing permit, since it would be regulated by other Federal permitting actions such as the FERC license. If this nationwide permit is established, the Corps will carry our its review when the FERC circulates the license application for public comment. The timing and eventual promulgation of the proposed rule are unknown at this time, but the present expectation is that the Corps permit will be required. 15.3.2 -Federal Land Use Permits Several different federal permits may be required for use of lands for the project. The lands fall into two basic categories--those under the jur-isdiction of the FERC 1 icense and those requiring additional permits. The lands needed for Devil Canyon and Watana dams are, at this time, either federal lands that have been classified as power sites, lands under the jurisdiction and administration of the Bureau of Land Management (BLM) or lands owned by Cook Inlet Region, Inc. (CIRI) and its member corporations. The FERC license constitutes the authority to use the Federal lands and establishes the amount of annual payment appropriate for use of public lands~ The license also grants the right of eminent domain for acquisition of non-Federal lands, although this right presumably is duplicative of the APA 1 s statutory authority. In addition, the Federal lands needed for the transmission facilities which are included in the FERC license application will need no further permit. For any remaining non-Federal lands needed for the transmission corridor, it can be expected that the right-of-way permits will be needed from the BLM as well as from the Alaska Department of Natural Resources. There is no standard application form for this action; thus, applicants coordinate with BLM in preparation of the request for a permit. Several additional permits could be required, depending upon the selected transmission corridor. One possible route could parallel or share the existing right-of-way with the Alaska Railroad. The railroad is I .I _I I I .I I I i .. I n n E~ u: U. u IJ u j I n I u I u I u j u 0 ! o.· i 1 i I J Ol 1 I lo· I . , lo 15-11 administered by an agency of the same name, part of the U.S. Department of Transportation. There is no standard for for application or hearing process but there are several specifications and standards for compliance. Should Alaska Railroad right-of-way be needed as part of the project licensed by FERC, there would be a question of whether the FERC license constitutes allowance for usage of the land, or separate permit action is needed. 15.3.3 -Environmental Protection at the Federal Level At the Federal level, formal involvement in permitting procedures for environmental protection is limited (barring the FERC license requirement). The U. S. Environmental Protection Agency (EPA) administers two a~r pollution programs which apply to emissions caused by project construction and temporary generating equipment. Although EPA initially set up regulations for this program, these emissions wi 11 be regulated at the state level. The National Pollutant Discharge Elimination System (NPDES) is also administered by the EPA. The purpose of the system is to prevent water pollution by controlling waste discharge from point sources. Under this program, a permit may be required for the treatment facilities provided for construction camps and permanent facilities. If the construction or operation activities warrant the need for a NPDES permit, the application must be filed 180 days prior to commencing the discharge and a review period and public hearing will follow the submittal. At this time, the dam project itself is not considered a point source and therefore does not requi.re a permit. This status may change in the near future, however, pending the outcome of two court cases. The participation of other Federal agencies, such as the Fish and Wildlife Service and the National Park Service, is required by the coordination requirements of the FERC license. Specific regulation of most environmental issues will take place at the State level. 15.4 -State and Local Requirements 15.4.1 -Public Utilities Commission ------------------------ The Alas~a Power Authority is not subject to the jurisdiction of the Alask~ Public Utilites Commission, as a result of Section 44.56.090 of the Alaska Statutes. Therefore, the Commission will have no approval authority over site selection and development, nor will it have franchise approval over the APA, since the franchise to develop and sell power is vested by the authorizing statutes. The PUC may, however, have some indirect influence on the marketing of Susitna power, since it reviews and appraises utility rates. With the local utilities selling and distributing the energy at the retail level, these rates will be subject to PUC approval. ~ ~ I I ~ ,) ~ ~ ' I 'i I I ~ I] rJ u i ij ! i ij ~ .l ij ;l j 15-12 I 15.4.2 -State Agencies and the Master Application Program Alaska's State agencies have a high degree of involvement in the Susitna Project in two capacities. The first is a coordination capacity, in which agency personnel provide technical input to Project development, as required by the FERC license. The second capacity will be regulatory approval. As many as 30 permits may be required by the State, which will apply some degree of regulation to the Project, the construction process, the participating companies (contractors) and individuals. To simplify the process of obtaining these permits, a consolidated Master Application Process was provided by the State legislature under the Environmental Procedures Coordination Act of 1977. Under the Master Application Process, the Alaska Department of Environmental Conservation (DEC) coordinates the action between the applicant and all State agencies. Initially, the applicant must file a master application form with the DEC, which sends notice to all State departments and any municipality which is affected by the project. Agencies which claim jurisdiction over the project must respond to DEC within 15 days, supplying the required application forms and hearing requirements. DEC collects all forms and requirements, delivers them to the applicant for completion, and arranges a preapplication conference between the applicant and agencies. The applicant then prepares the applications and returns them to DEC, which is also responsible for arranging for the public hearing. A hearing process and appeals will follow if deemed necessary. The final result is a decision regarding the issuance of the State permit. The local borough is also included in this process. Prior to the submittal of the completed applications, the Matanuska-Susitna Borough must provide a certification that the project is in compliance with the local government statutes. It is anticipated that the required State permits will be pursued in two steps separated by at 1 east 18 months (Refer to Figure 15.1). The first set of permits includes those required tor project implementation. These permits deal primarily with the conceptual development of the project and its compatibility with State standards, policies and planning. The following are included: o Coastal Zone Management Certificate of Consistence o Water Rights Permit o Water 4aulity Certificate o Right-of-Way Easement o Highway Encroachment Permits o Anadromous Fish Protection Permits o Dam Safety Permits I ~I 1 1 ~· I .I J J J ~I ,.I J J I u u u u IJ D D 0 0 0 0 0 15-13 The steps leading up to submittal of the completed applications will be timed so that submittal of the first group of State applications with the Department of Environmental Conservation will roughly coincide with submittal of the FERC license application. As this timing implies, preparation of the State permit and the FERC license application will occur simultaneously, and in many cases, will be drawing from the same infm--mation source (project study reports). This ·will ensure consistency of information and minimize duplication of effort. The maximum time from the submittal of the completed applications to permit issuance is about six months. Agency response times to complete applications are established by law. Including the time for completing the forms, the total period from filing the Master Application to permit issuance is eight months. The second set of permits will include those needed for the construction of the Project. They deal with details of project development, the construction processes to be followed and the personnel on the project. For these, the application and hearing process will be initiated within two years of the planned start of construction. As can be expected, the state and local authorities have a great interest in the day-to-day developments of project planning. This is especially true of the State environmental agencies, which are taking advantage of the opportunity to expand their data base and understanding of the Project area environment. This groundwork will enable the State agencies to make judgment and lend their expanded expertise to the satisfactory solution of environmental problems. Coordination, in addition to satisfying the FERC requirements, starts the groundwork for many of the permits required from three State environmental agencies. 15.4.3 -Local Requirements The only local permitting action required is a special land use permit required by the Matanuska-Susitna Borough (MSB). The permit was established by the Borough Assembly in Ordinance 79-35 which created the Talkeetna Mountains Special Use District. The purpose of the ordinance is to conserve the unspoiled beauty of the region, consistent with its use as a mining district as well as a water resource district, and to aid wildlife habitat while permitting resource development, recreation, grazing and related activities where appropriate. The Talkeetna Mountains Special Use District includes approximately 10,633 square miles of 1 and area. The permit is administered by the Planning Department of the Borough. Since the project will include roads, water resource development~ timber harvest (clearing), and possibly recreational f~atures, a11 of which are regulated by the permit, the Borough will be interested in all aspects of the project. At this time, there is no set requirement for a formal permit application. The environmental report, Exhibit W, for the FERC application, is expected to satisfy application requirements of the Borough. ·· .. I < J I 15-14 Submittal and review of the MSB application will occur at two distinct times. An application for the project \-Jill be submitted at the time o-F FERC application submittal. Issuance of the permit is expected within six months. A second application for a construction permit will be filed closer to the time of commencement of construction, and after completion of the detailed design. II I I I I I I I I I I I I I I . I I . I I I i J 11 I; ~ 1.' AL.;St:A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT PROJtCT OVERVIEW REPORT CHAPTER 16 -FINANCIAL FEASIBILITY ANALYSIS 16.1 -Introduction JANGARY 15, 1981 DRAFT FOR Dl~CUSSIO~ 1 The purpose of the Financial Feasibility Analysis is to establish the 'envelope' within which the staging, design and ~perating configurations of Susitna are amenable to market financing, based upon reasonable ?ss~ptions concerning financial 1.1arkets and the proclivities of investors over the next 20 to 30 years. Financial requirements place an overall constraint upon construction outlays and capacity of the Susitna Project. But it is not realistic to endeavor to 'fine tune' the financial objectives in order to establish optima for Susitna's construction and operations at such long range, and at such an early stage in the conceptualization of the Project. In order to define the range of feasibility (the 'envelope') we have proceeded by way of examples, rather than by way of a 'range'. The reason for this is that all alternatives that are feasible, are not eguallt attractive fran the standpoint of public policy and from the standpoint of system planning. Also, the number of variables entering into the financial feasibility studies at the present juncture is very large. Until these have been priorized, and maybe t certain ones eliminated, it is unrealistic to approach financial feasibility in terms of optima. ACRES AMERICAN INCORPORATED I ~ ~ ~ ~ 1 ~ I f l I I I I I I I • ~ I J ~ ' ALASI~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANuARY 15, 19~1 ~HAFT FOR DISC~SSION ~ In the course of this work, we have sought to develop an array of viable ex~ples. These need to be flexible enough to admit rapid modifications. The overriding parameters are the precepts of sound utility ~anag~ent, ana financial integrity in the context of debt management. With these models in place, it should be relatively more simple to apply incr~ental cost-benefit techniques to fine-tune the numerous inputs and outputs, and meet specific new requirements which exigencies of engineering design, or the preferences of APA, may i~pose upon the systemc So one initial objective was the ~odel itself; to build into the output sufficient signals to permit us to monitor the financial outco~e of the various design, cost and phasing assumptions. Also, to include controls which would allow a test of a range of different assumptions, and comparisons of the outco~~ in the context of financial viability. In the course of 17 full runs of this model, completed by the beginning of 1981, a nUiilber of different fi nanci a 1 alternatives presented thernse 1 ves, and different assumptions in respect to pricing, energy sales, rates of interest, repayment terms and phasing of the project were tested. The outc~~e of these tests was the es.1ergence of several key variables discussed in subsequent sections of this chapter. Considerable additional work ramains to be done in order to define which configurations of generation and construction phasing are preferable from the standpoint of APA's future financial integrity. ACRES AMERICAN INCORPORATED .. I I I I I I I I I I I I I I I I I ·~.·.; lfi, m· w • r: I 1.: 1··., ' . 1: J I l I I I I. ALAS~A POWER AUTHORITY SUS1TNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSiON 3 It is desirable that this work should proceed at an early stage in the planning process, a~ decisions relating to financial integrity could fund~nentally alter· APA's main strategies in respect to the programming of major phases of the Project. Addi'tionally, financial planning could well influence the 1nstitutional str·ucture in which APA and the State of Alaska determine to cast the Susitna Project. 16.2 -Alternative Financing Strategies 16.2.1 -Approach to Financial Analysis The inputs to the financial analysis of Susitna are substantially influenced by: (i) the.phasing of the construction outlays (the so-called HS" curve of expenditures); the duration of the construction phase; (ii) the 'spacing' of the first and second components of the project (Watana and Devil Canyon) -whether there is an 'overlap' or a 'gap • bet't'leen the two; (iii) engineering assumptions in respect to capacity and plant factors during the initial years of operation; (iv) assumptions with regard to pricing, and returns on rate base (self-regulation included -and the constraints, under the PURPA chapters of the National Energy Act of 1978). which could considerably influence future State regulatory activity; ACRES AMERICAN INCORPORATED I ! II I • • I ' : ' . ' Il l i 'r ' IJ I ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 4 (v) amounts, and accuracy, of the various capital and ope~·-~·:.'ng contingency pro visions, and the accuracy of the cost ,1.,t imates genera 11y; (vi) the institutional setting, including guarantees and taxes, under which the project is operated and financed; (vii) conditions in financial markets at the time when financing takes place; (this rests in part upon the institutional 'flexibility• under which Sus itna operates: e. g. capacity of .'\PA to control the timing of its capital funding and to engage in interim borrowing or lending in order to take advantage of conditions in the capital markets). Financial counterparts of the preceding list of issues are: (a) the phasing of drawdmms in the construction period. including interest during construction; (b) the amount of internal cash flow from operations during the second phase of construction (e.g. froffi Watana -assuming it is completed first); (c) the level of 'free' cash flow, over and above operating and maintenance expenses, to meet debt service requirements and interest coverage. In the models this has been labeled ~available for rate stabil i zat: ion". So in each mode 1, the amount of rate fl exi bil i ty is ACRES AMERICAN INCORPORATED I I I I I I I I m I • E It 1ft I I I 1: I_ I I. 1-- ~ £!• ··~ I_ I. m ALASI~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1961 DRAFT FOR DISCUSSlOh 5 indicated. In generalJ such flexibility is more slender in the early years of operation when heavy debt service charges are a higher burden on the operation; (d) the degree to which the 'free' cash retained would be pe~nitted to esca 1 ate during ;.;;a debt repayment period; (e) the coverage and risk constraints generally; the reliability of financial esti~ates on the capital side, and in respect of operating cash fl 0\':1; (f) the adequr.cy of guarantees both in respect of principal, and interest, ~nd the resulting credit standing and bond rating of the APA; (g) :-evailing rates of interest at which it is eventually possible to secure long term funds in the markf~t OF through private negotia- tions; (h) availability of longer term debt financing and the extent to which requirements of Susitna ~atch the constraints of the marKetplace in ~ect to duration of debt repayments and scnedule of maturities. 16.2.2 -Judgmental Selection In order to structure and test financidl models which may te appropriate, it has bee~ neces~ary to establish an initial selection of inputs based upon judgment and past experience. ACRES AMERICAN INCORPORATED ' j ~ ' I I I I I I I I I I I ALASt.A POwER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15~ 1981 DRAFT FOR DISCUSSION 6 These reversible decisions permit us to reach inside the envelope of financial viability~ but all must be regarded at this time as flexible and tentative. Establishing an 'Equity' Base In the first instance we must recognize that /4FA is a State organi- zation, and that part or all of the return to residents of Alaska from any State i nvest'ilents in Susitna may be aerived in the fonn of lower cost electricity-or 'electricitJ at cost'. The basic facility at Susitna is a drainage basin which is part of the inalienable resources of Alaska~ so we have started with the cuncept that the Susitna River Basin might well. itself, comprise Alaska's equity in the project. All capital works would then be financed with borrowed funds. The result of that set of ass~ptions would be to plqce a significant burden on the Alaska electricity customer in the init·',~l year of Project •Jperat ion. That would be so, even if the debt r~payments were to be spread-out over a re1atively long period. This model did, however, demonstrate the degre.:a to which substantial cash surpluses would accumu1ate over the initial 25 years of Project. Also, the internal rate of retur·n estai:>lishes a reference benctlnark of o11eral1 viability. wnieh justifies pursu1t of an accept·able i nst itut·iona 1 frar.1ework. ACRES AMERICAN iNCORPORATED ~I 1 I I I I I I ,I I I I I I I I I . I I I' I ' ALASt~A POWER AUTHORITY SUSlTNA HYDROELECTRIC PROJECT The Subordinate Loan Model JANUARY 15, 1981 DRAFT FOR DISCUSSION 7 Having established that (given capacity of the ~arket) Susitna represents a viable project for financing purposes, the next approach to structuring was to start to quantify the ~aunt of conventional financing that the 9enerating facility would support under reasonable assumptions concerning energy price, and plant factors, as well as debt interest and repayment rates. As interest during canst ruction is such a s i gni fi cant cot.tponent of . total capital costs in any project of the magnitude (and schedule) of Susitna, it is vital to establish precisely which component of the capital pragra~ ought to be associated with conventional financing, and which should be reserved for subordinate (or 'equity') financing. Interestingly, Susitna facilities appear to divide themselves into two categories: (i) 'Permanent' civil works, such as darns, roads, eatth/rock removal . and placelilent in facilities which have an al~ost indefinite life span, and correspond virtually to an econooist's definition of 'land' -that is, once they are in place. (The daJil proposed for Watana was visualized as being 'permanent'.) (ii) Engineering, civil, mechanical and electrical facilities, including caverns, buildings and generating, trasformation and transmission facilities which may be regarded realistically as having a life span in the order of 50 years or more. ACRES AMERICAN INCORPORATED I J ;! 1 ~ 1 l l l ·'! :1" .,: hl. I . ' • I: , 1\ ' f j l 1: 1 l m' ' ' g, m, Li; II ALASl:A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 8 This artificial division of facilities was therefore introduced, in order to establish a second 'S' curve of expenditures for category {i) above, and subordinate financing was attributed to the long life facilities under that category. In order to establish financial viability of the canponent ((ii) above) dedicated to conventional financing, a separate set of models ~as developed, excluding the 'dam'. For the purposes of those moaels separate financing was assumed to be undertaken by some other agency. {This approach appears to be justified in terms of the financial realities of the situation. Susitna appears likely to generate substant;al surplus revenues in the later years of operation. Those can realistically be allocated to the servicing and ar.~ortiz:ation of the long term ca?ital outlays attributed, in this model, to the d~.) Royalties on the •oam' As a further elaboration, we recognized that one alternative might be for the dam to be vested in the State (i.e. the residents of Alaska) on a perpetual basis. In that event it seer.1ed realistic to establish a royalty revenue emanating from the dam. Therefore, those models which exclude the capital schedules for dam construction and repayment, incorporate a reasonably scaled royalty payment calculated by reference to gross revenues from energy sales. Taking a 50 year reference period as an example, the aggregate royalty revenues reach the handsome ~ount ACRES AMERfCAN INCORPORATED l I I I I I I I I I I I ·. I I I I I I I I I I . I . 1: IJ I li Ill I I I . ' I I I ALASKA POWER AUTHORITY SUSITN/, HYDROELECTRIC PROJECT JANuARY 15, 19&1 DRAFT FOR DISCUSSION 9 of $37.8 billion, and even at a seven percent discount factor, the present value of those future royalties in 1980 dollars is approximately $1,291 million • Effect of Excluding the 'Dam' One significant finding from the models, which excluded the civil construction of the dam, was that steep exponential price escalations are not a necessary prerequisite of financial viability and capital repaynent in the instance of Susitna. The key constraint for Susitna is the 'threshold' mill rate per kilowatt hour in the earlj' years after the generating plant comes on strea1.r. Even in the context of seven percent annual price escalation, (at 10 percent interest rates) Susitna exhibits reasonable viability (including the notional 'royalty' on electrical e11ergy sales) over a 20 to 25 year period. Under the operating conditions predicated, the conventional debt contracted for the project is paid-off in 10 to 15 years. Financial integrity, ancl reasonable liquidity and 1nterest coverage are established early in the life of the faci'lity • Deferred Payment Financing in Lieu of Equity Recognizing that the exigencies of fi nanci a 1 rna rkets may require Jaore tangible evidence of th~ capacity of Susitna to support equity finance, we also constructed a deferred payment finance model, which ACRES AMERICAN INCORPORATED I l I 1 1 e ~ m 1 l 1 fl .~ ~ 1 ,j •! 1 ~ 4 ~~ 1 ,, 1 J ,i ! . Ul i 'j [ [l i :,; ,, ., f' ' ~; ~; j t! ,, 1 il j ! ! ; ALAS!~ A POWER AUiHOR ITY SUSI1'NA HYDROELECTRIC PROJECi JANUARY 15, 1981 DRAFT FOR DISCUSSION 10 incorporates financing for the dam, but assumes that this subordinate financing will be made available to Susitna at low interest rates and on a deferred repayment basis.* This model demonstrates the financial capacity of Susitna to service such a program; but it is clearly less attractive, from a public policy point of view, than a program which vests the permanent facilities in Alaska residents. Naturally this 1 atter (deferred payt.1ent) alternat·ive does not incorporate the front-end royalty which is an attractive public policy feature of those models which segregate the daR from the power generating facilities. Initial runs of the deferred payment model indicate that the effect is a rather low return on rate ba:;e {including the dam) and somewhat meager coverage of first mortgage interest charges. However, on the assumptions adopted, the model is marginally viable, provided the borrowing rate for the senior debt does not exceea ten percent. ~In t~e initial model debt service charges are deferred until the Project comes 'on stream'. The interest rate is five percent per annum, and debt repayment term is 40 years (two and one-half percent) up to expiry of thP. loan for Watana; thereafter 20 years. ACRES AMERICAN INCORPORATED I I I I I I I I I I I I I r 1! . ···, I j f.', I ' 11 ·~·· ,. ~ ' l [ r,' . j ·~· ALASKA POWER AUTHORITY SUS1TNA HYDROELECTRIC PROJECT 16.3 -Basic Structure of Financial F~asibility Analysis 16.3.1 -Rationale for a Structure JANUARY 15, 1981 DRAFT FOR DISCUSSION 11 At this early stage, precise future configuration and timing of the Susitna installations has not yet been finally decided. What financial planning therefore offers at this stage, is a set of techniques for testing d~fferent configurations of design, construction and operation, to compare the financi·al inputs required and the cor-responding flows of benefits which ensue. Financial planning presents an assembly of typical assumptions to characterize the Projec~ ("co~ventions"). It tests those conventions against sel~:ted precepts of the capital markets. So, at this stage, selection of the appropriate conventions and market precepts is largely discretionary; because, of course, precep~s of ~ financial markets, looking several years ahead, involve judgmental predictions, not just on intarest rt:!tes, but upon future preferences in r~3pect to repayment terms; including the probable availability of new categories of financial instruments, not yet devised. One important initial aim was to assenble a 11 model", or set of procedures, that would pennit the planning team, APA ana other financial advisors to chec~ through the comparison data rapidly --as the design process advances. That can be achieved by identifying sensitive points of contact, where engineering considerations and financial policy ACRES AMERICAN INCORPORATED if:. U!; ~ ' ( . '. I ' . ~'; ~.· i ALASI~A POHER AUTHORITY Si.:SITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSIOi~ 12 considerations interact. Knowledge of those sensitivity points pennits the planning teara to develop selective control mechanisms, to constrain the planning exercise on the engineering side and adapt it and bring it into focus~ in the context of financial, regulatory and public policy requirements. The first objective has to be to ensure that the anerging construction and generation configurations conform within the tenets of sound comJercial practice. But that is merely an initial objective. Event- ually~ the interface be+ween financial criteria and construction and operational progra.1ming s <1uld be such that nreferred solutions emerge which use the financial model to weigh the cost-effectiveness of the different cours~s of action open on the design side. That second phase of financial feasibility analysis generally proceeds through appl·ication of incremental cost/benefit analysis, sensitivity analysis, and risk analysis during the design phase of a major project. The initial considerations relate to the need to preserve a balance between engineerin9 optimization and environmental, public policy, regul~tory, and risk precepts, laid down in the terms of reference of the plan of study; consistent with the aims and cbjectives of APA. 16.3.2 -D~Jeloping and Testing the Model To develop an effective tool for financial analysis of Susitna, we reviewed various techniques and selected a set of procedures which would ACRES AMERICAN INCORflORATED 1 I I I I I I I I I I I I ·~ If [: . ' . ~ ~l . . ~\··· •' i " J.: til ALASKA POI<IER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 13 match the design and economic analysis packages being assembled by those task grou~s of the Study Tea~. In the early phases it was therefore important to test the structure and viability of the ~odel itself, in order to modify it to the specific ne~ds of APA and Susitna. Thus, parallel with the Financial Analys.is work, the financial specialist teZlr.l was developins and modifying the financial procedures themselves--introducing new criteria and ratios which will come into focus as the Susitna study proceeds, and w~ich {if critical) way eventually deterQine, or modify, the design and phasing of the ProJect. {One may certainly question whether a "complete .. model does not exist sor.1ewhere. which might simply have been adopted "in packa~e form" by the Study Te~. We are not however aware of such a model. It seems more realistic to assune that the present custom-designed r.10del suits the purposes of Susitna more particularly, and eliminates elaborations which could conceivably distort the main financial policy conclusions. What we ware in a position to do \'Jas to er.~pl oy a format and set of procedure$ which have been used in a similar context previously, and apply certain adaptations to meet the requirements of Susitna producing a fiexible and well-defined asse~bly of financial control criteria). Hence, develo~1ent of the nodel, and the testing of enyineering "conventions" and financial assumptions have been procee.=ing simulta-· neously with the gr~dual elimination of less relevant criteria and tighter definition of governing inputs. ACRES AMERICAN INCORPORATED ~l .Jt.; l 'i l Wj . 1 I . ?A ~ ' 1 l ' tY,l IJi;, 11-il I j I ~.d : ,, .'' .. ali ' ; ~f~ 1 i • i ai I 1 ·! ALASI~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT 16.4 -Special Features of Financial Analysi~ JANUARY 15, 1981 DRAFT FOR DISCUSS10h 14 At the present stage, more than 17 sets of engineering conventions and financial precepts have been run through the model. The inputs may be categorized as follows. Capacity ·-Models assume 800 MW at Watana and 600 MW at Devil Canyon • Ctr.~pletion Dates Various ccr.1pletion dates have been tested as well as alterations in phasir.g between watana and Devil Canyon. Energy Sales Energy sales at fu11 level of production are asst~ed to be in the order of 3,252 GWh for Watana and 2,873 GWh for Devil Canyon with a level annual plant factor {i.~( only modest 'run in'increases from year to year; and it should be noted that lower levels of production wei"e tested in certa·in runs). Capital Costs Capital costs are assumed to be constant in terms of 1980 dollars. Current dollar costs are detennined by application of seven percent per annun escalation factor. Construction phasing and interest rate ass~ption determine the amount of interest on funds during construction. ACRES AMERICAN INCORPORATED . . 1 I I I I I I I I I I I I m . ' ' m •' ~ ~~ ~ ' ' ALAS~:A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT Interest Rates JANUARY 15, 1981 DRAFT FOR DISCUSSION 15 Rates in the range of eight percent to twelve percent have been tested. The main focus has sa far been upon a ten percent interest model. Repa,YI!lent Tenns Various repayr.~ent terms have been tested inciuding very long terms (up to 39 years), and "full payment" models with very rapid repaylilent. Energy Prices A nulilber of different assumptions have been made, with escalation of typical current milt rates and fuel costs; also "threshold reductions" in the rates to be charged, to ensure that power frOiil Susitna is COiilpetitive and acceptable. Disaggegation The model has also been run for Watana and Devil Canyon separat~ly. Equity Provision To provide an equity contribution in Susitna and place the Alaska Power Authority in a P·~sition to raist: bort·owed capital, the initial investlilent for the d~a at Watana and certain other long-lived civil works have been ACRES AMERICAN INCORPORATED ~·, . . ' ALAS~~A POWER AuTHORlTY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSlG~ 16 segregated and categorized as "equity" investment. Returns on this Hseed 11 capital refle~t in the overall return fr~~ the Project after it reaches its full completed capacity. Royalty Revenues As a means of ds.1onstrating the eventual capacity of Susitna to pay out a return upon the initial equity investment in the Project, certain of the Financial Feasibility models make provision for pay.1ent of a royalty upon the energy sold from Susitna. Th 1 s royalty has be~n started at one-half of one f.Jercent of revenues in the initi,,l year of op~::ration and escalated to eight percent in the sixtf:!enth yt:ar. However, the precise ratio and application of royalty is a rc1atter for public policy resolution. These amounts ~;auld equally w~11 be applied as a discount to power customers generally, or to particular categories of customers deservinE of special concessions in respect of Susitna. Operating Expenses Standard provisions for operqting and maintenance expenses are provided. These are in line with our experience in other hydro projects. Expenses are escalated at the standard rate of escalation (typically seven percent per annum). Additional provisions are included for renewals, and for start up contingencies (over the first five years of oparation of each maJor power plant). ACRES AMERICAN INCORPORATED J J I I I I I I I I I [: ' . C ., ' ; ,) If W: • fl ·.:.· < . t 1,\ ' ·. ~ ' ' ~' ' ' n .. · ' I ~, c : ! ,,: ~ (ff: ~ ·u··~· ,, ,,-It A IJ:.l' ~ ALASJ:A POWER ALl THOR I TY ~US!TNA HYDROELECTRIC PROJECT Depreciation JANUARY 15, 1981 DRAFT FOR OISCUS~ION ]7 The facilities are deprecigted (straight line) over a 50 year life. Output Output is in the fo~ of a year-by-year printout of Operatin~ State~ents, Sout'ce and Use of Funds Statements, and Balance Sheets. Various supplementary and control data is provided. To this we have added the following co~putation of interest coverage on long term debt -computation of ~ill rate per kWh assw.1ing that all excess revenues h'ere applied to reduction in the mill rates -comparison of (theoretical) minimum mill rate with the previous year to indicate capacity for rate smoothing (certain ;,1odels only). Rate Base: R~t~ base has been taken as an average of fixed assets (net) at beginning and end of year, plus a theoretical allowance equivalent to 45 days of revenues for working capital. (This is a control precept to enable our own and underwriters • analysts to compare Sus;·itna' s year-by-year performance. It has no direct reference to any regulatory proceedings in the context of Sus'i'i:na.) ACRES AMERICAN INCORPORATED I I ,: ~',': ' ' ~' ' ' : ~.· ff! ji' 1..1' .,;J,i ' t ALASI:~ PGriER AUTHORITY SUSITHA HYDROELECTRIC PROJECT 16.4.1 -Conclusions Thus Far JANUARY 15, 198l DRAFT FOR DISCUSSION 1& The financiai projections are highly sensitive to the asstr.led borrowing rate and to the profile of capital drawdowns for construction purposes (i.e. the duration and phasing of construction). They are also sensitive to the price per kilowatt hour, particularly in the initial • period of operation. FtiJo'a the standpoint of financial feasibility, the chief constraining factor appears to be the "threshold" mill rate per kWh for Susitna energy. That is because investors tend to be concerned about the operating statement and capacity of the utility to meet current interest costs out of sales of ener~v. In any typical "b1ended 11 schedule of principai and interest, regaraless of whether or not one adopts the sinking fund approach, it is the interest compot~ent of the debt service charge which is higher in the earlier years. This has to b~ provided out of current revenue and investors like to see it ilnply covered after depreciation.! Thus, where provision is gade out of earnings for straight line or diminishing balance depreciation, earnings availabla to pay interest charges may appear slender, even in circLJnstances where total cash flow is (reasonably) adequate to meet total debt service charges. That is well demonstrated in many of the computer runs related to these Susitna financial studies~ lwllich is an allocation of resources which may be available for repaj'lllents of principal. ACRES AMERICAN INCORPORATED 1 1 I i I I I I I I I I I a· ID : . ' ill. If: U: ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSIOh 19 TI1ese investigations indicate that Susitna would probably be financially viable on stable energy rates, once the initial 11 threshold 11 period has been overcome. One solution to this dilem~a would be to provide row interest or deferred interest funding from State sources for part of the Project. That is not in any sense a requirement of financial viability (assuming for the mor:~ent that the State would undertake the Susitna dam and road works), but it may be a desirable prerequisite for an optimal progression of energy rate lsvels. (Note: The precise duration and terms for deferred interest financing by the State would depend upon: (a) ultimate contracted capital costs of the project; (b) the level at which it is desired to stabilize energy rates; (c) projected levels of interest rates, and borrowing terms for Susitna.) Possible Configurations: Examples and Models Once th~ main installations at Susitna have been completed and commissi~ned, the models are unanimous in demonstrating that ~ple positive cash flows will rapidly emerge. From the point of view of APA, the planning problem is to develop some technique to access those future cash flows and use them to service the relatively onerous interest charges which arise during construction and during the early years of operation. ACRES AMERICAN INCORPORATED I , ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSIO~ 20 There is no easy way to effect this transfer of resources through the markets for borrowed funds. In fact, of course. investors expect to see "equity" dollars in place, before they are anxious to advance very large long-term loans to the Project. Alternatives for circumventing this problem are traditionally: (a) for the project sponsoring company or authority to become an investor-owned utility and go to the market to raise equity capital. In this event the "sponsor 11 'ftOuld become a taxable corporation, and on a pre-ta>: basis it would have to earn a relatively high return on its preferred and common share equity components. This hypothetical alternative is not truly an option in the case of Susitna. (b) for the Authority to receive public funds from State or Federal Authorities. Such loans might be "subordinate" to public borrowings through the bond market, and they might bear escalating rates of interest in the latter years. Moreover they might be exempt fr'.lil redemption or sinking fund payments in those early years when Susitna is under construction or in part operation. (c) the public authorities may see fit to divert public monies into resource developments at Susitna on a 'once-for-all' basis. These ACRES AMERICAN INCORPORATED I I I I I I I I I I I I I I I I I I I . il' rr ""' n.·. ~· rr ~· nr . ~- ALASl~A POWER AUTHORITY SUSlTNA HYDROELECTRIC PROJECT JA~UARY 15, 1981 DRAFT FOR DISCUSSION 21 investiaents by government could most reasonably be associated with those parts of the capitar works progr~s at Susitna which have an almost perpetual life span. Moreover, it would be reascnable, and in keeping with such arrang~ents that Susitna should pay a toll (here termed 11 royalty") to the related authorities by way of compensation or rental of the lands ~nd civil works involved. (d) for the State, or other public authorities to confer certain specific or general guarantees upon the long term borrowings contracted for the purposes of Susitna. Special guarantees could, for instance, reduce the interest rate APA would be required to pay, and might also appreciably lengthen the repayment schedule borrowers would be prepared to accept. More significantly, under p;esQn~ market circumstances, any guarantees which had the effect of improving the guality of the borrowings for the purposes of Susitna, would also increase the aggregate amount of funds available to this project in the i.la rket p 1 ace. Related Public Policy Considerations The aim of funding arrangements from the public policy perspective should be smooth transition of rates, combined with adequate interest coverage, asset coverage, and i"eturns on rate base. These financial ACRES AMERICAN INCORPORATED I n. •• ML lf ,j ~j U1 l 11'1_ 1 ~~ ; Q -' . ·: I . ·. ALASt:A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSIO~ 22 feasibility precepts assure investors of the financial integrity of Susitna. Ina~uch as they are optimal, or near-optimal, they save Alaskan constr.1ers' money. The converse is also true. So the modelling process should. seek to establish an.optimal level of long terr.: interest chargeso Beyond that optimum, electric power customers in Alaska are being penalized relat1ve to other borrowers in the capital markets. The impact of overburdening the Project with interest charges and capitalized interest expense is not simply to render Susitna non-feasible. Excessive interest costs which place an unaue burden on electric power consumers in the State have the effect of retarding economic develo(T.ient and funnelling a portion of the returns from electricity revenues out of the State in the direction of investors elsewhere. Thus, strictly from the standpoint of residents of Alaska, the financial costs associated with the pricing and delivery of electrical energy are a matter for considerable public concern. Inasmuch as temporary constraints in the capita 1 mal'·kets (including high interest rates) may impede develo~1ent of renewable resources, it may be in the interests of public policy in the State to assume certain invests.1ent risks, to which the major public debt markets are currently averse; and to make appropriate p1ans to recoup through participation in the plentiful and inexpensive electrical energy 20 years fror•l now, that Susitna pr~nises to confer. ACRES AMERICAN INCORPORATED I I I I I I I I I I I I I I I I I I I 8' ,g n . . ' ft Jj M' u . IJ M u ~: ! f ~J n. I it1 . '· ~. , LL . a i 0 I o·· .! l '! ,, j . ' ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT 16.4.2 -Choice of Calculation Method JANUhRY 15, 1981 DRAFT FOR DISCUSSION 23 The financial planning model being employed produces and prints out the fo 11 owing tabul at~ ons -Year by year -Balance Sheets -Operating Statements ~ Sources end Uses of Funds Stat~ents -Statements of Capital employed -Capacity and Sa1es -Debt Service. Payments Tabulations of Returns on Invesi:r.lent both in current value terns and real terms (including the DCF return on total cash flow) -Supplementary information for each model. For each model, these stat~ents are mutually consistent, and have been run through the canpl ete debt retirenent peri ad. - A manual model was also prepared in one instance only, to simulate the computer runs and test the internal consistency of these procedures. The financial planning model employed is highly flexible, and has routines for relating various inputs and outputs which are amenable to adjustment to conform with all our requirements at the financial level. ACRES AMER5CAN INCORPORATED n! fl u· 1 ) aJ l ! :j nl l' I wtl :1 I i nl ·~ i UJ 1 j 1 Gl l l n: I l ·' !d' ! ALASI.il. POWEP. AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 24 New criteria or control factors can be introduced, and the models can be operated in an iterative mode to test individual variations in assu@ptions fro@ a remote terminal. 16.4.3 -Quarterly, Annual and Quinquennial Calculations The model offers the convenience of a switch from one interval to another in the course of a run-Thus, initial years can be reported quarterly, and longer term results can be monitored at five years intervals. Thus far, with the exception of certain qu~~terJy test runs on debt service charges (to test their 'correspondence' with annual charges') the output has been calculated on an annual basis and printed out for one-or five-year intervals. 16.4.4 -Ta~ation Considerations In that taxability of obligations of APA has not yet been established in the context of Susitna, this important impact upon financial feasibility has not been fully explored and confronted. In the event that APA is not in a position to fund the Susitna Project through the issue of tax exempt obligations, tax exposures could impinge upon Susitam from two directions: (i) Tax exposure would raise the interest costs on Susitna, and these higher debt service charges might seriously affect the financial viability of the Project. ACRES AMERICAN INCORPORATED I I I I I I I I. I I I I J I. I I I ~ IT~ !'r' lj u- rr d ' rr 11 u I rr ' ! u l ·~ , II I U. u M l i ' ~ ,: n I, 1 il 'f ~ fli1 j.J 1 Ll t )' li: n· Ji iJ [ ALASKA POWER AUTHORITY SUSITNh HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 25 {ii) The capacity of financial markets in respect of taxable obligations may be less broad than the tax free municipal markets, and this may influence the overall capacity of APA to finance Susitna through issue of taxable obligations. In any event, institutional factors are bound to alter in the years prior to major financing for Susitna, and the precise configuration of maturities will be contingent both upon the market in which the bonds are sold, and conditions then prevailing in respect to the institutional e nvi ronnent. What the financial Consultants wish to emphasize at the present stage is that -for the relatively large borrowing envisaged -financial circum- stances, and the prevailing market climate will influence initial planning feasibility. So the present tests rely heavily upon •generalized assumptions• which could require appreciable modification under circumstances seven to ten years from now. 16.4.5 -Escalation/Inflation Treatment In construction of the financial models, an inflation rate for costs of seven percent per annun has been enpl oyed. The use of a seven percent escalatio~ rate was •discretionary', in the sense that most of the pri~es and costs in the model are advancing exponentially in unison. ACRES AMERICAN INCORPORATED 0 0 ALASI:A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 26 Certain other assumptions have been tested, and in particular we have examined energy mill rates that advance at only half the rate of inflation, (i.e. approximately in line with anticipated rate of escalation of fuel costs over and above the general inflation rate). We have further assumed, in certain of the later models, an absolute ceiling for the millrate, once financial feasibility has been attained. However, because borrowing charges are fixed, the output is not independent of the escalation rate selected, and later tests will produce a risk relationship or range of viable values, to establish the margin of financial security associated with those models selected for intensive study. 16.4.6 -Institutional and Legal Structure To optimize the financial costs attaching to Susitna it may be desirable to alter the institutional, legal or contractual fr~~eworks in which the hydroelectric facilities (for APA) operate. That is not unusual in the instance of any large, new project. In fact, it would be surprising if an undertaking of this magnitude could be accomplished without new legislative provisions or legislative amendments at the State or Federal levels. In the instance of smaller installations, APA might detennine -as a matter of policy-to simply accept the pragmatics of prevailing legal or institutional barriers~ In the case of Susitna the capital costs at stake at·e very substantia 1. Careful consideration has therefore to be ACRES AMERICAN INCORPORATED I I 'I I I I I I I I I I I r'f i ., u rr tJ 8 !'"1· lJ n: i J L4 r"f. I I u 0 r-'1' u n u f""~ 1 I . I ~ n. ' ! l...t ln. ~ u ALP.S!:A POWER AUTHORITY SUSIT~A HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSIO~ 27 devoted to any impedi~ents which ~ight tend to escalate funding cost;, or restrict APh'S options, once it enters into negotiations in the financial arena. 16.5 -Sensitivity Analysis The objective of sensitivity analysis is to establish key control criteria and 'priorize' the engineering and planning processes. For exa~ple, the sensitivity analysis exw.1i nes: -engineering alternatives; -alternatives in phasing and ti~ing of construction; -pricing schedules; -financial maturities and other covenants; interest rates; institutional and contractual setting of the project; -n~aerous other sensitive factors. Fra;1 the point of view of APf..., the economics to be derived from appropriate scheduling, institutional arrangenents and financing, are so vast tha.t selection of appropriate control opti~a is a vital cost-effective function within the planning process. In the course of implementation of a large project such as Susitna, the array of alternatives open to Management narrows quite rapidly as the time frame to completion advances. Schedules of sensitivity should therefore be prepared for ACRES AMERICAN INCORPORATED iJ, ~ •' •' i '--A : . 1 ll .iJ:· 1 /)' .- ;-' 'D J ALASI~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSlO~ 28 different points in the planning and design process so that management does not 'paint itself into a corner•, or inadvertently •trade-off' important engineering or contractual options. Quite aside from examining the scenarios whi.ch present themselves in the models, it is desirable to compare projected operating characteristics of Susitna with experienced perfonnance of other large hydroelectric projects. That places the efficiency of the proposed installations in perspective, and affords APA some valuable 'norms' on what to expect under actual operating condi~ions. An initial effort will be undertaken on this sensitivity analysis in the spring of 1981. This will include comparisons of risks under various possible generating scenarios, including Watana, Devil Canyon, and any other options which present themselv~s. ln particular, selected financial feasibility models will be subjected to sensivity tests on a variety of significant engineering, operating ~od financial inputs {torsion tests). Contingency planning and policy o~tions can th~n be formulated applying the priorities which emerge. 16.6-~usions from Financial Feasibility Analysis Integrity of Susitna, in common with other giant projects, depends on adept selection of inputs right from the start. In particular, capacity to steer the project to a successful conclusion requires tne management and engineering consultants .. , incorporate effective monitors and controls. The aim, from a management standpoint, is to close-out undersirable options at an early stage, ACRES AMERICAN INCORPORATED I I I ' ' I I I I n u 0 n LJ D 0 n u 0 . D 0 I 0 il I ... n w 0 11 LJ I D m ALASI~ POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 29 but to keep those options which are favorable, as far as may reasonably be possible. This requires managelilent to focus on sensitive control criteria, in engineering, in the contractu.-1 and institutional context, and also in the real!.1 of commercial and financial dealings. Furthen~ore, decision-ma~ers need to be aware that, as the Project progresses, certain alternatives and choices will become inaccessible, while other alternatives and choices will develop a clear focus and require decisions that are irreversible, and critical to future succe~s. Fortunately, it is possible for experienced project management te~ns to forecast many of these decision points well in advance of the time when the decision must actually be •locked-in'~ This planning approach makes it possible for decision-makers to heighten their awareness and specific knowledge of decision criteria well in advance of firm commitments. This is part of the role that financial models have to play. They enable management to focus on what is critical and discard information that is less relevant. In the context of Susitna, there has already been snme opportunity to narrow- down the ·financing alternatives~ to develop alternative structures, and to test techniques which would allevi~te the relatively heavy burden of high initial debt service charges. From the point of view of utility customers, their main concer~s aie avail- ability of supply, and the effect of Susitna:s energy rates upon pricing of electrical energy in the Railbelt region. The initial upward pressures that new ACRES AMERICAN INCORPORATED \.' ALhSi.f.. POwEr: AUTHORITY Su~ITNh HYDROELECTRIC PROJECT JANUARY 15, 19Bl DRAFT FOR DISCUSSIO~ 30 ca?ital-intensive hydro projects exert upon system rate levels is likelys at present interest rates, to be the ma~e-or-break of this category of energy proJect. In the long run, a project of the calibre of Susitna is almost bound to pay-off handsooely for residents of Alaska. However, the threshhold 'hllilp' of debt service charges which confro~ts Project rate payers in the initial years after the generators come on strear.1, could be a significant financial disin- centive. It is an impedir.1ent which calls for exercise of extremely sophis- ticated analysis and public policy, to scale the hump and elevate the electric power syste1.1 of Alaska to a new 1 eve 1 of autonomy through renewab 1 e energy resources. ACRES AMERICAN INCORPORATED I f1 Ll ~I I ll 1· i I'. 1 ~--.· ·' ~ ,, lin IJ I 1m IJ I ; 1 ' I I I I ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 19bi DRAFT FOR DlSCUSSJON 1 CHAP'fER 17 -SECuRITY OF PROJECT COST AND REVENUE STRUCTURES 17.1 -Introduction Reliability of engineering and financial estimates for Susitna depends in part upon mutual consistency of design inputs. It also depends on the probability that unforeseen considerations will intervene to divert or frustrate the Project. The purpose of the present Chapter is to focus on both 'internal' and 'external' hazal~ds which need to be provided for in the course of planning, constructing and commissioning Susitna. ln order to allow the Project to proceed, public policy-makers at the legisla- tive, administrative and regulatory levels have to be convinced that the Project will proceed according to plan. Also, that its environmental, economic or ecological impact will not impin~e detrimentally on the affairs and interests of residents of Alaska generally, or upon particular social, industrial and interest groups. ln addition, other decision-makers in financial and credit markets and at the FERCt DOE, or in other regulatory capacities (e.g. the SEC) need to be convinced that the probability of unforeseen events seriously distortiny the objectives of ACRES AMERICAN iNCORPORATED I OJ ' ~~ WI . ,, i m ~ m .~ ~ ALASI~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSIOf; 2 APA and its planners is sufficiently remote, that gover111:~ent and private investors should be pennitted to commit substantial resources to the Susitna Project. There is now considerable backsround of methodolo9} dealing with a~1ino theory, risk analysis, and the inter-dependency of planning and design estir.1ates. In s~. 'a chain is as strong as its weakest link' and 'external' ev~nts can impact upon the strength of individual links. The present chap:.er seeks to examine and test the likelihood of external or unplanned dislocations, and the potential for 'internal' Project departures from plan. It also exai.iines the Wurk progr~.1s necessary to avert such events or provide for th~J on a contingency ba~~i. 17.2 -Overal Risk Analysis as Contingency Return 17.2.1-Cateaories of Concerns~ 'External' Areas of concern in respect to external events include: (a) env;~~onmental hazards, seismic influences, landslides, unusual weather cond·ltions, forest fires, volcanic eruptions, and so on; {b) unfoteseen political events, major wars~ major disruptions in unforseen political opposition to the Project itself; ACRES AMERICAN INCORPC.RATED I I I I I I I I I I I I I I I I ·I r ' ;} : f rn ; t . . -1 g l I ~ r~ J1 ;I ~ j rn tl 'l ,:1 '1 i n1 i ~ .J tl 'l tl rn ' ' " 1 '1 I ~~ lt fj;; > -~1 rn· 1 ' .. n~ ,· i m . . ' ,,, n;. ' ' .L p W' . j rP b ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 19~1 DRAFT FOR DISCLJSSI01~ 3 {c) economic and financial disruptions, major unforeseen depressions, inflationary collapse of the economy, with resulting dislocation of supplies; (As has been observed in the energy crisis since 1973, a train of political events originating in an area far renote from Alaska could precipitate collapse of supply lines or credit markets, and thus invervene unfavorably in the major programs of APA.) (d) social or institutional developments: again, these interact with politicaln environmental or economic influences. In virtually every decade of the present century there have been ne\'1 and previously unforeseen developments which have altered the objectives and plans of large nations and social groups. 17.2.2 -~ate;ories cf Concerns -'Internal' Int0rnal concerns relate to perfonnance and the probability of miscalculation by those directly involved in the Project at any phase of its forseeable life. These may be categorized by Project phases (st~1y, design, constructions, and operation) and also in relation to the origin ~f the miscalculation tram which the event or dislocation emanates. From the manag~ent standpoint, the important control mechanism is to ensure that all aspects of planning proceed in unison. ACRES AMERICAN INCORPORATED i m :1 ~ ~1 ALASKA POWER AUTHORITY SUSiiNA HYDROELECTRIC PROJECT JANUARY 15, 19.81 DRAFT FOR DISCUSSIOfi 4 At the survey stage, there are two separate areas of study which bear upon internal sources of dislocation. These are: (1) coordination of different disciplines within the survey (planning) exercise; (2) development of plans and progr~s to avert or deal with sources of dislocatior during design, construction and operation. Coordination of Disciplines -Study Stage At the present stage of the Project, we are particularly anxious to ensure cohesive planning between the engineering projections for Susitna and the economics and financial projection~ which emerge. As various models are being employed to test the outputs from these activities, careful regard is necessary to the compatibility of assumptions and progression of the models (particularly OGP~ and FEZIBL). The simple management approach is to estab1ish a hierarchy and establish priority of one or another of the models. More complex, but more meaningful, fr~n the design standpoint, is to retain flexibility but to retain an 'ir1teractive' posture. Fr001 the practical point of view, engineering parfonnance should asstri1e priority in this early phase. But realistically cost-benefits should be carefully established for each incremental component which may be discretionary at the level of engineering inputs. ACRES AMERICAN INCORPORATED I I I I I I I I I I I I I I I I I I ALASI:A POWER AuTHORITY SUSITNh HYDROELECTRIC PROJECT JA~UARY 15~ 1961 DRAFT FOR DI SCUSS10i, 5 To the layman, including the adr.~inistrator and public policy-maker, the independence of various engineering components is difficult to assess. So identification of individual ele~ents and the risks and cost-benefits which attach to then is an important function as a prerequisite for system planning, and r.~arket and financial planning. Contingency Planning -Internal Internal contingency plans are a component of design, and can only be touched-on in the more general contex~. In the early phases of planning the main task here is classification of different sorts of conti11gencies which have to be provided for; allocation of responsi- bilities; and outlines of budgets, or provisions of budgets. Much of this exercise is routine when one is dealing with experienced engineers and ~Ianners. Our contention here is that such plannin; should be 'explicit' so as to minimize the danger of some ir.~portant ele.1ent in contingency plans being o't·er1ooked. 17.2.3 -Manifestations of Unforseen Develo~ent in Te ms of Project I,.;.;n.J;.p..;;..ut.;;.s::;..... _______ _ These r.~anifestations are an analytical inventory of events which could, or will, transpire to influence the validity of engineering and planning in either direction. ACRES AMERICAN INCORPORATED ALASf:A POI-JCR AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 6 Clearly it is not possible to assemb're an inventory of this kind without inti~ate knowledge of what the planning inputs are, 'inside the anv€lope'. Also required is an in-depth knowledge of local circumstances relevant to Alaska, including the Rai1be1t and Susitna tegions specifically. Additionally, past project experience in closely CO.";Jparable circur.1Hances is al~ost essential. In view of the present fluidity of the program for Susitna, it is only appropriate to generalize upon these ~atters. However, re9ul a tory applications and public partici~atory he~rings require APA and its advisors to establish a high level of preparedness when the ti~e comes for the Project to be opened-up for public scrutiny. Exar.iples of classifications of criteria would be detailed lists COhlparable to categories in Section 17.2.4. In.any exercise of this kind, events may tend to reinforce one another or to offset one another. Thus risk analysis explores co~bined probabilities of various exposures. It it is a necessary preli~.,inary to establish and categorize th~ ris~s. On the manage~ent side, the planners are rdsponsible for costing the risk exposurt!S into th~ Project. Those provisions for risks that are insurable can be appropriated out of operating budgets, and contingencies that require the incorporation of special safEty measures ' may be budgeted in the engineering estimates. Financial risks (including risk of default) are likely to be shared between APA, the investors in the Project, and the purchasers under contract. But in ACRES AMERICAN INCORPORATED 1 I I I I I I I I I I I I I I I I I ALASY.A Pm!ER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 7 that APA is a creature of the State of Alaska, and inasmuch as obligations of APA may be 'backed by covenants of the State', it can be stated that those risks wi 11 be totally or partially secured by the assets and taxation base of Alaska. They are thus born~ by a11 present (and future) State residents. 17.2.4 -Specific Instances of Risk Categories The following paragraphs discuss the implications of the various influences which might be expected to ir,Jpact the security of project cost and revenue structure. (i) Capital Costs At the time that application is made to the Feder a 1 Energy Regula tory Commission (FERC) for licence to proceed with hydroelectric develo~~nt on the Susitna River a significant amount of engineering wor~ will have been completed to define and delineate project structures, equiJlilent and construction works. The basic construction cost est~1.1at~ for the ProJect wi 11 have been prepared with partic~lar thoroughness and care following the course well established for heavy construction Proj~cts. It will entail a detailed analysis and assessnent of the size of the labor force required for each element of the w:>rk; of the construction equi Jlilent required for the efficient use of labor; of the support facilities needed and of the time to perfonn the work. labor rates and ACRES AMERICAN iNCORPORATED .,j [t ·J ~J -u~_-.. '' .. WI JH ~j . ALASKA ?OWER AUTHOKITY SUSITNA HYDROELECTI\I C PROJECT JANUARY 15, 1961 DRAFT FOR DlSCUSSI~:~ 8 corresponding working r.onditions prevalent in Alaska at the date of the estimate will be applied. The estimate w'ill reflect the latest known conditions at the site, as well as a recetit experience with similar projects throujhout North America, and actual costs of construction and equipment procurenent on like facilities. Plant and equipment costs will be supported by estimating quotations received from major suppliers. Of major importance in the case of Susitna, ~here there will be extensive surface and subsurface construction, are the geological conditions likely to be faced. Extensive drilling and field explorat1on in the areas of all major works supported by surface excavation, diamond drilling, seismic ·Investigation and test pits will have confirmed the basic sour.dness of the selected site and the locations of all major structures. This data would ultimately be built to a level which would allow contract bids for construction to be dete~ined with reasonable accuracy. While the Project does entail maJor d~ structures in areas where there is potentia 1 for seismic activity, engineering design approaches will be made which are based on adey~ute1y conservative criteria. By the time estir.1ates are firr.:ed-up, they must be robust enough to provide a high l~vel of Gonfidence. A substantial a;~ount of field exploration and engineering design has yet to be completed prior to the filing of the application to FERC. An additional year of work is involved, and at this stage it must be recognized that capital cost estir.1ates may well increase from the present levels which are being used simply to test the viability of the ACRES AMERICAN INCORPORATED I I I I I I I I I I I I I I I I I I I l!f.r• i l d' l ALASKA PO~ER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 9 Project. The tests being applied at present must be secured by a sufficient margin of conservatisn to cope with upwa:-d cost trends. In the final estimates there will be provision for contingency. Each e1ement of the estimates will contain a contingency allowance appropriate to the degree of risk attendant with tle type and scope of work. The aim will be to establish the equivalent of the contract price which would be entered by a prudent contractor faced with no~al competitive conditions. Stringent attention will be applied to ensuring completeness of all items of these estimates. However, variances can arise from unpredicted circ~1stances or uncertain underground or foundation conditions, as well as unforeseen items of construction and procut·enent~ Estimates of contingency appropriate to the risk involved in related areas or the estimate will be made. An accumulation of all the unforeseen and unpredictable item assessments will embedded in an overall contingency allowance which wil1 be added to the base estimate of direct construction cost. As the estimate:s proceed, and at their 1.c .. clusion, a comprehensive risk analysis will be carried out to determine the probabiiity of the final construction cost underrunning the final estiliiate plus contingency allowances. The approach to this risk analysis has been described in Chapter 9. ACRES AMERICAN INCORPORATED r· l' ., .. r L ALASI:A POWER AUTHORITY SuSIThA HYDROELECTRIC PROJECT (ii) Cost escalation JAN~ARY 15, 1981 DRAFT FOR DISCUSS1Gl; 10 It is recognized that the planning for Susitna and possibly any implementation of the Project ~Hhich may follow, will take place durin9 an era of relatively high general inflation. During the planning stage sensible predictions of cost escalation must be taken into account, particularly in the financial analysis; and the sensitivity of the Project to variations in this parameter must be studied. It may well be expected that the overall costs of plant, construction, and fuel components for alternative means of generation will escalate at some level higher than that of the general econor.~y. This arises fror.1 the fact that aiternative energy costs are heavily influencea by fuel cost escalation which:~ unlikely to be lessened as resource aepletion becomes more and more o• a near-term possibility. The cost escalation up to the time of ProJect release for construction is a significant factor, as it determines the baseline for the committed construction cost. Of separate and equal concern is the degree of cost escalation during the actual construction period, which may be expected to cover the late 1980's and extend into the early part of the next century. Various means will have to be considered to achieve constraint on those cost es:alation rates, applying particularly to the labor input to a major hydroelectric pr~ject such as Susitna. One possibility is the negotiation of a master labor agreement, negotiated specifically for the Susitna Power Project which wuuld securs the position for the initial years of construction, and provide a reasonable base for assessing the labor element of escalation in the later years. ACRES AMERICAN INCORPORATED I I I I I I I I I I I I I I I I I I I rr .. tr pf' ~ ~ ' h 'y ALASJ:A POI-~ER AUTHORITY SUSITN~ HYDROELECTF~C PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSIOt; 11 While it is unlikely that the contracting industry would be ~nable to finn price bidding not subject to escalation, every opportunity should be taken to negotiate such contracts should the time duration of the work and conditions make this possibla. Detailed analysis of cost escalation applying to labor, materials, plant and equiJlllertt, construction services, and fuel will ultimately be made. To that end. a pro vision for cost esc a 1 at ion wi 11 be recOf,uiiended, and probably set aside as a fund for APA allocation and control, as the work proceeds. (iii) Cost Overruns Cost escalation on major project works arises, in th~ main, from circumstances out-with the control of the project manager. Other potentiai cost overruns do arise from circumstances which may be generally within the project manager and owners' control, but nonetheless may occur. Construction cost estimates set at levels so high to cover all eventualities tend to encourage excesses. A more prudent npproach is to assess the basic cost, assuming reasonable degrees of efficiency and adherence to the basic plan. Due allowances should then be made for possible variations. including th~se arising from stretch-out of scheduled work. Such allowances should be included within the overall project contingency, or in other construction cost reserve fund. Once again this should be set aside as a pool under the direction and control of the owner and the project manager. to meet all eventualities during the project implementation period. ACRES AMERICAN INCORPORATED n u ""!· I i u n IJ. i'l u n, I I , :! ~> ALASKA POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT (iv) Delays JANwARY 15, 1981 DRAFT FOR DISCUSSIO~ 12 Delays in project construction leading to late completion have an impact not only on costs of construction and the impact of escalation, but also may cut back the revenue earnings ~n the initial planned years of operation. This risk can be substantially contained by a proper schedule set from the beg~nning, with reasonable contingencies particularly for critical items. Management control in the modern context should then keep all Project works to the master schedule and ensure that contingency provisions are preserved throughout. Particular recognition would be taken in the case of Susitna of climatic influences which might interfere with one or several years of summer season work. Contingency planning ~uld play an important role in this connection enabling the Project to proceed with some alternative means of meeting unexpected circumstances. (v} Events Leading to Noncompletion There are few circumstances which can be visualized which would prevent a major hydroelectric project from being ultimately completed, but it must be recognized that in recent history such circumstances have arisen, based on environmental and ecological grounds. ln the case of Susitna, catastrophic natural events, such as a major earthquake, have to be recognized in their proper order of likelihood of occurence. They cannot be entirely eliminated, but nevertheless, seen in the light of probablistic assessment, they would not stand in the way of the ProJect. The senior debt investors, however, may still be expected to require assurance that even under extreme or catastrophic circumstances any and all obligations will be fully met by the project sponsors. ACRES AMERICAN INCORPORATED J 1 I I I I I I I I I I I I I I I I I fr" jJ a. ~' {! t',, h : ;;,~- 1 r l[ lL jif,- 1.~ I· u rT It Jl Ul ~· u .,.,\ p . I U. !"': II u !";'· r! u -n w rr- ! f \' w. d n '' w 1"'1·. ll i.J.. n !l !J n I f l.tl. f1 i l' I' W .. r-" j j \a.L. r., 1 i w ALASI:A POWER AUTHORITY SUSITN~ HYDROELECTRIC PROJECT (vi) Serious Outages Affecting Delivery JANUARY 15, 198! DRAFT FOR DlSCUSSlO~ 13 Once the Project is COiilp l ete, there exists a risk, however sr.;a 11, that the orderly operation of the plant and facilities may be suspended for a period of time) either in part, or totally. Under these circ~1stances, it is possible to postulate a case where insufficient revenues are generated fro~ the sale of power and energy to service outstandins debt. Although that ~isk is remote, consideration must be given to its possible occurrence and it should be recognized that it might arise in the areas of generation, transmission or operation of inter-tie facilities. Senior debt investors will expect a minimur.i debt service commitment or alternatively some measure of compensation under temporary outage cil"cumstances. It should, furthennore, be recognized that power and energy sales contracts may themselves have conditions covering inability to delivery to contract commitment. (vii) Failure of Revenue Fr()., Power Resources The prospect must be faced where, d~spite the orderly completion and co~nissioning of the project the purchasing utility may provide less than anticipated cost flow under the supply contract with AFA. This might result from anticipated reduction in der.1and, from a major set-back in the economy of the Railbelt, or from the unexpected emergency of an alternative low cost energy source. Contractual provisions under which the output of a major hydroelectric power project would be sold may be expected to cover at least a portion of such exposures. However, investors would require assurance that the project debt service funds could nevertheless be assured by resultant lower levels of output or lower prices which might be anticipated. ACRES AMERICAN INCORPORATED n.".· i l ui r ~! 1 tL I ) I I ! ., I I. Fl' U·. ' .• l; fu4 ! • I ·' . ~ '·! '~, l ~ri •j ': .jj J 1 n1 ! 1 . U.~ j ! I n:J I ~,' ALASI:A POWER AUTHORITY SLSITi;;, HYDROEU:CTRIC PROJECT (viii) Regulatory Risks Jht-iUARY 15, 19ol DRAFT FOR DISCuSSIOI\ 14 In the area of regulatory risk the potential impact of both State and Federal authorities must be taken into consideration. All the requi re.sents in p 1 ace at the t i1,1e the Project is committed will no doubt have been satisfied by the permitting and regulatory process. Future char'}e in requirsnents would then be the only cause for any concern. It re~:la ins for review at the appropriate stage of the study -probably in early 1982 -to apply mature judgnent to the most 1 ike ly future trends which would affect the project. Fror.1 the position in 1961 it is considered that regula tory risks affecting the Sus itna Project Cos~ and Revenue Structure is relatively 1ow, and may be r~leyated to later consideration at the t~me that regulatory approval is being secured. 17.3 -Completion Guarantee At the ti~e of this first draft Project Overview Report only very preliminary consideration has been applied to the issue of a completion guarantee. Such a guarantee would be an essential element of any wajor Project financed, for instance, against a fim power sales contract. Lenders 'I'IOUld require assurances that funds will be forthcoming to complete the Project, so that cash flow for debt service. charges is not in question.! Such assurances would have to be provided by a 'credit worthy' sponsor. The only possible candidates we can envisage. in this context are agencies of the Federal Government, the State of Alaska itself, or a syndicate of banks, dealers or institutional lenders. ifor financing of a going concern the interest coverage test is nonnally retrospective. So cash flow is available to service new debt before that debt is ever rai 'ed. ACRES AMERICAN INCORPORATED I I I I I I I I I I I I I I I I I I M"' iU'' l IT·. ' .· : . ) rr: i l ~ { J ~j' . ,_,.~ i j. 6i U ., . . ~. ! J r~ , u· n U., n W .. ALAS.~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 15 In the instanc~ of a 'municipal' corporation, completion assurances of this kind may partially replace the need for equity capital. But it does seem improbable that investors outside the State will commit for such substantial amounts of funding unless there is an initial heavy commitment in Susitna from inside of Alaska. Completion guarantee requirements are an essential contractual el~1ent in eventual financing agreements for Susitna. But they cannot realistically be canvassed at the present early stage in financial planning. What APA can do, however, is to consider the institutional setting in which such agreements are likely to be framed and ensure that its selected approaches are compatible with trends of public policy in Alaska, on the one side, and the preferences of probable managing underwriters on the other. 17.4 -Revenue Assurances Requirements Adequate assurances of revenue fr01~1 the Project are an important aspect of feasi bi 1 ity required by investors, to mi ni111i ze risk~ The risk in this regard is the risk that any unproven Project might generate insufficient revenue to meet debt service charges, including repayment of principal. From the standpoint of financial projections this reservation may be satisfied by demonstrating: ACRES AMERICAN INCORPORATED ~ 0 q q r1 y d ALAS~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSION 16 -cash flow; -liquidity and working capital; -coverage of debt service charges requirements; -acceptable schedules of debt repayment. However, on the contractua1 side, lenders may visualize situations under which revenue streams are imperilled. So they may look to the intended custcxners of APA, or even to the State of Alaska itself, to provide assurances that the revenue strear.r wi 11 b~ forthcoming. So, just az the institutional framework of APA has to stand proxy for Completion Gu~antees at the present juncture in the Project, -so, likewise, should the power contracts and mark~ting projections of APA stand proxj· for the Revenue Assurances. (Inasmuch as r·evenues fluctuate in response to seasonal conditions and levels of industrial activity, it is taken for granted that strong banking arranganents for current l-ines of credit will be established by APA in the context of Susitna). 17.5 -Form of Power Cuntract ana Interrelationship With Financial Plan Chapter 13 has outlined various forms of Power Contracts which may be appropriate for a project of the nature of Susitna. As the plan for opt ir,Jum financing of the Project proceeds, elements of the power contract~ will require special consideration to allow for the most beneficial relationships. ACRES AMERICAN INCORPORATED I I I I I I I I I I I I I I I I I I I 'f 0 l g j n ~a LJ ~ 0 ~ n ~ '~ I D n G r u !1 ; 1 u 0 n u n u 0 ALA.St~A POWER AUTHORITY SUSITNA HYDROELECTRIC PROJECT JANUARY 15, 1981 DRAFT FOR DISCUSSIO~ 17 At this stage only preliminary consideration has been given to the form of power contracts. The following items are listed as areas where a close interrelationship could exist between such a contract and financing a rrangeHents :. o Coincidence of execution of pow~r contract and senior debt commitment agreements 0 Completion dates and first delivery of power and energy o Schedules of power and energy deliveries 0 Firm capacity provisions and schedules o Rate schedules (including possibility of two-part tariff) o Escalation provisions 0 Payment obligations o Term of contract 0 Meterir.g and measuring 0 Reserves and standby provision Wheeling charges 0 o Recapture o Penalties o Mi nimllll payments 0 0 Force Majeure provisions Indr.!IT!nification and liab~1ity o Management responsibilities o Effective date. Work on details of power contracts will extend into Phase II of the Susitna Plan of Study advancing in close coordination with the d2tailed financial plan. ACRES P.MERICAN INCORPORATED ACRES AMERICAN INCORPORATED I I I I I I I . I I ;· I rn ' ' ' n\ l..ii CHAPTER 18 -ORGANIZATION AND MANAGEMENT 18.1 -Role of Alaska Power Authority in Development of Susitna Hydroelectric Project 18-1 The or1g1ns, operating authorities~ and responsibilities of the Alaska Power Authority (APA) were addressed in some detail in Chapter 3. This Chapter considers the project-specific organizational arrangements within APA as well as the manner in which the management function is carried out by various participants in the Susitna Hydroelectric Project. A simplified diagram of the project control structure appears at Figurr 18.1. Because current efforts are focused on the conduct of a detailed feasibility study, the organization has been optimized for that purpose. Should the project advance to later stages at some future date, some evolution in management approach is likely to occur. For this first edition of the Project Overview, however, emphasis is placed on management of current activities and only a brief preliminary reference is made to those organizationa·l needs which are expected to arise if feasibility is shown and a construction decision is later made. Although APA is administratively assigned to the Department of Commerce and Economic Development, the nature of its activities is such that it is frequently required to report on operational matters to the governor and to the legislature. Figure 18.1 shows the function of all those to whom APA accounts for its activities as the "State of Alaska", since the management of the Susitna Project itself is exercised through APA. Certain state agencies have a direct interest in the course of the work. The Alaska Department of Fish and Game in particular is actually conducting a significant portion of the environmental studies. Others with involvement or who maintain close monitorship include the Department of Natural Resources and the Department of Environmental Conservation. The dashed line on Figure 18.1 indicates the necessity for liaison with other State agencies as well as with the project manager of concurrent studies the outcome of which may influence the results of the Susitna studies. The Executive Director of APA is also the Project Manager for the State for Susitna. He is assisted in this capacity by members of his own staff as well as by the Project Manager for Acres American Incorporated. A full time Native Inspector works closely with the Project Manager to assist him in proper implementation of an agreement which grants APA certain rights to conduct the Susitna study on Native lands and which requires that certain procedures be followed to ensure that opportunities for Native involvement in the project are afforded. Directors of Engineering and Finance on the APA staff serve for project purposes as Assistant Project Managers for Technical Output and Schedule and for Budget and Finance, respectively. A Project Engineer devotes his full time attention to day-to-day reonitoring and coordination of projec. activities. The Accountant and the Public Participation Officer provide services in their respective fields for Susitna as well as for other APA projects. ----··~ r- J I I I I I l I I ~ I I I I I I I I I I L_ ---··-· ------ -OTHER STATE AGENCIES EXTERNAL REVIEW BOARD NATIVE INSPECTOR ASSISTANT PROJECT MANAGER FOR BUDGET AND FINANCE I ACCOUNTANT ACRES POLICY BOARD ---- ---.------..._.._, STATE OF ALASKA BOARD OF DIRECTORS, ALASKA POWER AUTHORITY PROJECT MANAGER D ALASKA POWER AUTHORITY I . . • t .. " ~ .. .' I • • I t ' PROJECT MANAGER .. ·~ ! ' J_L~S.Q!JL RAILBELT ALTERNATIVES~~--_l I AND COOK INLET TIDAL POWER STUDIES f I . . • I I i I • I J j • i . . I i . ASSISTANT PROJECT MANAGER FOR TECHNICAL OUTPUT AND SCHEDULE PUBLIC I \ ! PARTICIPATION; t1 OFFICER ' ..• ·:t '--'---"·--- PROJECT ENGINEER .. I I I I I I I t I I I I . I I I I PROJECT MANAGER . . ~:.·I: I ACRES AMERICAN ~----\ ~ ~~.:_------_j INCORPORATED....;;.._ .. PRDJECT CONTROL STRUCTURE J:'lniiPJ:' IP I ,, 0 U; Ol ' n~ """"' cr' i ; ) f1 i 1 r \ ~:. ' '""" .. ,_ ',·.~',._· ':" . e ·:- '·'< ;je: .. ~ •. ... '.~ 18-3 The APA Project Manager exercises his management role in a variety of ways. He or designated senior members of his staff attend various project and Review Board meetings, review regular monthly progress reports, receive periodic formal briefings on project status, and coordinate on a day-to-day basis with the Acres Resident Manager who maintains a Project Office in Anchorage. 18.2 -Project Management The conduct of the Susitna feasibility study itself is accomplished under contract to Acres whose Project Manager is responsible to the APA Project Manager· for all Acres activities. Figure 18.2 illustrJtes the Acres study management organization. A Policy Board within the Acres organization consists of three Vice Presidents and the Project Manager &nd his Deputy. Meeting periodically (usually monthly), the Board ensures that corporate attention is focused on the project activities and has broad powers to act in cases where assistance to APA or to the Project Manager is necessary. From time to time, for example, the Policy Board has made available scarce specialist manpower resources not otherwise within the powers of the Project Manager to acquire and has established priorities within the corporation to support successful completion of important milestone activities. External and Internal Review Boards and a Working Group are also available at various levels. These bodies are discussed in a later Section of this Chapter. The Acr~s Project Manager holds overall responsiblility for the project within Acres. Principal efforts under his direction include the conduct of the study itself, maintenance of schedule and budget, coordination of Review Board activities, liaison with other state agencies and with managers of concurrent studies whose outcomes will have a bearing on the ;Usitna study~ administration and control of major subcontracte~ work, and response to the requirements and requests of the APA Project Manager. He is assisted in this effort by as many as 50 individuals directly involved in the day-to-day project work for Acres and is backed by major supp ;""i ing staff and technical resources as necessary. Major subcontracts, primarily with Alaskan firms, are being conducted as follows: 0 0 0 0 R&M Consultants, Incorporated, for geotechnical and hydrological data collection, survey and mapping Cook Inlet Region Incorporated in association with Holmes and Narver for camp construction and operation. Terrestrial Environmental Specialists Incorporated with further subcontracts primarily with the University of Alaska, for environmental studies Woodward Clyde Consultants, for seismic studies and load forecasting. I : ACRES POLl CY BOARD ,....__ _____ _, ALASKA POWER AUTHORITY OTHER STATE AGENCIES I ~---...J PROJECT MANAGER, (LIAISON) OTHER ,-·_--':ft- ~ r-,-______ _ ACRES · CONa.JRRENT STUDIES EXTERNAL REVIEW BOARD MANAGER OF OPERATIONS ; INTERNAL REVIEW 1------f CONSULTANTS RESIDENT MANAGER, ALASKA ALASKA PROJECT STAFF TECHNICAL STUDY DIRECTOR TECHNICAL TASK COORDINATORS l DEPUTY PROJECT MANAGER WORKING GROUP I SUBCONTRACTORS I I FINANCE AND LICEf'!.SING STUDY l)IRECTOR TASK COORDINATORS STUDY MANAGEMENT ORGANIZATION .. .. MANAGER OF PROJECT SERVICES PROJECT ADMINISTRATOR PROJECT SERVICES STAFF . .... ~ ............. .,...., ,...,. :.i 0 0 ft1 u r"'1 LJ ·~ I J I I (~J M u M ' 1 tJ l""'1l ; ,) ! 1',! LJ :t l I l,.J, 0 0 Frank Moolin and Associates, for project management support activities ERA and Ackland, for furnishing helicopter support. A substantial portion of the environmental data collection is being accomplished by the Alaska Department of Fish and Game (ADF&G) under a Reimbursable Services Agreement with the Alaska Power Authority. Project staff from ADF&G are located in the Acres project office in Anchorage. 18.3 . Management of Engineering and Construction In the event that feasibility is shown and a decision to proceed further with the project is made by the State, subsequent phases of the work wi 11 demand that a substantial engineering effort be undertaken to produce detailed designs and construction documents. Management of this engineering effort and of the construction of a selected project will likely be accomplished by subcontract to a qualified consulting engineering firm, but decisions on this matter have not yet been made. 18.4 -Policies and Procedures: Management Information Systems The project has sufficient scope to demand that complete management information systems be established specifically for the Susitna Hydroelectric Project. Policies, procedures, and systems now in force include: 0 A Policies and Procedures Manual specifying duties and responsibilities of project staff as well as regulating the manner in which all project activities are conducted. o Cost and Schedule Control Systems providing monthly printouts which permit APA and the Acres Project Manager to take appropriate actions to maintain budget and meet required milestones. 0 0 0 0 Monthly Progress Reports reflecting the status of all project activities. Project Documentation including design transmittals, completion reports for all subtasks, approved revisions to the Plan of Study, field notes and logs, and correspondence files. Subcontractor Procedure Manuals governing the conduct of subcontracted effort. Project Manuals issued from time to time for individual subtasks, setting forth unique work plans when necessary. 18-5 I I I I I I I I I I I I I I I I I I I r t.;J 0 ~ LJ f1 lJ i1 j t LJ n u n ! I !....,.; n L1 n I ) l L t...,,. r'""l u fl I !. u 18.5 -External Boards of Review Provisions have been made for engineering and environmental reviews at various levels within the overall project organization. (See Figures 18.1 and 18.2). 18-6 An external review board has been named by the Alaska Power Authority. This impartial group of eminent engineers and environmental experts provides objective professional review and advice to APA. A second external review board also has been designated by APA to provide independent review of the work performed by Acres. Meeting more frequently than the APA External Board, this second group convenes at the request of the Acres Project Manager when important engineering decisions influencing the course of further work are being considered. Two additional technical advisory groups function within the Acres organization. The Manager of Operations is assisted in his work by Internal Review Consultants who are not directly involved in project activities, but who have achieved eminence in their respective disciplines within Acres, as well as international prominence. The Technical Study Director, under whose aegis technical interpretations, analyses, and conclusions are developed, is assisted by a Working Group which provides advice and assistance to him. 18.6 -Quality Assuranc~ A rigorous quality assurance program has been established to ensure that attainment of quality objectives is achieved in the feasibility study work and that verification of conformarice to established quality requirements is accomplished by those who do not have direct responsibility for performing the work. This approach extends from reviews and checks accomplished for work elements within any given subtask through and including external review processes as discussed previously. While the objectives of the Quality Assurance program remain constant, the manner in which it is conducted and the emphasis on various aspects of performance will change with time if detailed design and construction are accomplished for the Susitna Hydroelectric Project. 18.7 -Public Participation and Information Program A full description of the Public Participation Program was presented in Chapter 14. It is important to note that members of the study management organization play a key role in the success of this effort. The Project Manager, Resident Manager, and other members of the project team as appropriate make presentations and actively participate in public meetings, workshops, and other public involvement events. 0 I The unique action list program which ensures that a response is made to each question or concern offered by the public sometimes requires that answers be prepared from within the project team. These answers are returned to APA for processing by the Public Participation Officer, who reports, for project purposes, to the Assistant Project Manager for Technical Output and Schedule. (See Figure 18.1). 18.8 -Labor Relations In the event that construction activities ultimately take place, it will be 18-7 · necessary to plan and conduct a compreher.sive labor relv~ions program and the Labor Relations Manager will be a key element of the project staff at that time. While the feasibility study is conducted, labor relations functions are generally handled by individuals responsible for such activities within the corporate structure of Acres and each of its subcontractors. Special efforts have been made to ensure full compliance with equal opportunity provisions at Federal and State levels, to promote opportunities for Native involvement, and to maximize the use of Alaskan residents and Alaskan firms. 18.9 -~ecurity Field investigations in a variety of disciplines have necessitated the acquisition of substantial quantities of valuable technical equipment, much of which is the property of the State of Alaska. To ensure accountability for these items, an inventory system has been established and provisions have been made to return all accountable property to the State upon completion of the work. Aside from certain minimal proprietary information, all communications, correspondence and files are available for inspection, and APA consistently makes interim findings and project documents available to interested members of the public. Special procedures for security have been instituted at the Watana field camp. Firearms normally carried by field crews are controlled and kept under lock within the camp. Fire protection devices and fire fighting equipment are maintained at the camp, and fire fighting crews are regularly designated and briefed. Security arrangements during the construction phase will, of course, d~mand major attention. I 1 ~I 1 ') 1 I I I I I I I I J J ~I J J 0 0 lo l : I l[l LJ r-1 u ,-.., i ,1 u n 1 \ u 0 Uri ~ t ' 0 rJ·. f-l. l u :1~ \l ,; w ·r~~ r-\ 18-8 18.10 -Organization for Operating Phase It is, of course, too early in the work to discuss project operation in any degree of detail. Even so, it may reasonably be anticipated that plans for the operating phase wil1 be drawn up during the detailed engineering phase to ensure compatibility between facilities and systems on the one hand and operating organizational concepts on the other. , u ''r~...,._... ... ..._........_...,_,_.,..,_ ..... _~ ..... ,.,-., __ , __ , ___ ~,~-... ,.,._,_, ____ ·-· .. M-.. >',' "·-·'~"'" r ' 11 .. '~ -~' 19-1 CHAPTER 19 -IMPLICATIONS OF PROCEEDING 19.1 -Introduction HCSSB 294 requires that the Alaska Power Authority (APA) prepare and submit a report to the governor and the 1 egis l ature, by March 30, 1981, "recommending whether work should continue 11 on the Susitna Hydroelectric Project. If the recommendation is to continue, the APA must describe: -economic evaluations and preliminary environmental impact assessments for Susitna and all viable alternatives the Federal and State permits required for construction and the expected construction start date; and -any other pertinent information. Earlier chapters in this Project Overview have focused upon these required descriptions, for they are necessary to provide a rational base upon which a recommendation can be made--irrespective of whether the recommendation is to continue with the study or to terminate activities. The purpose of this chapter is to review the implications of proceeding with the study after March 30, 1981. In the op1n1on of APA, there are five issues that merit close review in deciding whether the Susitna feasibility studies should continue on their present course. These issues were originally introduced in summary form in Chapter 1. Succeeding sections of this chapter address each question and conclusions are reached in the final section, based upon these responses. 19.2 -Load Forecasts QUESTION #1. ARE THE PEAK LOAD REQUIREMENTS FORECASTED OVER THE NEXT 30 YEARS SUFFICIENTLY LOW THAT NO MAJOR ADDITION TO THE RAILBELT POWER GENERATION SYSTEM IS REQUIRED? Existing facilities are adequate to meet today's peak load requirements in both Anchorctge and Fairbanks. Indeed, the combination of current generating capacity and additions already planned for the near tenn is probably sufficient to meet Railbelt generation system needs through about 1992 unless some currently unforeseen major electrical energy consumptive industrial development takes p 1 ace sooner. Many of the existing facilities wi 11 reach the end of their . r ,~: I I ,. I f e>·•. 1: ( (,: [) 19-2 useful lives over the next several decades. At issue is whether the difference between forecasted loads and available facilities over the next 30 years is of such a magnitude that projects the size of Susitna Hydroelectric Development make any sense. Susitna developments under consideration range from 400 to 1500 MW. Within this major issue are several subsidiary ones. First of all, the adequacy and objectivity of energy demand forecasts must be ensured. Secondly, the derivation of peak load forecasts associated with energy demand projections must be reasonable. Thirdly, the question of avai 1 ability of facilities must take into account not only the physical plant, but also the probability that required fuels will be available. Finally, it is implicit in the statement of the issue that whatever generation system exists in any future year, it must be capable of meeting the forecasted load while it consistently maintains sufficient reserve capacity to meet both planned outages which are periodically required for maintenance purposes .. and prudently set loss of load probabilities. In an effort to ensure objectivity, demand forecasts were accomplished independently by the Institute for Social and Economic Research ( ISER). ISER employed an end-use model, a relatively modern approach to the forecasting problem, and developed a range of forecasts, all of which are lower than would have been produced by extrapolation of historical long-term trends. Railbelt utility managers have generally argued that the ISER forecasts are too conservative. The environmental community has countered by claiming they probably overstate real future demand growth which will be held down by rising energy costs 3 conservation, local small energy sources, and technological improvements in efficiency of energy use. In the case of Susitna study in particuiar, tests of generation system expansion needs have been made against the most likely forecast as developed by ISER and against high and low forecasts well outside the ·ISER range. The need for objectivity is answered through the selection of ISER to produce forecasts. The question of adequacy of results has been handled by testing Susitna at ranges which take into account extremes above and below ISER's projections. Peak load forecasts were derived by applying historical load patterns to ISER's energy demand forecasts in a manner whir.h was consistent with the ISER methodology. If there is an error in the load forecasts, it is most likely to represent an understatement of peak load. This latter assertion stems from data base deficiencies which identified annual historical high, but not necessarily highest, peak loads. It follows that peak load forecasts will tend to be on the conservative side. The retirement schedule for existing generating units is consistent with useful operating life experience in the utility industry. Coupled with the fact that even the low load forecast predicts modest growth, additional capacity will be needed after 1992 or so. There' are restrictions contained in the Fuel Use Act which limit the ability of the Rail belt System to add certain types of capacity. Natural gas for electrical power generation will be available ir future only to fire existing units or to accommodate future peaking units. I I I I I I I I I I I I I I I I I I I I~ ( I. - 19-3 All generation planning analysis conducted to date has accounted for reserve requirements. In short, the subsidiary issues described earlier do not militate against Susitna development. The primary issue concerning whether a relatively large hydroelectric development makes sense in light of forecasted loads was dealt with in Chapter 8 of this Project Overview. Simply stated, addition of a 400 MW Susitna Project in the early 1990's is economically favored over thermal generation and development of other hydroelectric resources in the Railbelt Region, even for a load forecast which is significantly lower than the low range projected by ISER. For the most likely and high forecast ranges, even maximum development of the Upper Susitna Basin potentiel will be insufficient to meet all generation needs. In these latter cases, significant amounts of coal-fired and/or additional non-Susitna hydroelectric developments would also be necessary. Studies to date lead to a negative answer to Quest ion #1 and peak load forecasts do not represent a reason to terminate the study. 19.3 -Seismic Risks QUESTION #2. ARE THE SEISMIC RISKS ASSOCIATED WITH THE PROJECT AREA SUFFICIENTLY GREAT THAT THE HYDROELECTRIC POTENTIAL CANNOT BE DEVELOPED SAFELY? The Upper Susitna Basin is a seismically active area, and the safety of structures is of paramount importance. This question deals with the issue of whether it is technically possible to build safe structures. Question #4 at paragraph 19.5 below addresses the extent to which the costs of ensuring structural integrity may be prohibitive. Unusual measures have been taken to scientifically determine the nature and extent of seismic activity in the Susitna Basin. A major field investigation program was conducted in 1980 and a network of highly sensitive measuring and recording instruments was ·installed. Earthquakes with magnitudes generally lower than those which might be felt by an individual were recorded and data gathered has significantly improved understanding of seismicity in the region. As a result of a careful screening process, thirteen features have been selected for more detailed ~tudies in 1981. Many of these features are not necessarily faults. It appears that the most severe seismic hazards will stem fran the Denali Fault {about 40 miles north of potential dam sites) and from the Benioff Zone (deep underground and generally south of the sites). Either of these features could be the center of a major earthquake which could produce high ground accelerations. Even so, designing dams te safely withstand such movement is within th~ state of the art. DtJring the development selection process, dar11 cross sections were chosen to acr:ount for max imuro cred ib 1e earthquakes and the Extern a 1 Review Pane 1 reviewed i . j ; i ( • -I •I 1,[ 1 ·.; 11 i 1': I I I 1: I, I r· I I II I' I. II J lj \1 19-4 progress to date in seismic studies. As of March 1981, no evidence has been found which would suggest that dams and other structures cannot be designed and constructed to maintain their integrity even under severe earthquake loadings. Based upon extensive studies to date, the answer to Question #2 is negative. 19.4 -Environmental Considerations QUESTION #3. ARE THE ANTICIPATED ENVIRONMENTAL LOSSES UNACCEPTABLE REGARDLESS OF OTHER CONSIDERATIONS? There can be no doubt about the fact that construct ion of one or more major dams in the Upper Susitna Basin would introduce significant changes to the environment there, as well as downstream of the dam sites. Losses would clearly occur. Some, such as acreage inundated, can be quantified with precision. Others are more difficult to define exactly. A major effort began in 1980 to conduct comprehensive studies of the environment which would be affected by project development. The program is scheduled to continue well beyond the point of license application. It is particularly important that the environmental study team and the engineering design team work closely together since proper design can serve to avo~d or minimize certain impacts. Mitigation planning will be accomplished through8ut the feasibility study and will continue during detailed design, ~onstruction, and operation phases of the project if successive decision points are passed successfully. It is, of course, difficult to define an 11 Unacceptable 11 loss. Widely divergent views on this matter have been expressed through the Public Participation Program. Data collected to date, as well as tl:lat which will be acquired in the future, will permit development of detailed descriptions of probable impacts. The State of Alaska must then decide whether the potential benefits outweigh probable losses. Based on the first year of intensive environmental studies, no evidence h~~ been found which represents a substantial departure from the sort of results which had been anticipated when the program commenced. ~~hile it can be said with certitude that much work remains before the Susitna Hydroelectric Project can be determined environmentally acceptable, the response to Question #3 is essentially indeterminate at this time. 19.5 -Alternatives QUESTION #4. IS THERE AN ALTERNf-. .'IVE SET OF t"'ROJECTS THAT CAN BE FOUND TO MEET THE ELECTRICAL ENERGY DEMAND FORECASTS THROUGH THE YEAR 2010 AT A COST SIGNIFICANTLY ;JELO~J THAT OF THE SUSITNA PROJECT? The detailed study of alternatives is, of course, outside the purview of APA. Battelle Memorial Institute has been commissioned to undertake this major effort. I I I I I I I I I I I I I I I I I I I I I I I I I I' I f, I ~~ I. I I I No definitive results are expected from Battelle prior to the March 1981 decision point. 19-5 The process of selecting and scheduling an apparently appropriate Susitna development has necessarily included a generation planning exercise because a Susitna Project, if constructed and operated, will be a large addition to an existing generation system rather than a rep 1 acement for it. Certain major alternatives, particularly fossil fuel-fired po~Jer plants and non-Susitna hydropower, \-.Jere considered as the basis for determining how future Railbelt generation systems will probably evolve with and without Susitna. Parameters such as expected fuel cost escalation, useful plant life, contingencies, and the like were applied over all demand and load forecast ranges to select the apparent most appropriate Susitna development from a group of technically possible ones. The selected plan was then subjected to unusually conservative contingency assumptions, increases in cost to deal with 11 worst case" seismic issues, and a series of sensitivity analyses. The benefit to cost ratio exceeds unity for Susitna over all forecast ranges. In other words, no set of alternative projects has yet been found which would cost less on a life cycle basis than a Susitna Project within a reasonable range of parameter variationse In the case of the most likely demand forecast, additional generation requirements will have exceeded the er.~rgy potential in the Susitna River Basin before 2010 and other developments will have to take place. As the Battelle study proceeds, a number of alternatives not required for :-;,usitna aevelopment selection wiil De considered. For examp-le, wind, solar, geothermal, and tidal power will be tested. It may be anticipated that a more complete 11 Without Susitna 11 generation system will be described. It remains to be seen whether it will have any cost advantage over a 11 with Susitna11 generation plan. It follows that Question #4 cannot yet be fully answered. It is not possible! to state unequivocally that no significantly lower cost set of alternative projects can be found. It is possible to assert that none has yet been found. -- 19.6 -Financial Mechanisms QUESTION #5. ARE THERE NO FINANCIAL MECHANISMS OR APPROACHES THAT CAN INSURE ACCEPTABLE POWER COSTS? The response to Question #4 suggests that the cost of a Susitna Project will be less CIE~r time than that of other alternatives explored to date. The fact that a project could lead to long term economic benefits does not necessarily make it financially feasible, however. Major hydroelectric projects tend to be capital intensive. A large initial investment is required, after which operating and maintenance costs are relatively low for the remainder of the project life. Preliminary modelling of alternative financing arrangements has led to some important considerations: ' :j-~· 1 ., ' ' f (; I,' I' l i··· i ' li l i.' ' 19-6 a. If all capital works were to be financed with borrowed funds, it is 1 ike 1 y that the cost of electric energy would be greater in the first few years of operation than it would have been for an all thermal generation system. Over the project life, however, the "with Susitna" system would cost the consumer considerably less. b. If the State elects to provide some initial equity in the Project, financing the remainder would be less difficult; the initial cost to the consumer could be held to the then extant electricity cost (or less); and the State could collect royalties essentially in perpetuity beginning at some pre-set period after the project begins operation. c. Deferred payment financing in lieu of State equity can also serve to reduce the front~end loading problem, but such an approach is only marginally viable and depends upon being able to secure relatively low borrowing rates. d. Mechanisms whereby special guarantees are made, perhaps by the State, upon long term borrowing could serve both to reduce the interest rate and to lengthen acceptable repayment schedules. e. Although current federal legislation does not provide a vehicle for tax exempt bond financing of a Susitna Project, attempts to secure legislative change on this issue may be expected to occur ·in the next few years. Tax exemption 'NOuld, of course, facilitate financing at the same time that it leads to lower electricity costs. Susitna's viability does not seem to depend upon success on the tax exempt issue. Until detailed cost estimates and schedules are developed and refined for the selected plan, it is premature to develop detailed financial plans. Even so, preliminary modelling of this important element of the total project leads to the conclusion that financial mechanisms that can insure acceptable power costs can be found. Thus, the response to Question #5 is currently negative. 19.7 -Conclusion No barriers have been discovered in the first year of study effort which would preclude eventual development of the Susitna River Basin. Initial indications are that a Susitna Project could return significant economic benefits to the State of Alaska and that design of safe operating f~cilities can be accomplished within the state of the art. Environmental impacts of project development cannot be fully detrmined until completion of various ongoing studies. Termination of the study at this time would leave unanswered the question of project feasibility, lead to major cost increases if study activities were started at some later date, and would probably foreclose the opportunity to put power on I I I I I I I I I I I I, I I I I I I I I I I I I I' I I' li I I I ··~ ,, I •• I I I _u I 19-7 line at Susitna in the early 1990's (because of the lead times requit·ed for licensing, design, and construction). Continuing the study effort does not imply a decision to proceed with construction. Continuation will lead to a final determination as to whether the project is in fact feasible, and will permit schedule maintenance if it is later shown that a Susitna Project is clearly in the State's best interest. The environmental impacts associated with conducting the study itself are minimal and completion of the environmental effort can provide valuable additions to the existing Alaskan data base whether dams are built or not. .. ..... PHASE I PHASE II . Literature ~ 1------, Review I + 4 7 8 9 . Economic Assessment Forecast of Future of Important Commar-Determine & Evaluate Assessment Social Sfgnlfl-Socioeconomic clalj Recreational, & Project's Impacts o~ canc·e of Project's ~ Conditions In ~ Subs stance Flsh & -r-Important Commercial Economic Impacts on Absence of \HI dllfe -Under Recreational & Sub-~ lmPQrtant Commercial, Project 11 Without Project" s istence Fish & Recreational & Conditions Wildlife Resources Subslsi~nce Fish ~ i Wildlife Resources . I Socioeconomic I Prof lie 1-I DeveJopment I I 5 6-A 6-B I Forecast of Future Identity & Evaluate Assess Social and I Socioeconomic Con-~ Slgnlf cant Soclo-Economic Significance dltlons In Presence ~ economic Project of Impact Eva I uat I on I of One or Two Dam Impacts ( exc I. Impacts ~ Results Project on fish and wildlife) I i ~ I I Preliminary I I Socioeconomic ~---_J Impact Studies il GENERAL FRAMEWORK FOR PLAN STUDY FIGURE I C( , / I I I :t: I N • .., ~ I I I I I --,. I EL 1455' I ·a I I I + 112 I EL. 1151' +83 I I I AREA OVER WHICH VERTICAL .JOINTS OPEN ... A EL. 1463' EL.I405' EL. 1151' UNRESTRAINED CANTILEVER SiRESSES (PSI) SECTION A-A HYDROSTATIC HYDRODYNAMIC LOAD DJSTRI~UTIONS HYDROSTATIC DIRECTION OF GRouiro MOVEMENT NOTES: -(MINUS) INDICATES TENSILE STRESS. +(PLUS) INDICATES COMPRESSIVE STRESS. C~'f.lf\J ,C.AIV't\l..~IJ\!~ I DEVIL CANYON ~/ANALYSIS fcf'. \>C)>U~>\Cl-f-1¥'\M ~(4)Vt\Jt> ~0'\\o\'J (ACCELERATION 0.5 G, DAMPING J0%0