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HomeMy WebLinkAboutAPA4110------------ Senator Hike Gravel gave a pr'esentation to the Anchorage f1unicipal Assembly regarding progress to date of the Devil's Canjon and Watana Dam projects.' Gr~vel explained in detail (using charts and graphs as illustration)the tra.eli t i anal method of hydroel ectd c cleve 1 opment and the method proposed under the J\laska Hydy'oelectric Pm·J.8~'DeV'2lopmen't Act. Sus itnd PO\':ei~Project Presentation by:' Senator Gravel Di\TE, ~; filE NO: sur-lee r. THEPI·:ONE NO: s")T:.'>;'V ;~, J;'0'.1 ..'-'J,(/'-./.'•.......:.-r ~/...I'/vJ>JJ .;,;/I.r:.~·'-'1J I,'.J -'• d IC1'-.1 ~.0 ~~~<..ql e..a61 .CSU,s,ttn~ .{\U~Just 22,1977 '~YO~e.d Q}prJ Chi"isty Nillct' The Hecorcl ~.. Res i stance by Cong~~ess to the Susi tna hydl"opm'/er project,and other Alaskan projects because of th~State's image as becoming the wealthiest State in the Union h'el~e ite'rilted by Grave·l.This type of Congressional resistance plus the traditional method of financing a hydropm'ler p'('oject (through ~he time-consuming procedure of aut~orization,app'('opriation and construction)Gravel explained,are what prompted him to look at a nc\'/approach to financing the Susitna project. In brief ~~avells financing method is as follows:1)Through Congressional legis'lation a $25 million revolving fund Houle!beestablish.?cI,2)The money'\'/ould guat'antee sta:te bonds issued to pay for Phase I \'liJrk (i,nvolves advanced engineering and design)fin~l F.T'~'J ~nrl cost/benefit analj5is). 3)If the project is II go 11 the Alaska PO'.'/c-;r f~.uthority (\"rould handh:the· bond iSst'?and run the project)may at this time,el iminatc~th~fu,thcr' _assistance of the Corps of Engineers,choosing another constru~tion ' 'contractor)or the Corps would be choosen as the contractor offeri11g the adv:lntages of a gl1a~~;:.mtee against cost OV'2i'rUnS and\lacts of God II • 4)If it "is detcrm'ined in Phase I that the dam should ·not be.built,the fedei.~a190vernment\·;ould be obligated to payoff tl12 Stdtc1s bonds, The"-11e\1c~~I:~ap·p;'i~+ed·chafrmun·-0f··the A1asket 'P6t'ier Jlutfibri tY,Phi'l;Hllb~)a1~L, 'c\\tas:-introcl ucecl.-~-,..···_~···--·"-·":"'~.---.',,'~ nti -IT [- U po L ·nu [10:f- [ C FROM: ,,~ [, -"J, -.-., _-:3 [ [ C l C [] 8 ---.----::-.---._--_. /"or ·i I E '.-/'r.1•..-\:,"\"-\ ,.-#""""';~'" ~-~. , Several questions Here asked by assembly members \"ith respect to the impa ct of the Su s itna Proj ec t on local government.Gr<1 'Ie 1 recommended that the Municipality establish and maintain contact with the Corps and the Alaska Pm'ler Authority as Phase I progresses. C August ,22,1977 ~...- .~, -2- C';"-/ CO-__'_".__. For the Record • L; Gravel emphasized that he Would like to see Alaskans benefit from low cost hydroelectric pm-ler,"not some Outside aluminum company."(It is. my understandi n9 that he may have been l~eferri n9 to a proposal and report by the Henry J.Ka'iser Company,September 1974,for an energy- intenshe industry to utilize any electricity .surpluss~s.).. The attached summary paper on the Susitna POi'lel~Project\'las distl~ibuted to assembly membei~s and other attendees. C\I LOI'--.' T"" LO T"" T""oo LO LO I'-- (t) (t) '[._,'. -;:? [ [ [ L [ [ o fl."LJ- "0 fl (j [1 U fJ~ C"~"·"""" ." 0- G..b [j r ,. :Chairman,WatcT,Resources SubcoITJnittee ,ComiTti ttee on Environment and Public WOl:ks ..\..- t\ [ [ ,[ [ [ [ '0 13,'L 'C [l- o C'.- LJ C-'-"'-"" C L' U l. " c; ",' THE SUSITNA POWER PROJECT A Report to Alaskans by Senator M~ke Gravel Nay 23,1977 '. ARLIS Alaska Resources Library &Infonnation 5eMl:e$ ,llbrary Building,Suite 111 ,3211 Providence Drive Anchorage,AK 995084614 I (> .0 o 0 IV: 1425 :S~ G73 )'l.17 Page 1 of Senator Gravel's report is missing. At first glance,the prospects for a dam project on the Susitrta would seem very bright.. The site is particularly '....ell-suitec1 to hydroelectric dove lopTi1cnt.Envi ronmen t0lists had ci ted it during.the R.:t"lpart o -THE'OLD WAY. "2- (;, ~. FINANCTNG"- a huge da~at th6 Yukon1s Rirnpart Canyon 100 mites northwes~of Fairbanks.A heated national debate arose over the environmen- tal liabilities of the Rampart proposal,and a subsequent cost/benefit analysis snoHcd the project to be economically undesirable. The Rampart proposal w~s dismissed just as a second water crisis arose:the 1967 flood at Fairbanks.For the next several years)t.he need for flood cont.Tol dre\V attention RiYay from the question of hydroelect:ric develop~ent in .the state. .In 1972,however,the Senate Public Works Committee ordered the Corps of Engineers to rencw the study of power options)including hydroelectric potential,for ..therailbelt. By the time I became chairman of the Water Resources Subcommittee in 1973,the Corps was Teport~ng that pTeli~iniTY .data pointed to the Susitna at the Devil Canyon site ..Its location,its high pow~r potential,the stabilizing effect it could ha~e on the energy systems oIthe railbelt area and the fact that it would reduce the need for new fossil fuel plants in Al~ska:all these factors were~in its favor.I.acquired accelerated funding £o~ the study,and last year the :orps finalized itsrecomnendation. The Corps suggested to the Congress a $l.S billion pro- ject composed of a 63S-foot.concretc dam at Devil Canyon,14.5 .·mileseas~of the Alaska Railroad at Gold Creek:with four 194- megawatt gcneriting units;and an SID-foot earthf~ll dam at the Watana site,31 miles upstrea~from Devil Canyon,with three 264-megawattunits.. The Watana Dam would be built first.Together the darns would generate anuveragc 6.91 billion kilowatt llours per.year. According to the Corps)'demand for electricity in the railbelt area,presently about 2 billion kilowatt hours annually,will ~p~~h ~~hill ion by 1980 and IS billion by 2000. E,..~ [ [ [. C [ u· o c c § tl C '~,_,__.__._ r:Wa tana '\V'Ould be on line in 1986,DeviJ.Canyon in 1990.1 \(f H They.would comvrise the J grgest p-coj ect in Corps his·torv .-.-....1.ll.i ...~ £:act·"the largest hz.slroelec't cvelonr.18nt in North Arnl'::rica ...,.,. o:oc;;:~.-'-",c'''''''";:':<': C- C B L controversy as a preferable alternative because it would ~o rclatively little harm to fish and uildlife habitllt.And as chairman of the Senate subc-ommittee,I \':<1S ina position to support the project. The traditional method of.financing a federal hydro- electric project is"through Congress's dual procedure of authorization (basically,permission to act)and appropriation (lnaking money available for the action).These'two distinct functions must be completed"for each s~ep in the making of the dam.' Ci -3·· ----------------._------"._-_.~._._--.. 'G, my committee work,I had learned that the pros- fact not bright for any hydroelectric project~· promising the project might be.F~rthermore7 were declining year by year., .. But in pec ts \....ere in no matter hOH the prospects All of this is time-consuming in itself.But more than that,the appropriations process is a political,and hence a relatively capricious,one.It is subject to nIl thel·rinds'of the .American political process,including the popularity-or unpopularity of dams and federal projects in general.These .f"lln(~c:r.mc:"t"rnmn ..~te \-lith all·other appropriations . .... The initial surveys,a plan of study.for Phase I,Phase , I itself (involving advanced.engineering and design,~ofinal _ environmental impact statement and cost/benefit economic analysis), and the actual construction:all of these,must be separately , authorized~and money than appropriated.'Furthermor~,rilthough authorization is needed only orl~e for each phase.of the project, the money is appropriated only as needed on a yearly basis. This means that)during-the long,planning aad conceptual phase, ..Phase I,and during the construction phase,appropriations Bust be made again and again,year after year,for a single proje~t. -[, r '" .J c· [ c [ [ o '[] r]lJ·0' o O· Li ....._.&4 __...........----.'.r"'" ~.Engine~rs may know the right amo~nt of mo~cy t?request bj.'"year,by year J.n order to complete a proJ ect on an optJ.mun o c',.:schedule~.B1J.:t:..~Jlle_mbg;~~~~QfCgJlgre5s l.J.l'eto think :'0 f ',.thel:1Selvcs ;[-~~'-:;~;~~·~:~;~;~';~f~i~f~h;;t;~·;,~~~{·~t~~~~',,~~.~.f6~i~~~~lfI6~~:~~>t{i~~',"f~.~b;i~~ quests that come before them. D- C E L . The result of this process is predictable.In the case of.,fceleral \{ater proj ects they are never finished on schedule. They drag on,sometimes for:several decad~s>and costs go up. A fCH examples arc ins tructi ve:. .,'The Lo\{-E:T Granite Lock and Dam in Washington,part'of 'the Lower Snake RIver Multiple Purpose Project),,,as authorized in 1945 at an estimated cost of $82 million.Construction,was initiated in 1965.The project ~·is no',.,92 per cent complete and the total estimated cost is $310 million.Date of completion is now scheduled for Septembe~1979,34 years from original authorization.. The Harry S.Trur;l<lIl Dam and Reservoir in Hissouri 1S a mul t.i -purpos e project ",hi cll \'las author i z ed in 1954.Cons t ruc tion money was first appropriated in 1965.Total project cost at that time Has cstir.18.ted to be $129.5 million,and cO;i\pletion was scheduled for 1971.Now,in fiscal year 1977,the cost estimate ]12S climbed 219 per cent to $413 million.The project .is 51 p~r cent clone:J ..and is scheduled for cOJ:lpletion in December 1980,26 years from original authorization. It ]las taken an average of 18 years from the time of authorization to first construction ~onies.Construction when initiated has been prolonged an average of five years,or a third longer than engineering sclledulcs would require. .It should be pointed out that th~Corps of Engineers suffers the cy-i.ticism for cost overruns 'Hhen in fact most over- runs are a product of erratic cash flows necessitated by federal budget cons train ts.. I c· -4- c , The.Tennessee-Tombigbee waterway in Alabama and Mississippi will provide a connecting waterway system consider~d to be national in scope.It was authorized in 1946 at an estima~ed $120 million.Construction funds were first ap~ropriated in 1911.The estimated total cost·at that time was $361.3 million. Th~1977 cost estimate for this project-is $1.5 billion.It is 6 per cent complete and the estimated completion date is March 19~67'40 years from original authorization . [. .C [ 'C [J [ [ '0- C ·c Q g....3LJ C n...;.§ :. .""'c.........·,·..It .is.a:l,SO-c\"9i-.i:JJ,.,..RqillttAg'-.Oll"(:..tha-e·,·thename:d·'above.prujects 1J-'~~~~b~~'~~1~-nJ~~~-.~~~~~;~1'~~~_~:J'~.~:~~.~:i{~~;:.5~fl~~~~;i~ri~.f~~·'-~:d~;~~u~-'. Magnuson and Scoop Jackson ..If these mert have not succeeded' 'f''''''~b.etter in advancing proj ects essential to their states 7 I can It j be very sanguine about the chances for the Susitna project under .the Congressional appropriation process. U Th?~act is that federal fund!ng for w~tcr projects has. been declln1ng for years,even tllougn the natIon's hydroclectr1c ~~ap,tci.ty coul c1 be daubl c:d.It coul cl provi de non -poll 111.:ing,Te-lJ nc".....ablc enc:-gy and,in effect,help conserve petroleum.I r:ysclf .'h'oulcl favor an aggressi V(~national hyc1r-oclectric policy., l ~-;.----~~----------~----~-------~-----~~--~--- .~-----~-~~.-~--- Ten years ago,nearly 7S per cent of-the Corps'appro- priation lias for con'struction;14 per cent was for operation and maintenance."Toclay construction accotmts for only 58 per cent of the Corps'budget;operations andrnaintenance account f6r 27 per cent., Alaska's energy wealth,in particulriT its pipeline wealth, is no ,secret in Washington.In facti stnri~s of pipeline sal-, aries seem to make a more vivid i~pres~ion on national legislators than do the much more widespread instances of high costs for basic materials and services. Already,then,it seems an in"opportune time to propose a neli project,the largest ever,for the Corps of Engineers. But there is yet another strike against the Susitna proposal, one which makes_adequate funding for the project appear virtually imp~ssible.' :. c."~5- THE I~l!\GE OF ALASKA c Funding was terminated this year for ~l.ongoing Corps projects.And my prediction to the legislature last year that '8.change in Administrations would not'mean a change in this policy has been borne out:one of Pr~sident Carter's first actions lias to threaten water projects underway in all parts'of the country_ ,But the conclusion is'inescapable that in thcco~petition for federal dollars,the priority given to water projects is slipping lowcr each year,The total Corps of Engineers program is currently being funded at a rate less than half that of ten years ago.TIle current bu~get includes no'neW construction starts and very few new survey starts. [, ,[ [ c c [ C· o [j C H.0- '13 l=ll=-~ n Alaska experienced a boom ,.,.hile most of the country under-·tJ ',.....ent a recession.No matter that the blessings.':o£a bOOl:>arc very mixed.A Congressman who hears of a single 17-year-old e~~····•.··.·~~~Y~~~i:~~~f~t~~~~~~~~';.~0~~i;\'~,;i~~i~~;':'~~"~~i2.;~.~~:nl -••..-.,-.-........~~-•._--...--•••-. -•--~--~-,....~-..........:._--•.:•.~~--:::--•..-..:~•..:....:...........~.---->-•• ~~'Throughout its history as 'a state ,-~Alaskans -approached [.•-the Congrcss 1·lith the explanation that "things arc <:lifferent .'here"and "things arc harder )and they cost more.fI This is all ~~true,and Congress has responded:as recently as 1974,Alaska'L received more than twice as much in federal dollars as we paid -,in taxes.In hi2"h~'lay construction and in feeleral land revcrkues, ''Ie enj 0)'a higher share of U.S.money than any other sta to. IJ L -'" At lunch one day with Maj.Gen.Ernest Graves>chief of ··the Corps T Civil Works divisio"il,I fOD..i1.d myself asking a fanliliar question:"Why'not pay for it ourselves~lf In 1974,in f~ct,tlle governnent spent more per capita in Alaska than in any other state.'Only in W~s~ington>D.C.was more federal money spent per person. H01Y,then,'could the Susi tna proj ect be brought about? How could l'ie even fund the $20 million Phase I ,.;ork,,.".i thout \·/hlt..h \'Ie could not be pos·;t;ve of the feasibilit.y and the desirability of the project? In recent years,it has become appa'rent'that our I'lelcom.e is wearing thin.Alaska i~to become the wealthiest state in th~union ..lfuy,a congressman asks himself,can't we pay our own Hay? " C·/ -'"-6- . A NEW APPROACH c; FINANCING ., .If that budgetary'level '~Tere to remain constant over the next decade,we would have one project using,for t~n years running,som~12 per cent of the total construction £unds for alISO states.And this''1ould be for the benefit of little more than one-tenth of one per cent of our nation's pop~latio:r:. One .thing "las clear:."'i t ,.,.asn't going to happen .tha t i'iay. This situation is especially applicable to the Susitna proposal.The Corps estimates.ten years for construction uader ·,optir.Hlli1 funding."At an estinated cost of $1.5 billion,.this averages out to $150 million per year.Tha~is 12 per cento£ the total Corps ~onstructi6n budget for the entire country in .1977. '.'..c·.-~-~--_._-~_.~~- [ [ C' [ [ C.. D. C C· fl...!u· o C Q ····~:·~·The·state could sellrevenue bonds to PaY the Corps to f~:c·~_--:.:.J;tudycaiid·-'·eve-n"tu<llclyto-.build:the proj ect".~..Wc.",ouldsti.l-1 ha vou·--..-the.a dv £rit aie·';-'8P"·'1:?dsi:a·1'·~gc~1~-T'aB.tees-d"~·~.iRg.~;cb.n,st+Ji,c t.~qj;~...But..••. .when the dam 1-lasfJ.nJ.shed,.J.t 't'Touldbe.the"prbpeTty-oi:-:'~he stat·e 1 of Alaska>not the federal govermaerit.·> [Perhaps ~ost important,if the state sold revenue bonds .to pay for construction,we could be sure that the money would[1 be available \'lhcn it ""as needed.That ":ould mean .ontimum~scheduling,which would lower the cost of the dam a~d get power on·line quickly. U L .r --._---'~'----;"-------,-----_._'-'.-'_._------,----_._--~---'---------~--,----_._-------.--'------~---------------------.~--~-~---- :.. I then presented the plan to the legislature.In its refined form,it looked like this: .I car;le to Alaska in February to discuss this plan Hith state officials,utility executives ~nd ~ll interested parties. The co:ncept HD.S well-received. "c -7- f~'"--" f.n 1~.1ask3...-2.o.."'·!Je:L_A.uthQxiJ:Y.,""ouJ.d also have.to.be creat.ed to handle the bond issues and run the project.State Reps.Jim Duncart and Red Swanson had already introduced legislation creat- ing such an authority before I addressed the legislat.ure,and this was approved a short time later. I introduced ~he Hydroelectric Powar Development Act in 1976 t9 create the revolving fund,and it '-!as reported by the Public Works Committee in September as part of the Water Resources Act. (In an ironic twist,the House-SenQte conference co~mittee refused to believe that.the $25 million bond guarantee fund wis simply that •.They alteran the title and -'ehe authorization so . tht:>.•'11 h'""~....,,,,h~·....\1...1....1.1 d""~lD '~.,-'...p.•"'-·n v··1·,.,.,....·to'i .---.'.....~DJ...~,t,;.c~L,I.,Y•.··J~0 '"\..':",•.J,y ..,)..0,-,.\;;CL.T1C .0 ,-Tv J....c.C.0J)Il.t;:;Jl.__.)._~\..~ ma'kl'.n£-.:A.-I:a.~.•.;ka:-::.t.''he-.·._~-=.(y.,.._..J!lY..~-.-:s.-t-.a..t.'c.=-..e..:-ligi.b.-.I.,..-E~£..o.-i.-.'.il1e.~~b-E:l1-c.-..~~.'·ts.-~...'.;"'othe . Te vo 1 v i ng -fund;.Jo·t?"2~·~:'lS/djijoa-Jcc...'!)a.-/ic/-l4...("/:Yl <Je(~/v ~'f7---.'. After the bill was passed and signed into law last fall, I oTganizcd meetings between the Corps,bond at.torneys and state offici2.Is.THO mo;:c needs were idc:iltified:I}the.Corps needed $100,000 to c08nletc a Plan of Study for the Phase I wor~;andl)clean-up language was needed in the authorizing bill to 171ake clear the liability for Ii t:i.ginous cost overruns. If it Has decided to go ahead Hith the project,the state '\fould issue new bonds ";lhich ",auld,1)'payoff the Phase I .bonds,thus rei~bursing the governmrint for the Sorps'work;and 2)pay.fo~the coastruction of the dam,either by the·Corps or by other private contractor.The bonds would be repaid through the sale of electricity fro"il the proj oct. Through Congressional legislation,~$25 million revolv- ing fund would be established,The money in the fund ,,,auld be used to guarantee state bonds issued to pay for Phase I work On hydroelectric projects.If i~was determined in Phase I tha t the da'm sh'oulcl not be'buil t;the federal goverIllrtent would. .payoff l:hcsta to's bonds.The state in othe.r "\<fords loses nothing if the project proves to be ill-advised,either because 'of reasons of engineering,environment or:economics.! .~,[, [ [. ·C.· l C [ 0- n...d C Q. [j. o o --'"'"'.c C D B r: ..' ..-:...-.~-:...__.~.".- c,'"S- ADVANTAGES •0 c~.' The state agreed to put up thb $100,000.To have that money a~thorized and appropriated ~y tIle Congress would have delayed the project a year. The clean-up language is part of this year's omnibus water bill,now r~ported to the Senate by the Environment and Public Works Cormili tt ee. The Hydroelectric Power Development Act was originally conceived out of necessity:,.,.e sir.lply needed an alternative· ~o the traditional financing method,because it wai clear the Susitna project could not be financed that way_As it was developed and refined,however,,·;e recognized 8;,:numbcr of un- ed advantage?that c.ome .;frofil the al te1."n.~tive finan.cing 0'0 .;.•••~;:> A-gT-eaT··h)-'d"TCH~Tcc.tric-projcctcoulet be cbmpleted'111 tcn years,not 30 or 40.Not only did this mean power on line more quickly,but it mcant lower construction coSts.Even the llighcr cost ot Wall Street bonds,as opposed to federal money, '\<lould be mOTe than.counterb:Jlanced by.the savings effected by an optimum construction schedule.. . f·In award,the detailed Phase I study,meant to enable the Corps to giye a fi:n:1 recommendation for or ag3.inst the Susitna pro j ect,is on its 1.;ay.'I'inat remains to be done is to secure the passage of the clean-up language;finish the.Plan of Stuc.y and pay faT it;approp:riatc the 'first $6 million of the $25 million revolving fund,needed to gu~rantee the state's bonds;secure a resolution from the state legislature authoriz~ 'ing the sale of the bonds,and sell the bonds.The Corps says that if it begins next spring,Phase I recommendations can be completed by 1980. -0 T'._.[.'> [ [ C" ["" .[ [. o ~~other facet remains.My original legislation pro- ~..'".vi4e~for thorough independent cri~.iqUe.of each,of.the seg~ents l:of,tne Corps t Phase I report:.engJ.neerlng and Cleslgn,envlTon- ,}..,,·:;:.;mental impact statement,and ~.cost/benefit analysis.This n...'...-':··::'·:·.pray.ision '\'las inadvertan tly .omi tted by the House-Senate can-t ferees,and I was una~le to have it reinstated in this'year's .omnibus bill.It is my hope tha·"L,·the state pm.;er authority Fl.'"/ou!-d pTovide for such.an independent critique of the Corps f [jo ·HarK .. E C G ·C··"·····-···......~-,- ,'J '. ;- [ F: b U L ""• c; "~," "-9 -" -~'----~--_._--'---~--,--~-'-~------~'-----'---------~'.----'--,--.-.,~.----------_. c; .. ~ " At th~end of constru~tion,the dan would be owned by the state.This Houlel give the st2.te,gTeat flexibility to provide lm'/-cost po',{er throug:lOut AIQ.sk";:-.,This is because \{hen the construction bonds are paid,the huge pO'l.;er output from the project would be extremely low-cost,the operatiTIg and ~aintenance costs of hydro projects being very small and there being no fuel costs.The state,through its power authority,could equalize electricity rates throughout Alaska ,so that all residents would share in the benefit of state ownership."', ...': Even in spite of its ev'ent,ual 'o\·t11crship ..'however,the state's risk in minimized.The experience 0,£the -Corps in dam :'building is ui'1assailable.The thorough Phase'I study assures .~reliable go or no-go decision --and if the decision is no-go, the state does not pay the Phase I costs.,.. .Finally,the procedure offers m;re disci~line'for safety. A traditional project undergoes the scrutiny of the·Corps and the Congress.Projects 'under the Hydroelectric Development Act would undergo not only this scrutiny,but also that of the state power auth~rity,the state legislature ..the national bond market --and hopefully a qU~lifie~independent source to cri t:i:que the Corps f work.' v,.,. ,---~--~~ ,,\~, Lt., [ L [ [ [ [. A.U' C r,-,~,'1J 0' o '6 B " '. .~':. ....;,....-'....-. v,.. ,..•.,".". ;.,'0_~.." '" ,"l :.~...",'''' e .[ fj [