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Northern Intertie Bills 2000
(LIMITED RUN FOR ALL ADDITIONAL SPONSORS)1-LS1245\I CS FOR SENATE BILL NO.255(RES) IN THE LEGISLATURE OF THE STATE OF ALASKA TWENTY-FIRST LEGISLATURE -SECOND SESSION BY THE SENATE RESOURCES COMMITTEE Offered:3/2/00 Referred:Finance Sponsor(s):SENATOR PETE KELLY REPRESENTATIVE Barnes A BILL FOR AN ACT ENTITLED "An Act relating to best interest findings and land use permits,rights-of-way,and easements issued by the Department of Natural Resources;and providing for an effective date." BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: *Section 1.The uncodified law of the State of Alaska is amended by adding a new section to read: FINDINGS.The legislature finds that (1)AS 38.05.035(e)provides that the director of the division of lands in the Department of Natural Resources,with the consent of the commissioner,may approve contracts for the sale,lease,or other disposal of available state land upon a written finding that the interests of the state will be best served;paragraph (e)(6),however,specifically exempts certain land uses,including a permit or other authorization revocable by the commissioner,from the best interest finding requirement; (2)AS 38.05.850 specifically authorizes the director of the division of lands SB0255B -1-CSSB 255(RES) New Text Underlined [DELETED TEXT BRACKETED] oeSANAMHhkDHNH=wowWwNHNYNYLKNHNHNNNNF-FFFFFFEFFEOSEUSS™©0COCAHDAmnB&FNY=COOHOBEATAAF&FWHNY=OS1-LS1245\ in the Department of Natural Resources,without the commissioner's consent,to grant land use permits for specified purposes,including electric transmission and distribution lines; (3)in 1999,the Department of Natural Resources,in accordance with the direction given to it by the legislature in AS 38.05.850,issued a conditional,revocable right- of-way permit to Golden Valley Electric Association for construction of an electric transmission intertie between Healy and Fairbanks; (4)in accordance with AS 38.05.035(e)(6)(C),the Department of Natural Resources did not issue a written best interest finding,since the conditional right-of-way permit granted to Golden Valley Electric Association was a permit and was revocable by its terms; (5)in December 1999,the Alaska Supreme Court held that the conditional right-of-way permit that the Department of Natural Resources had granted to Golden Valley Electric Association was not "functionally revocable"and that the Department of Natural Resources should have issued a best interest finding under AS 38.05.035(e); (6)the Alaska Supreme Court's recent decision jeopardizes the status of permits previously issued by the Department of Natural Resources under AS 38.05.850,as each of those permits may constitute a disposal of state land for which a best interest finding is required; (7)in order to comply in the future with the Alaska Supreme Court's recent ruling and to avoid challenge to its permits,the Department of Natural Resources will likely have to issue a best interest finding for every permit issued under AS 38.05.850; (8)issuing a best interest finding for each permit issued under AS 38.05.850 will necessitate substantial additional expenditures for which the Department of Natural Resources is inadequately funded; (9)the consequences of the Department of Natural Resources'having to issue best interest findings for permits issued under AS 38.05.850 without additional funding include (A)the creation of uncertainty on the part of prospective permittees; (B)the rapid depletion of the Department of Natural Resources'funds; (C)substantial delays in the permitting process; (D)a negative effect on the development and use of state land resources;and CSSB 255(RES)-2-SB0255B New Text Underlined [DELETED TEXT BRACKETED] eofeHNBDUKhh&YN=weWwWNYNHNHNYKHNYNYNYKNNO&-F|-FFFEFFPOOSS=©OoCBTAvAB&BBeNY=COBOBAITAWAuNhkWBNY=SC1-LS1245\I (E)potential impairment of the safety of Alaskans;and (10)in passing ch.113,SLA 1981,the legislature's intention in enacting AS 38.05.035(a)(14)(C),now AS 38.05.035(e)(6)(C),was to create an exception to the best interest finding requirement that would apply to all permits issued by the Department of Natural Resources under AS 38.05.850,including the permit issued to Golden Valley Electric Association. *Sec.2.The uncodified law of the State of Alaska is amended by adding a new section to read: INTENT.It is the intent of the legislature to confirm by clarification that all permits issued by the Department of Natural Resources under AS 38.05.850 are exempt from the best interest finding requirements of AS 38.05.035(e). *Sec.3.AS 38.05.035(e)(6)is amended to read: (6)before a public hearing,if held,or in any case not less than 21 days before the sale,lease,or other disposal of available land,property,resources,or interests in them other than a sale,lease,or other disposal of available land or an interest in land for oil and gas under (5)of this subsection,the director shall make available to the public a written finding that,in accordance with (1)of this subsection, sets out the material facts and applicable statutes and regulations and any other information required by statute or regulation to be considered upon which the determination that the sale,lease,or other disposal will best serve the interests of the state was based;however,a written finding is not required before the approval of (A)a contract for a negotiated sale authorized under AS 38.05.115; (B)a lease of land for a shore fishery site under AS 38.05.082; (C)a permit or other authorization revocable by the commissioner; (D)a mineral claim located under AS 38.05.195; (E)a mineral lease issued under AS 38.05.205; (F)an exempt oil and gas lease sale under AS 38.05.180(d)of acreage subject to a best interest finding issued within the previous 10 years or a reoffer oil and gas lease sale under AS 38.05.180(w)of acreage subject to a SB0255B -3-CSSB 255(RES) New Text Underlined [DELETED TEXT BRACKETED] ooSeNHnOhhWDNH=WOWNKNNYNHNYNHNYNNNO=||FFF|-|SOSt=©OoCONTAmn&&NY=COOOBATAnAhkWDNY=©1-LS1245\ best interest finding issued within the previous 10 years,unless the commissioner determines that substantial new information has become available that justifies a supplement to the most recent best interest finding for the exempt oil and gas lease sale acreage and for the reoffer oil and gas lease sale acreage;however,for each oil and gas lease sale described in this subparagraph,the director shall call for comments from the public;the director's call for public comments must provide opportunity for public comment for a period of not less than 30 days;if the director determines that a supplement to the most recent best interest finding for the acreage is required under this subparagraph, (i)the director shall issue the supplement to the best interest finding not later than 90 days before the sale; (ii)not later than 45 days before the sale,the director shall issue a notice describing the interests to be offered,the location and time of the sale,and the terms and conditions of the sale;and (iii)the supplement has the status of a final written best interest finding for purposes of (i)and (1)of this section; (G)a shallow gas lease authorized under AS 38.05.177 in an area for which leasing is authorized under AS 38.05.177; (H)a surface use lease under AS 38.05.255; (I)_a permit,right-of-way,or easement under AS 38.05.850: *Sec.4.AS 38.05.850 is amended by adding a new subsection to read: (c)If the director determines,by evaluation of the nature and duration of the intended use,that an easement or right-of-way issued under this section will not be functionally revocable,the director shall provide public notice before issuing the easement or right-of-way. *Sec.5.The uncodified law of the State of Alaska is amended by adding a new section to read: RETROACTIVITY.Section 3 of this Act is retroactive to,and applies to permits issued under AS 38.05.850 on or after,July 27,1981. *Sec.6.This Act takes effect immediately under AS 01.10.070(c). CSSB 255(RES)-4-SB0255B New Text Underlined [DELETED TEXT BRACKETED] Zon -dah tea ponee.yf S ee DVM CAC GOLDEN VALLEY ELECTRIC ASSOCIATION INC.PO Box 71249 »«Fairbanks,Alaska 99707-1249 *907-452-1151 EGEIVE Alaska Industrial DevelopmentandExportAuthority March 31,2000 Randy Simmons Executive Director Alaska Industrial Development and Export Authority 480 West Tudor'Rd. Anchorage,AK 99503 Re:Status of Healy-Fairbanks (Northern)Intertie Dear Randy: |am pleased to report that the Healy-Fairbanks (Northern)Intertie ("Intertie”)design and location phase is nearing completion.The right-of-way on federal ground has been approved and we expect the issues surrounding line location on state ground will be settled this spring.We have completed engineering design on the entire proposed route and have purchased 3.8 million pounds of foundation steel.Legislation supported by the Alaska Department of Natural Resources that would allow the Intertie to proceed has been passed by the Alaska Senate and House and is pending signature by the Governor. In accordance with the Grant Administration Agreement,AIDEA will not release funds for "Phase II”construction of the Intertie until two conditions are met:demonstration of the ability to raise all additional amounts needed to complete the Intertie and "final approval of matters submitted to the Alaska Public Utility Commission (now Regulatory Commission of Alaska "RCA”)related to the funding or use of the Intertie.”With respect to funding GVEA's costs,|am pleased to report that our loan applications to the Rural Utilities Service ("RUS”)and the National Rural Utilities Cooperative Finance Corporation ("NRUCFC”)have been approved by both agencies.RUS will lend GVEA up to $35 million to cover the cost of the Battery Energy Storage System,an integralpartoftheIntertie.CFC has agreed to provide GVEA up to $50 million through a line of credit to finance GVEA's share of design and construction costs for the Intertie.With these loan commitments and the grant funds to be provided by the State under SB 186 passed in 1993,the funds available are adequate to allow completion of the Intertie. With respect to gaining RCA approval,GVEA submitted an application to RCA on February 14,1997 seeking RCA approval of its participation in the Intertie.After discussing the purpose of the filing with RCA Staff,we withdrew the application,based Randy Simmons March 31,2000 Page 2 on Staff's view that the ultimate wheeling rate,not the construction or ownership of the Intertie,is subject to RCA approval.RCA expects GVEAto file its transmission rate tariffs with RCA for approval once the Intertie nears completion.Our attorneys concur in that result.The amendment to the 1993 Intertie Agreement provides that GVEA "shall provide the other Participants access to capacity in the /ntertie for the purpose of assured access to resources,economy energy transactions and other similar uses under rates and tariffs filed with and approved by the Alaska Public Utility Commission.” SB 186 made the grant appropriation contingent upon the inclusion of this provision in agreements related to the Intertie between the utility participants. In December of last year,GVEA and the other utility parties to the 1993 Alaska Intertie Agreement approved an amendment making GVEA the sole owner of the Intertie.In addition,all the utilities have signed amendments to the Intertie Grant Agreement and the Grant Administration Agreement.While these amendments have been reviewed by AIDEA counsel,Jonathan Rubini,we have delayed submitting them to you for execution,pending the resolution of financing issues and other matters.We believe the current status of GVEA's activities related to the Intertie merit the State's completion of those amendments.If you agree,we will forward the two amendments to you for final execution. As you know,the Intertie has been an important GVEA goal during my tenure as CEO of GVEA.On April 1,George Kitchens will assume those duties.Please contact George if you have any issues or questions with regard to the Intertie or other GVEA activities. Randy,|am very pleased that |can end my business relationship with you on a positive note.The Intertie and the Healy project will be major assets to interior Alaska once they are completed and in service. Tih. Mike Kelly President &CEO cc:George Kitchens,Golden Valley Electric Association,Inc. GVEA Board Ron Saxton,Ater Wynne LLP Jonathan Rubini,Foster Pepper Rubini &Reeves LLC - Fle 1-LS1245\D SENATE BILL NO.255 IN THE LEGISLATURE OF THE STATE OF ALASKA TWENTY-FIRST LEGISLATURE -SECOND SESSION BY SENATOR PETE KELLY ' Introduced:2/8/00 Referred:Resources,Finance A BILL FOR AN ACT ENTITLED "An Act regarding best interest findings and land use permits issued by the Department of Natural Resources;and providing for an effective date." BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: *Section 1.The uncodified law of the State of Alaska is amended by adding a new section to read: FINDINGS.The legislature finds that (1)AS 38.05.035(e)provides that the director of the division of lands in the Department of Natural Resources,with the consent of the commissioner,may approve contracts for the sale,lease,or other disposal of available state land upon a written finding that the interests of the state will be best served;paragraph (e)(6),however,specifically exempts certain land uses,including a permit or other authorization revocable by the commissioner,from the best interest finding requirement; (2)AS 38.05.850 specifically authorizes the director of the division of lands in the Department of Natural Resources,without the commissioner's consent,to grant land SBO255A -l-SB 255 New Text Underlined [DELETED TEXT BRACKETED] NYNNWKNYN*FSSBSSSOSOSoSoeSBNAabkWDN=1-L$1245\D use permits for specified purposes,including electric transmission and distribution lines; (3)in 1999,the Department of Natural Resources,in accordance with the direction given to it by the legislature in AS 38.05.850,issued a conditional,revocable right- of-way permit to Golden Valley Electric Association for construction of an electric transmission intertie between Healy and Fairbanks; (4)in accordance with AS 38.05.035(e)(6)(C),the Department of Natural Resources did not issue a written best interest finding,since the conditional right-of-way permit granted to Golden Valley Electric Association was a permit and was revocable by its terms; (5)in December 1999,the Alaska Supreme Court held that the conditional right-of-way permit that the Department of Natural Resources had granted to Golden Valley Electric Association was not "functionally revocable"and that the Department of Natural Resources should have issued a best interest finding under AS 38.05.035(e); (6)the Alaska Supreme Court's recent decision jeopardizes the status of permits previously issued by the Department of Natural Resources under AS 38.05.850,as each of those permits may constitute a disposal of state land for which a best interest finding is required; (7)in order to comply in the future with the Alaska Supreme Court's recent ruling and to avoid challenge to its permits,the Department of Natural Resources will likely have to issue a best interest finding for every permit issued under AS 38.05.850; (8)issuing a best interest finding for each permit issued under AS 38.05.850 will necessitate substantial additional expenditures for which the Department of Natural Resources is inadequately funded; (9)the consequences of the Department of Natural Resources'having to issue best interest findings for permits issued under AS 38.05.850 without additional funding include (A)the creation of uncertainty on the part of prospective permittees; (B)the rapid depletion of the Department of Natural Resources'funds; (C)substantial delays in the permitting process; (D)a negative effect on the development and use of state land resources;and (E)potential impairment of the safety of Alaskans;and SB 255 -2-SB0255A New Text Underlined [DELETED TEXT BRACKETED] owFNBDnHhh|]NNYNYNYNYFSFFSFEFFEFPUSOUSTUDS1-L$1245\D (10)in passing ch.113,SLA 1981,the legislature's intention in enacting AS 38.05.035(a)(14)(C),now AS 38.05.035(e)(6)(C),was to create an exception to the best interest finding requirement that would apply to all permits issued by the Department of Natural Resources under AS 38.05.850,including the permit issued to Golden Valley Electric Association. *Sec.2.The uncodified law of the State of Alaska is amended by adding a new section to read: | INTENT.It is the intent of the legislature to confirm by clarification that all permits issued by the Department of Natural Resources under AS 38.05.850 are exempt from the best interest finding requirements of AS 38.05.035(e). *Sec.3.AS 38.05.035(e)(6)is amended to read: (6)before a public hearing,if held,or in any case not less than 21 days before the sale,lease,or other disposal of available land,property,resources,or interests in them other than a sale,lease,or other disposal of available land or an interest in land for oil and gas under (5)of this subsection,the director shall make available to the public a written finding that,in accordance with (1)of this subsection, 'sets out the material facts and applicable statutes and regulations and any other information required by statute or regulation to be considered upon which the determination that the sale,lease,or other disposal will best serve the interests of the state was based;however,a written finding is not required before the approval of (A)a contract for a negotiated sale authorized under AS 38.05.115; (B)a lease of land for a shore fishery site under AS 38.05.082; (C)a permit issued under AS 38.05.850 or an [OR OTHER] authorization revocable by the commissioner; (D)a mineral claim located under AS 38.05.195; (E)a mineral lease issued under AS 38.05.205; (F)an exempt oil and gas lease sale under AS 38.05.180(d)of acreage subject to a best interest finding issued within the previous 10 years or a reoffer oil and gas lease sale under AS 38.05.180(w)of acreage subject to a best interest finding issued within the previous 10 years,unless the SB0255A -3-SB 255 New Text Underlined [DELETED TEXT BRACKETED] oeSNAUUFk&NYYNNNYS|SeROoeeeeRPBRBRBeCeTDTAGDREBRES1-LS1245\D commissioner determines that substantial new information has become available that justifies a supplement to the most recent best interest finding for the exempt oil and gas lease sale acreage and for the reoffer oil and gas lease sale acreage;however,for each oil and gas lease sale described in this subparagraph,the director shall call for comments from the public;the director's call for public comments must provide opportunity for public comment for a period of not less than 30 days;if the director determines that a supplement to the most recent best interest finding for the acreage is required under this subparagraph, (i)the director shall issue the supplement to the best interest finding not later than 90 days before the sale; (ii)not later than 45 days before the sale,the director shall issue a notice describing the interests to be offered,the location and time of the sale,and the terms and conditions of the sale;and (iii)the supplement has the status of a final written best interest finding for purposes of (i)and (1)of this section; (G)a shallow gas lease authorized under AS 38.05.177 in an area for which leasing is authorized under AS 38.05.177; (H)a surface use lease under AS 38.05.255; *Sec.4.The uncodified law of the State of Alaska is amended by adding a new section to read: RETROACTIVITY.Section 3 of this Act is retroactive to,and applies to permits issued under AS 38.05.850 on or after,July 27,1981. *Sec.5.This Act takes effect immediately under AS 01.10.070(c). SB 255 -4.SB0255A New Text Underlined [DELETED TEXT BRACKETED] FULi,.Ther ginusw SENATE BILL NO.255 IN THE LEGISLATURE OF THE STATE OF ALASKA TWENTY-FIRST LEGISLATURE -SECOND SESSION BY SENATOR PETE KELLY Introduced:2/8/00 Referred:Resources,Finance A BILL FOR AN ACT ENTITLED 1 "An Act regarding best interest findings and land use permits issued by the 2 Department of Natural Resources;and providing for an effective date." 3.BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 4 *Section 1.The uncodified law of the State of Alaska is amended by adding a new 5 section to read: 6 FINDINGS.The legislature finds that 7 (1)AS 38.05.035(e)provides that the director of the division of lands in the 8 Department of Natural Resources,with the consent of the commissioner,may approve 9 contracts for the sale,lease,or other disposal of available state land upon a written finding 10 that the interests of the state will be best served;paragraph (e)(6),however,specifically 11 exempts certain land uses,including a permit or other authorization revocable by the 12 commissioner,from the best interest finding requirement;. 13 (2)AS 38.05.850 specifically authorizes the director of the division of lands 14 in the Department of Natural Resources,without the commissioner's consent,to grant land SB0255A -1-SB 255 New Text Underlined [DELETED TEXT BRACKETED] =CS/ CefFHAwm&BHWV=ve)ryNKRNYNHNKNVN*-FFFFFeFeFrEEOESSY&ReBRARRRAEOaRESiVCaAEAAARHOReSTS1-LS1245\D use permits for specified purposes,including electric transmission and distribution lines; (3)in 1999,the Department of Natural Resources,in accordance with the direction given to it by the legislature in AS 38.05.850,issued a conditional,revocable right- of-way permit to Golden Valley Electric Association for construction of an electric transmission intertie between Healy and Fairbanks; (4)in accordance with AS 38.05.035(e)(6)(C),the Department of Natural Resources did not issue a written best interest finding,since the conditional right-of-way permit granted to Golden Valley Electric Association was a permit and was revocable by its terms; (5)in December 1999,the Alaska Supreme Court held that the conditional right-of-way permit that the Department of Natural Resources had granted to Golden Valley Electric Association was not "functionally revocable"and that the Department of Natural Resources should have issued a best interest finding under AS 38.05.035(e); (6)the Alaska Supreme Court's recent decision jeopardizes the status of permits previously issued by the Department of Natural Resources under AS 38.05.850,as each of those permits may constitute a disposal of state land for which a best interest finding is required; (7)in order to comply in the future with the Alaska Supreme Court's recent ruling and to avoid challenge to its permits,the Department of Natural Resources will likely have to issue a best interest finding for every permit issued under AS 38.05.850; (8)issuing a best interest finding for each permit issued under AS 38.05.850 will necessitate substantial additional expenditures for which the Department of Natural Resources is inadequately funded; (9)the consequences of the Department of Natural Resources"having to issue best interest findings for permits issued under AS 38.05.850 without additional funding include (A)the creation of uncertainty on the part of prospective permittees; (B)the rapid depletion of the Department of Natural Resources'funds; (C)substantial delays in the permitting process; (D)a negative effect on the development and use of state land resources;and (E)potential impairment of the safety of Alaskans;and SB 255 -2- | SBO0255A New Text Underlined [DELETED TEXT BRACKETED]|.. CefFNAMNhkOHNH=-co11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1-LS1245\D (10)in passing ch.113,SLA 1981,the legislature's intention in enacting AS _38.05.035(a)(14)(C),now AS 38.05.035(e)(6)(C),was to create an exception to the best interest finding requirement that would apply to all permits issued by the Department of Natural Resources under AS 38.05.850,including the permit issued to Golden Valley Electric Association. *Sec.2.The uncodified law of the State of Alaska is amended by adding a new section to read: || INTENT.It is the intent of the legislature to confirm by clarification that all permits issued by the Department of Natural Resources under AS 38.05.850 are exempt from the best interest finding requirements of AS 38.05.035(e). *Sec.3.AS 38.05.035(e)(6)is amended to read: (6)before a public hearing,if held,or in any case not less than 21 days before the sale,lease,or other disposal of available land,property,resources,or interests in them other than a sale,lease,or other disposal of available land or an interest in land for oil and gas under (5)of this subsection,the director shall make available to the public a written finding that,in accordance with (1)of this subsection, sets out the material facts and applicable statutes and regulations and any other information required by statute or regulation to be considered upon which the determination that the sale,lease,or other disposal will best serve the interests of the state was based;however,a written finding is not required before the approval of (A)a contract for a negotiated sale authorized under AS 38.05.115; (B)a lease of land for a shore fishery site under AS 38.05.082; (C)a permit issued under AS 38.05.850 or an [OR OTHER] authorization revocable by the commissioner; (D)a mineral claim located under AS 38.05.195; (E)a mineral lease issued under AS 38.05.205; (F)an exempt oil and gas lease sale under AS 38.05.180(d)of acreage subject to a best interest finding issued within the previous 10 years or a reoffer oil and gas lease sale under AS 38.05.180(w)of acreage subject to a best interest finding issued within the previous 10 years,unless the SB0255A -3-SB 255 New Text Underlined [DELETED TEXT BRACKETED] CFNHvab&bDDNH=ewNRKRKNNVF&F====FFOSOSsSl&OONH= SCSEBFABAa&SHNH-=CS1-LS1245\D commissioner determines that substantial new information has become available that justifies a supplement to the most recent best interest finding for the exempt oil and gas lease sale acreage and for the reoffer oil and gas lease sale acreage;however,for each oil and gas lease sale described in this subparagraph,the director shall call for comments from the public;the director's call for public comments must provide opportunity for public comment for a period of not less than 30 days;if the director determines that a supplement to the most recent best interest finding for the acreage is required under this subparagraph, (i)the director shall issue the supplement to the best interest finding not later than 90 days before the sale; (ii)not later than 45 days before the sale,the director shall issue a notice describing the interests to be offered,the location and time of the sale,and the terms and conditions of the sale;and (iii)the supplement has the status of a final written best interest finding for purposes of (i)and (1)of this section; (G)a shallow gas lease authorized under AS 38.05.177 in an area for which leasing is authorized under AS 38.05.177; (H)a surface use lease under AS 38.05.255; *Sec.4.The uncodified law of the State of Alaska is amended by adding a new section to read: RETROACTIVITY.Section 3 of this Act is retroactive to,and applies to permits issued under AS 38.05.850 on or after,July 27,1981. *Sec.5.This Act takes effect immediately under AS 01.10.070(c). SB 255 -4-SB0255A New Text Underlined [DELETED TEXT BRACKETED] Dennis McCrohan From:Brian Bjorkquist [Brian_Bjorkquist@law.state.ak.us]Sent:Monday,February 14,2000 10:36 AMTo:dmecrohan@aidea.alaska.net;klaufer@aidea.alaska.net;rsimmons@aidea.alaska.netSubject:Northern Intertie 1 got the following estimate for when DNR will issue its bestinterestfindingontheNorthernIntertiefromtheAAGhandlingthecase(Mary Lundquist). "The public comment period ends on March 3.|figure that itwilltakeatleastamonthforDNRtodigesteverything.So thefinalbestinterestfindingshouldbeissuedsometimeinApril.Mary.” Issuing of the finding starts the time for requesting reconsideration,and then appeal. FEB-10-2000 THU 09:51 AM F°'ATTORNEY GENERAL FAX NO.4 Fi le.P, NI. In the Supreme Court of the State of Alaska , pe 3 ba]ge ogNorthernAlaskaEnvironmentalCenter,a ©} Supreme Court No.S-09367 Order Appellant. v. State of Alaska,Dept of Natural Resources, Appellee.Date of Order:12/17/99 NeeNeNeNeNeNeeeee”Trial Court Case #4FA-99-01226CI Before:Matthews,Chief Justice,and Eastaugh,Fabe,Bryner,and Carpeneti,Justices. The issues presented on this expedited appeal are whether the Alaska Department of Natural Resources must (1)make a best interest finding under AS 38,05.035(e)and (2)consider alternative routes under AS 38.05.850(a)before granting a right-of-way permit for the clearing for and construction of the Northern Intertie,a second system of electric transmission lines between Healy and Fairbanks. In 1993 the legislature appropriated $43,2 million for the constructionof the Northem Intertie.In August 1996 Golden Valley Electric Association (Golden Valley)applied to the Department of Natural Resources (DNR)for a right-of way permit to build the Northern Intertie. In its permit application,Golden Valley sought a right-of-way 150 feet wide and 65 miles long,an arca of state land containing approximately 1,200 acres. On February 22,1999,DNR issued its Decision on Remand,granting Golden Valley a thirty-year right-of-way along the "Rex/South"route.DNR concluded that under AS 38.05.035(e)(6)(C)the right-of-way permit was specifically exempted from the AS 38.05.035(e)best interest finding requirement!because:(1)it was "a permit or other authorization revocable by the commissioner;"?and (2)it did not dispose of an interest in Jand.Northen Alaska Environmental Center (Northern Center)appeals DNR's decision. |Alaska Statute 38.05.035(e)provides:"Upona written finding that the interests ofthestatewillbebestserved,the director [of the Division of Lands]may,with the consent of the commissioner,approve contracts for the sale,lease,or other disposal of available land,resources, property,or interests in them.” 2 AS 38,05.035(e)(6)(C). Order86.wat 02 39JANOLUYFHL30T1429Nwes FEB-10-2000 THU 09:51 AM T°"ATTORNEY GENERAL FAX NO,4 P le 'nvi etal v,f Alaska t Page2 Because we determine that the Northern Intertie right-of-way permit constitutes a disposal of an interest in state land subject to the provisions of AS 38.05.035(e),the primary issuebeforeusinthisappealiswhetherthispermitisrevocable.While AS 38.05,035(c)generally requires a best interest finding for such disposals,subparagraph (6)(C)specifically excludes revocable permits from this requirement.Northern Center contends that this exclusion does not apply because the Northern Intertie permit is not revocable in a "real world"sense due to the magnitude and importance of the Northern Intertie project.We agree. The AS 38.05.035(e)(6)(C)exclusion for revocable permits applies only to permits that are functionally revocable.In this regard,we concur with the reasoning of the court in Wildemess Society v.Morton,479 F.2d 842,875 (D.C.Cir.1973)(en banc):The exception to the best interest finding requirement can only be invoked if the permit "is really temporary and revocable."When the use is really not temporary or occasional,but is functionally permanent,"the matter cannot be papered over merely by designating it as 'revocable'when it is not intended to be revocable and,in the nature of things,is not in fact revocable,"The fact that the Northern Intertie permit is revocable on its face is relevant but not determinative.DNR and Golden Valley conceded in oral argument that any revocation would likely apply only to a portion of the right-of-way,and as we observed in Swindel v.Kelly,499 P.2d 291,296 n.16 (Alaska 1972),in determining whether a permit is truly revocable,we may properly inquire not only into the terms of the permit itself but also into the "true intent of the agreed upon license." Therefore,we conclude that the Northern Intertie right-of-way permit is not functionally revocable and thus is subject to the best interest finding requirement of AS 38.05.035(e).The decision ofthe Commissioncrof DNR is REVERSED and the case REMANDED for a best interest finding.A full opinion on this matter will follow.' Entered at the direction of the court. ;Northern Center's arguments regarding the proper interpretation of AS38.05.850(a)and che term "the land”are without merit. Order86.wopt »03 ve)SF File From:Jonathan Rubini [RubiJ@FOSTER.com] 'Dennis McCrohan Sent:Wednesday,September 29,1999 5:52 PMTo:'Dennis McCrohan' hi.guess you and clive were getting too close to a successful 90-daytest...or is there some reasonable basis to gvea's actions to shut-down the coal supply?i appreciate the gvea assumed responsibility for coal management.have youheardofanygveaargumentsorclaimswhichtrytopass-off responsibilityforthesituationtoaidea?CL 3)C.ve odd not aqua 7hglenpassedonyourquestionsrereleaseofintertie$$.i have not heard 5 ' anything from gvea re the intertie NER Woke \Camendments.we earlier advised gvea that until the amendments were ale Q TPE Chan Mwacceptabletoaidea,and until they had deait with the fiber-optic issues,Cc rs)uck NItheagreementscontinueinfullforceandeffect.i believe that is still Derl Te GW 'the case.which means that ipg review and approval is required before aidea iy treviews,or funds,any request for reimbursement from grant monies.i've No \got a few questions:are there still phase |grant funds available forreimbursement?and,who called,and what did s/he say re the failure topresenttheinvoicesthrutheipgreviewprocess?give me a call when yougetachance.thx.Gj)Actwwn te GxeR xo.' Cc OPNSuite1800 .222S\WColumbiaATERWYNNEu?wens Fortland,OR 97201-6618 ATTORNEYS AT LAW 503-226-1191 Fax 503-226-0079 August 19,1999 Glen Price,Esq Foster Pepper Rubini &Reeves LLP 601 West Fifth Anchorage,AK 99501-2226 Re:Summary of Discussions and Proposed Changes to the Intertie Amendments as ProposedinyourMemodated7/8/99 to Jon Rubini Dear Glen: The following sums up our discussion last week and the planned changes to the proposed Amendments to the 1993 Alaska Intertie Agreement and related changes to the Intertie Grant and Intertie Grant Administration Agreements.I will follow the order used in your memo. General Comments.We do not think the Grant Transfer and Delegation Agreement needs to be amended,since the operating premise of that agreement is to transfer the administration of grantfundstoAIDEA.The other two agreements are the agreements that have operative obligations')Ao Lye,related to the disbursement of grant finds that must track the Participants Agreement.GTA Intertie Grant Agreement: 1.When the City of Fairbanks sold the FMUS assets,it disbanded FMUS and the City became the successor in interest of all FMUS obligations.Since FMUS was a wholly owned utility system of the City of Fairbanks,once FMUS assets were sold,the Citybecameitslogicalsuccessor. 2.We will revise the amendment as suggested. 3.Section 4.3 does not need to be amended,The amendment to the Participants Agreement makes it clear that GVEAis responsible for all remaining costs of the Healy-FairbanksIntertie.Section 3 of the amendment to the Participants Agreement makes it clear GVEAissolelyresponsibleforthoseremainingcosts. 49791/1/LGHN052273-0073 PORTLAND SEATTLE 9002)a?INIGNY Waddad YsaLsos 86TL 222 406 Xvd ZT:FT TNA 66/02/80 *ATERWYNNEw Lo0B Glen Price,Esq August 19,1999 Page 2 Grant Administration Agreement: 1.Already addressed above. 2.We will revise the amendment to include the proposed change. 3.We will revise the last sentence of Section ¢ee)as follows: The IPG and GVEA shail submit/a schedule for the Anchorage-Kenai Intertie and the Healy-Fairbanks Intertie,[a schedule for the use of grant funds,and any amendments or changes thereto ds necessary from time to time,to assist AIDEA in developing the Investment Strategy. 4.We will revise the amendment to include the proposed changes. $.We will revise the amendment to include the suggested changes to the second sentence of Section 4,03(b). 6.We will revise the second sentence and the fourth sentence of Section 4.03(d)to include "the proposed changes. 7.GVEA is solely responsible for the construction costs for the Healy-Fairbanks line under the Participants Agreement.All agreements related to its design and construction will be between GVEA and its contractors.A change in the indemnity language is inappropriate. Project Participants Agreement.| 'LL.No change to the Agreement is necessary. 2.See item 1 under Intertie Grant Agreement. 3.See item 7 above. 4.We will make the suggested change. 5.We will insert the omitted language as suggested. 6.We will make the revisions suggested. 49791/1/LGHN52273-0073 au 8%INIGNY Wadddd waLso4 86TL 222 LO6 XYvd ZT:FT Id 66/02/80 AYERWYNNEw? s00h) Glen Price,Esq August 19,1999 Page 3 7.We will make the revisions suggested. In order to move the amendments along J am enclosing revised copies for your review.I am also copying each Participant's attorney with a copy of your memo as well as the revised amendments.|understand that Jon Rubini and Dennis McCrohan will be reviewing this letter and the revised drafts per our discussion.We request that you provide any comments by August 27th so that we can proceed with the execution of the amendments next week. Sincerely ce:Rick Baldwin,HEA,Baldwin &Butler Roger Kemppel,ML&P,Seward,Kemppel Huffman &Ellis Don Edwards,CEA Dave Johnson,CEA,Heller Ehrman White &McAuliffe Steve Ellis,MEA,Delaney Wiles Hayes,et al Jamie Linxwiler,City of Fairbanks Mike Kelly,GVEA Steve Haagenson,GVEA Ron Saxton,Ater Wynne,LLP 4979 1/1/.GH052273-0073 a 3 INIGQQM Waddadd waLsod 0 ,CQPYFT AMENDMENT_NO,1 TO INTERTIE GRANT AGREEMENT THIS AMENDMENT NO.1 TO THE INTERTIE GRANT AGREEMENT dated the 26th of October 1993 ("Grant Agreement")is entered into this ____day of ,1999,by and among the Parties hereto,namely The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER, CHUGACH ELECTRIC ASSOCIATION,INC.("CEA"),The CITY OF FAIRBANKS,GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"), The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,the ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC.,on behalf of its members HOMER ELECTRIC ASSOCIATION,INC.,and MATANUSKA ELECTRIC ASSOCIATION,INC.,"Additional Parties"("Participating Utilities") and the STATE OF ALASKA,DEPARTMENT OF ADMINISTRATION AND THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY. The parties agree to amend the Intertie Grant Agreement as follows: 1. €ffective Date of Amendment.This Amendment shall become effective at 24:00 hours on the first date that it has been executed by all of the parties.: 2,Section 3 is replaced with the following section: Ownership.Pursuant to this and any other necessary agreements,the Participating Utilities shall hold undivided ownership interest in the Anchorage-Kenai Peninsula Xo intertie as tenants in common in the proportion set forth in Attachment 1 to this Agreement,such proportions being»\\based on the relationship of the Participants' +:"\1990/1991/1992 three-year average non-coincident peakademandtothesumoftheParticipatingUtilities' 1990/1991/1992 three-year average non-coincident system peak demands,unless the Participating Utilities agree to a different allocation of specific project capacity in the Participation Agreement.GVEA shall own 100%of the Healy-Fairbanks intertie.All intertie costs relating to the Anchorage-Kenai Peninsula intertie shall be borne by Page 1 -AMENDMENT NO.1 TO INTERTIE GRANT AGREEMENT 32846/11.GH/052273-0072 stoR a?INIGNY waddad WaLsoOg 86TL 222 4086 Xvd OT:FT Tua 68/02/80 intertie,subject to the availability of adequate financingaanandinaccordancewithPrudentUtilityPracticesand u construction agreements which contain provisions forGadequateoversighttomaintainqualityandcostcontrol, 6TOR . those Participating Utilities which executed the SSParticipationAgreement.All intertie costs relating to the Healy-Fairbanks intertie shall be borne by GVEA. 3.Section 4 is amended as follows: (a)In Section 4.1,strike "the design and construction costs of the Healy-Fairbanks transmission intertie that exceed $43,200,000 and".Add a second sentence "GVEA agrees to pay the design and construction costs of the Healy- Fairbanks transmission intertie that exceed $43,200,000. (b)Revise Section 4.2 as follows: 4.2 O&M Costs.The Participating Utilities agree to paytheoperationandmaintenance(O&M)costs for the - Anchorage-Kenai Peninsula intertie and GVEA agrees to pay the O&M costs for Healy-Fairbanks intertie 4.Section 5 is amended and replaced as follows:_ 5.Design and Construction Management.The Participating Utilities agree to contract with CEA to design and construct the Anchorage-Kenai Peninsula intertie andytGVEAagreestodesignandconstructtheHealy-Fairbanks and to ensure that total cost of the Anchorage-Kenai Peninsula intertie do not exceed amounts.budgeted by the Participant'Group and its Participating Utility members.| Consistent with the above conditions,it is agreed and understood that GVEA and CEA,as contractors,will be free to subcontract all or any portion of the work .associated with the design and construction of the above projects.If,for any reason CEA elects not to act as the Page 2 -AMENDMENT NQ.1 TO INTERTIE GRANT ; AGREEMENT 32846/1/LGH/05 2273-0072 49 INIGNY Wadddd YaLSsod S6TL cee 406 XVd LT:FT IYA 66/02/80 contractor of the Anchorage-Kenai Peninsula intertie,the Participating Utilities may contract for construction with one or more of the other Participating Utilities or Additional Parties. 5.Section 6 is amended as follows: (a)Replace "interties"with "Anchorage-Kenai Peninsula intertie”in the first line of the first paragraph. (b)Delete "GVEA and"in the second fine and the last line of the third paragraph. {c)Replace "interties"with "Anchorage-Kenai Peninsula intertie”in the first and third lines of the fourth paragraph. IN WITNESS WHEREOF,the parties have caused this Amendment No.1 to the Intertie Grant Agreement to be executed on the day and year first above written. MUNICIPAL LIGHT &POWER By: Title: CHUGACH ELECTRIC ASSOCIATION,INC. By: Title: Page 3 -AMENDMENT NO,1 TO INTERTIE GRANT . AGREEMENT 32846/1/LGH/052273-0072 ozo a 8 INIGNY Wadddd WaLsog 86TL 222 106 XVA LT:PT INd 66702760 ae COPY DRAFT AMENDMENT NO.1 TO THE 1993 ALASKA INTERTIE PROJECT PARTICIPANTS AGREEMENT THIS AMENDMENT NO,1 ("AMENDMENT")TO THE 1993 ALASKAINTERTIEPROJECTPARTICIPANTSAGREEMENT("Participants Agreement")isenteredintoonthis_'day of 1999,by and among the Partieshereto,namely the ALASKA ELECTRIC GENERATION &TRANSMISSIONCOOPERATIVE,INC.,The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPALLIGHT&POWER,CHUGACH ELECTRIC ASSOGIATION,INC.,The CITY OFFAIRBANKS,GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.,The CITY OFSEWARDd/b/a SEWARD ELECTRIC SYSTEM,each designated in theParticipantsAgreementasParticipantsandHOMERELECTRICASSOCIATION,INC.,and MATANUSKA ELECTRIC ASSOCIATION,INC,,each designatedintheParticipantsAgreementasanAdditionalParty. WITNESSETH: WHEREAS,this Amendment provides for the withdrawal of each of theParticipantsandAdditionalPartiesotherthanGoldenValleyElectricAssociation,Inc.("GVEA")from participation in the Healy-Fairbanks Segment | and for the assumption by GVEA of all obligations related thereto for the- completion of the Healy-Fairbanks Segment;and WHEREAS,GVEA agrees to provide to the other participating utilities access to the Healy-Fairbanks Segment for the purpose of assured access to 2resources,economy energy transactions and other similar uses to the extent capacity on the Healy-Fairbanks segment is available in excess of GVEA's own requirements under tariffs approved by the Alaska Public Utilities Commission. NOW THEREFORE,IN CONSIDERATION of the mutual covenants set forth herein,the parties agree to amend the Participants Agreement as follows: Section 1.Effective Date of Amendment.This Amendment shall become effective at 24:00 hours on the first date that it has been executed by all of the Parties. Page 1 -AMENDMENT NO.1 TO THE 1993 ALASKA INTERTIE PROJECT PARTICIPANTS AGREEMENT 32645/1/LGH/052273-0072 5600 a 8 INIGNY Widddd YSLsod 86TL 2e2 206 XVI CT:#T Ted 66/02/80 Section 2.Amendment of Agreement. (a)Section 2(b)is amended by replacing "Project"in the second line with "Anchorage-Kenai Peninsula Segment". (b)Section 3(a)of the Agreement is replaced by the following: (a)The Healy-Fairbanks Segment.The Healy-Fairbanks Segment of the Project shall consist of a 230-kV electric power transmission line between Healy,Alaska,and Fairbanks,Alaska.GVEA shall be the sole owner of the Healy-Fairbanks Segment and shall be solely responsible for the routing and design of such Segment. (c)The third sentence of Section 4(a)of the Agreement is amended as follows: Unless otherwise changed in accordance with this Agreement, GVEA's Participant Share of the Healy-Fairbanks Segment shall be 100%and each Participant's Share of the Anchorage-Kenai Peninsula Segment shall initially be as follows: (d)Section 4(b)(3)of the Agreement is amended as follows: (1)Paragraph (A)is replaced with the following: (A)Generally.Each Participant shall be entitled to withdraw from participation in the Anchorage-Kenai Peninsula Segment,but in each case,only in accordance with the provisions of this Section 4(b)(3). (2)Paragraph (C)is amended by deleting the second sentence. (3)|Paragraph (D)is amended by deleting subparagraph (i). (4)Paragraph (E)is deleted. Page 2 -AMENDMENT NO.1 TO THE 1993 ALASKAINTERTIE _.PROJECT PARTICIPANTS AGREEMENT .32845/1/LGH/052273-0072 oto a 8 INIGNY Widdad YaLSOA S6TL 22 L06 XVd CT:FT Id 66/02/80 (e)Section 4(b)(4)of the Agreement is amended by inserting "in the Anchorage-Kenai Peninsula Segment”after "Participants Share”in the third and fourth lines. (f)Section 5(a)of the Agreement is replaced with the following: (a)Qwnership As Tenants in Common.The Participants shall be owners of the Anchorage-Kenai Peninsula Segment (including all personal and real property interests thereof)as tenants in common,with undivided interests and obligations with respect to all Anchorage-Kenai Peninsula assets and liabilities in the proportionate amounts of their respective Participants' Shares in such Segment.Except as otherwise provided hereunder,the Participants shall share in the Anchorage- Kenai Peninsula Segment's benefits,burdens and risks in proportion to their respective Participant's Shares in such Segment,notwithstanding that the IPG may select one or more individual Participants to manage,design,build, finance,operate and/or maintain such Segment or portions thereof on behalf of the Participants collectively. (g)Section 5(d)(3)is replaced with the following: (3)Terms and conditions governing GVEA facilities.GVEA shall provide the other Participants access to capacity in the Healy-Fairbanks Segment and its transmission system for the purpose of assured access to resources,economy energy transactions and other similar uses under rates and tariffs filed with and approved by the Alaska Public Utility Commission.(Exhibit D(2)is deleted from the Agreement) (h)Sections 6(a)(1)and 6(a)(2)are amended by replacing "Project"in the third and second lines,respectively,with "Anchorage-Kenai Peninsula Segment”. Page3-|AMENDMENT NO.1 TO THE 1993 ALASKA INTERTIEPROJECTPARTICIPANTSAGREEMENT 32845/1/LGH/052273-0072 TIO R®a 8 INIGNY Waddad YaLsod 86TL 222 L406 XYvd PT:PT Tad 66/02/80 (i)Section 6{e)(3}is amended as follows: (1)Insert "related to Anchorage-Kenai Peninsula Segment"after "Section 6(e)(3)”in the first and fourth lines. (2)Add anew Section 6(e)(6)as follows: (6)GVEA shall be solely responsible for all matters related to the financing,design,construction,operation and maintenance of the Healy-Fairbanks Segment,as well as accounting and auditing procedures related to such Segment in accordance with arrangements satisfactory to the Alaska Industrial Development and Export Authority. {i}Sections 6(h)is amended by: (1)replacing "each Project Segment"in the first fine of paragraph (1)with "the Anchorage-Kenai Peninsula Segment";and " . (2)replacing "each Segment of the Project"in the second and third fines of paragraph (2)with Anchorage-Kenai Peninsula Segment and "Project"in the fifth and sixth lines of paragraph (2)with "Anchorage-Kenai Peninsula Segment". (kK)Section 7(a)is amended as follows: (a)|Chugach shall serve as the Construction Manager of the Anchorage-Kenai Peninsula Segment unless Chugach elects to withdraw or is removed pursuant to Section 7(j).Chugach shall be responsible for the preparation of the design of such Segment for approval by the !PG and shall be responsible for the constructionof such Segment utilizing Prudent Utility Practices and subject to the construction budget approved by the IPG.Chugach shall be responsible for selecting and supervising any design engineering firms or subcontractors Page 4 -AMENDMENT NO.1 TO THE 1993 ALASKA INTERTIE .PROJECT PARTICIPANTS AGREEMENT 32845/1/LGH/052273-0072 cto ua 9 INIGIM Widddd WALSod 86TL 222 406 YVd FI:PT IMd 66/02/80 necessary for the successful completion of the Anchorage- Kenat Peninsula Segment. (I)Section 7(b)is amended by replacing "Each Construction Manager" with "Chugach or a replacement Construction Manager"in the first and sixth lines. (m)Section 7{c),7(d),7{e),7(f),7(g),7(h),7(i),and 7(j)are amended as follows: (1)Replace "Each Construction Manager"with "Chugach or a replacement Construction Manager”in the first and ninth lines of the first paragraph. (2)Delete "Healy-Fairbanks Segment or"in the third line of the first paragraph. (3)Replace "The Construction Managers"and "each Construction Manager"and "that Construction Manager” with "Chugach or a replacement Construction Manager"inthesecond,third and fourth paragraphs of Section 7(c)and in Sections 7(d),7(e),7(f),7(g),7(h),7(i)and 7(j). (n)Section 8(a)is amended by replacing "each Intertie Grant Account" with "the Intertie Grant Account for the Anchorage-Kenai Peninsula Segment”and adding the following sentence to the initial paragraph: The following provisions only apply to the disbursement of Grant Funds for the Anchorage-Kenai Peninsula Segment. (o)|Section 8(b)is amended by replacing "Project”with "Anchorage- Kenai Peninsula Segment"in the initial paragraph and subparagraphs (1)and (5). (p)Section 8(c)is amended by replacing "each Segment of the Project"with "the Anchorage-Kenai Peninsula Segment”in the Page 5 -AMENDMENT NO.1 TO THE 1993 ALASKA INTERTIE °- PROJECT PARTICIPANTS AGREEMENT 32845/1/.GH/052273-0072 £To a)a 8 INIGNY Wdddd WaLsoOd 86TL e2¢206 XVd FIShT INd 66/02/80 second and third lines and replacing "Project"with ""Anchorage- Kenai Peninsula Segment"in the fifth line. (q)Section 8(d)is amended by replacing "Project”with ""Anchorage- Kenai Peninsula Segment"in the first line. (r)Section 9(a)is amended by striking "and shall be removable only for reasonable cause,after reasonable notice and opportunity to cure"in the second and third lines. (s)Section 9(c)is amended by replacing "Project"with "Anchorage- Kenai Peninsula Segment"in the second and third lines. (t)Section 10(b)is amended by replacing paragraph (1)with the following new paragraph: (1)The [PG shall adopt in each Operating Year (and revise as necessary or prudent during such Operating Year)in accordance with its rules,an Operating Budget of Annual Project Costs for the Anchorage-Kenai Peninsula Segment for that operating Year,whichbudgetshallbeinanamountestimatedbytheIPGtobesufficient to pay all Annual Project Costs.Such budget of Annual Project Costs shall be broken down into categories approved by the [PG.No less than 120 days prior to the beginning of each Operating Year Chugach''or its replacement as O&M Manager shall prepare and submit to the IPG an annual budget of costs,which budget (or a replacement budget)the IPG shall approve or disapprove no later than sixty (60)days prior to the beginning of said Operating Year; provided,that the annual budget shall include costs attributable to overhead or administrative and general costs of the O&M Manager, ahy Participant,or any agency or political subdivision of the State, only to the extent that said costs are approved by the IPG before they are incurred,are reasonably incurred for labor directly employed by that O&M Manger in performance of its duties under the O&M Agreement,and would not have been incurred but for the activities undertaken as O&M Manager. Page 6 -AMENDMENT NO.1 TO THE 1993 ALASKA INTERTIE a .PROJECT PARTICIPANTS AGREEMENT 32845/1/.GH/052273-0072 PTo®U8 INIGN Waddad WaLsos 86TL 2c2 L06 XVd ST:PT INd 66/02/80 {u)Section 10(c)is amended by inserting "for the Anchorage-Kenai Peninsula Segment”after "Annual Project Costs"in the second line of paragraph (1)and the first line of paragraph (2). (v)Section 10(d)is amended as follows: (1)Replace "appropriate Project Segment”and "each Project Segment”with "the Anchorage-Kenai Peninsula Segment"in the second and sixth fines of paragraph (1). (2)Replace "each Project Segment"in the first line of the initial paragraph and "Project”in the first line of subparagraph (A) with "the Anchorage-Kenai Peninsula Segment". (3)Replace "each Segment"with "the Anchorage-Kenai Peninsula Segment"in the first line of paragraph (4)and delete subparagraph (A)(ii). (w)Section 10(e)}{1)is amended by replacing "each Project Segment" in the third line with "the Anchorage-Kenai Peninsula Segment" (x)Section 11(a)is amended by replacing "each Project Segment"in the second line and "Project Segment"in the eighth line,the tenth and eleventh lines with "the Anchorage-Kenai Peninsula Segment" and deleting ";respectively,Healy and Fairbanks,and"in the fifth and sixth fines. (y)Section 11(b)is amended by replacing ",on either Segment,the Project”in the first line and the fifth line with "the Anchorage- Kenai Peninsula Segment"and replacing "relevant Project Segment"in the eighth line with "the Anchorage-Kenai Peninsula Segment”. (z)Section 11(c)is amended as follows: (1)Replace "either Project Segment"in the first line of paragraph(1)and "the Project Segment"in the second line of Page7-|AMENDMENT NO.1 TO THE 1993 ALASKA INTERTIEPROJECTPARTICIPANTSAGREEMENT-32845/1/LGH/052273-0072 sToR a 3 INIGNY Wddad ALsod S6TL ecg LO6 XVA ST:FT IWd 66/02/80 paragraph (2)with "the Anchorage-Kenai Peninsula Segment". (2)Replace "Project"with "Anchorage-Kenai Peninsula Segment"in the first line,the fourth line and the sixth line of paragraph (3)and replace "either"with "such"in the second line of paragraph (3). (aa)Section 13(i)and 13({j)are amended by replacing "a Project Segment"with "the Anchorage-Kenai Peninsula Segment". (bb)Section 13(k)is amended by striking "Golden Valley Electric Association,Inc.shall be Construction Manager of the Healy- Fairbanks Segment"in the third and fourth lines,replacing "either" in the sixth line with "such Construction Manager"and deleting in the seventh line ",may be referred to collectively as Construction Managers". (cc)Section 13(0)is amended by replacing "Project"with "Anchorage- Kenai Peninsula Segment"in the first line. - (dd)Section 13(s)is amended by: (I)striking "the Healy-Fairbanks {ntertie Account and"in the first line; (li)striking "or both"in the second line, (lil)replacing "2.02"with 2.01"in the second line. (ee)Section 13(u)is amended by striking "the $43,200,000 appropriated by section 1 of ch.29,SLA 1993,for payment as a grant under AS 37.05.316 for construction of the Healy-Fairbanks Segment and"in lines one through three. (ff)Section 13(aa)is amended by replacing "a Project Segment or both Segments”with "the Anchorage-Kenai Peninsula Segment”in thesecondlineandreplacing"each"with "such"in the fourth line. Page &-AMENDMENT NO.1 TO THE 1993 ALASKA INTERTIE PROJECT PARTICIPANTS AGREEMENT '|oe.),82845/1.GH/052273-0072 sTo®a?INIGY Wddddd YALsSod S6TL 22 L406 XYvd OT'PT [Yd 66/02/80 ZT0R) (gg)Section 13(bb)is amended by replacing "Project or a Project Segment”with "Anchorage-Kenai Peninsula Segment"in the third and fifth line.. (hh)Section 13(cc)is amended by replacing "Project or Project Segment"with "Anchorage-Kenai Peninsula Segment"in the third and fourth lines. Section 3.Obligations of the Participants Related to the Design, Construction,Operation and Maintenance of the Healy-Fairbanks Segment. Golden Valley shall be solely responsible for all past,present and future funding of the design,construction,operation and maintenance of the Healy-Fairbanks Segment to the extent not provided the Healy-Fairbanks Intertie Account established in the Grant Administration Agreement. Section 4.Consent to Ratification of Assignments.The assignment of the City of Fairbanks d/b/a Fairbanks Municipal Utilities System interest in the 1993 Alaska Intertie Project Participants Agreement and the Alaska Intertie Agreement,dated December 23,1985 and its Participant's Share under each such Agreement to Golden Valley Electric Association,Inc.is hereby consentedtoandratifiedbythepartieshereto.IN WITNESS WHEREOF,the parties have caused this Amendment No.1 to the Participants Agreement to be executed on the day and year first abovewritten. ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE,INC. By: Title: Page 9 -AMENDMENT NO.1 TO THE 1993 ALASKA INTERT IEPROJECTPARTICIPANTSAGREEMENT 92846/14.GH/052273-0072 a 9 INIGQY Wadddd WaLso0d 86TL e722 106 XVd OT:FT IMd 66/02/80 Northern Intertie Project Page 1 of 2 Northern Intertie Project [Northe rn inte rtie Project Description E The Northern Intertie Project has two basic elements:the construction of a second transmission line between Healy and Fairbanks and the addition of a battery energy storage system (BESS)that will supply 40 megawatts (MW)of reserve capacity to the Railbelt electrical system for 20 se "#8 minutes. The Bureau of Land Management (BLM)is the lead federal agency for the environmental review for the Northern Intertie Project. Intertie is Needed Today Plans for this project started in the mid-1980s.The Northern Intertie is critical to the delivery of increased energy from GVEA's Healy plants and the Anchorage area.Golden Valley is always looking for the least cost option for the supply of our electrical energy.Coal and gas-fired generation from Healy and Anchorage has historically been more economical than oil-fired units located near Fairbanks.The second line will reduce transmission losses when delivering power from Healy and Anchorage.The battery will allow for increased power to Fairbanks and will reduce the effects of power supply outages. Project Cost and Funding Sources A legislative appropriation from the Railbelt Energy Fund was designated to cover 50%of the project cost.The remainder was to be funded by the participating Railbelt utilities.The State grant has been invested and has now grown with interest to approximately $50 million. Project Benefits The Northern Intertie will benefit GVEA members,as well as electric utility members along the Railbelt from Homerto Fairbanks.They will receive a benefit through distribution of profits from power sales to GVEA as well as enhanced ability to transmit emergency power from Fairbanks to the Anchorage areas. Summery of Benefits The project will ensure your co-op can... Meet increasing demands for power Enhance reliability Increase access to more economical energy Reduce transmission losses Share energy reserves Save $24.5 million on needed reconstruction of the existing transmission line #Reduce the number of outages e Provide low cost energy storage -BESS e Supply non-combustion "spinning reserves" Battery Energy Storage System (BESS) Construction of this 40 MW will also increase reliability.The BESS (a http://www.gvea.com/Projects/intertie.htm 10/26/99 Northern Intertie Project Page 2 of 2 mega-battery)will instantaneously provide 40 MW of emergency backup power for 20 minutes.BESS benefits: Capacity deferral Spinning reserves Reduced air emissions Improved reliability Power quality Reduced losses Lower risks from fuel price changes Route Selection In its final record of decision,announced in September 1998,BLM selected the Rex/South route for the Northern Intertie Project. Current Project Status The State issued an Early Entry Permit in March 1999 allowing GVEA to start immediate construction on State lands and geotechnical work has begun.The next step is to begin locating the centerline,structures and right-of-way limits.Final design and permitting will need to be completed to allow for material ordering and ultimately construction. http://www.gvea.com/Projects/intertie.htm 10/26/99 JUL 29-1999 17:13 FPR&R 907 222 7197 P.@12ww2wowporereroeesaNweweoe- ° A Limtren Geasttery Comeany FAX COV:BsAPLEASE DELIVER THESE PAGES TO: NAME:Kandy Simnm onsraxe,AIDE pate:1794-49 rrom:.Jet Ruouw ume:© Total Number Of Pages,Including This Cover Sheet:T '°t wast FittH Saize 500 ANCHORAGE MESSAGE:Alaska 99501-2226 Telephene (907)222-7100 Faceimile (997)222-7198 Websize WWW.fOsTER.caom Hard Copy to Follow By:Expedited Mail :Regular Mail Courier No Documents Will Follow This Transmission If You Do Not Receive All Of The Pages Or Have Any Questions Regarding This v0 ANCHORAGETransmission,Please Cal](907)222-7100.Alatke Bettevus Waskingtys PoartannTHEINFORMATIONCONTAINEDINTHISCOMMUNICATIONISCONFIDENTIAL,MAY BE ATTORNEY-CLIENT =OregonPRIVILEGED,MAY CONSTITUTE INSIDE INFORMATION OR WORK PRODUCT,AND IS INTENDED ONLY FOR / THE USE OF THE ADDRESSEE.UNAUTHORIZED USE,DISCLOSURE OR COPING IS STRICTLY PROHIBITED AND $SeartieMAYBEUNLAWFUL.IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR,PLEASE IMMEDIATELY Wasbingsen NOTIFYUS AT THE NUMBER LISTED ABOVE. CC.CVH JUL -29-1999 17:13 FPR&R FOSTER PEPPER RUBINI @ REEVES A LIMITER LIABILITY COMPANY ip July 29,1999 Ron Saxton,Esq. Ater Wynne LLP 222 8.W.Columbia Suite 1800 Portland,OR 97201-6618 Dear Ron: I write with respect to the proposed amendments to the Northem Intertic Agreements and your letter to me of June 15,1999. As I indicated in my recent telephone message,AIDEA is not prepared at this time to approve the proposed amendments in their current form. T enclose a memorandum from my colleague,Glen Price,which raises several technical issues and questions regarding the proposed amendments.PleasefeelfreetocontactGlendirectlytoaddressthoseissues. On a broader policy basis,AIDEA believes it necessary and appropriate to receive a direct acknowledgement and waiver from each of the departing utilities regarding the possible economic ramifications were the State to authorize inclusion of fiber-optic lines on the Northern Intertie.One option the utilities may wish to consider is the inclusion of a contractual provision to the operative agreements,such as: In entering into these amendments,the Participating Utilities (excluding GVEA)acknowledge and agree that they are knowingly and voluntarily waiving any and all use rights and economic benefits they may have,now or in the future,if any,related to the inclusion of any fiber-optic lines in the WHealy-Fairbanks Intertic.The Participating Utilities (including GVEA)further acknowledge and agree that nothing herein shall be interpreted as an agreement on the part of AIDEA as to whether the grant provisions or any agreements between the parties permits the inclusion of fiber-optic lines in either the Healy-Fairbanks Intertie or the Anchorage-Kenai Intertie. 987 222 7197 P.@2 LLC Direct Phone (907)222-7113 Direct Facaimile (907)222-7197 E-Mail RUBII@foster.com 601 Wesr FretH AvENuE Suite 500 ANCHORAGE Alaska 99501-2226 Telephone (907)222-7100 Fatsimite (9607)222-7198 Website WWW.FOSTER.COM ANCHORAGE Alaska Reainvue Wathingron PORTLAND OCregen SEATTLE Warhington JUL 29-1999 17:14 FPR&R 987 222 7197 P.a3 Ron Saxton,Esq. July 29,1999 Page 2 If the contract amendment technique is not desirable,AIDEA will entertain other ways which those utilities electing to forego further participation in the Northern Intertie may acknowledge their waiver of prospective rights to participate in any benefits associated with the possible fiber- optic enhancement. Would you also offer AIDEAa brief description of the Project status.AIDEA isunderthegeneralimpressionthatGVEAismovingforwardwithcertaindevelopmentactivities pending resolution of the ongoing regulatory appeals.While GVEA certainly enjoys the discretion to expend any of its own resources to the extent permitted by law,use of grant funds is restricted by the Phase-limitations established under Section 4.02 of the Grant Administration Agreement.As you know,GVEA has not solicited AIDEA approval that the prerequisite to Phase 2 have been satisfied,so that any expenditures for work beyond the scope of approved Phase 1 activities and funding must be undertaken at GVEA's sole risk. Let me also comment briefly on your recent telephone message,in particular the suggestion that Mike Kelly may feel it necessary to discuss his concerns regarding the scope and timing of AIDEA's review with the Fairbanks Legislative delegation.AIDEA welcomes those discussions.Randy Simmons believes that the broad issues raised by the proposed inclusion of fiber-optic lines on the Northem Intertie,and the allocation of associated economic benefits, merit further consideration and guidance by both the Administration and the Alaska Legislature. Let's talk once you review this letter.As Glen's memo reflects,he also intends to sit down with Dennis McCrohan once he has an opportunity to address his various issues with you. Sincerely. ec:DD.Randy Simmons Executive Director TAAIDEA(99-GENICORRESPONDENCEISAXTON LTR.7.28.99_DOC JUL-29-1999 17:14 FPR&R 9a?222 7197 P.@4 Fosti.PEPPER RUBINI @ REEVES LLC ATTORNEYS AT Law Memorandum To:Jon Rubini From:Glen Price Date:July 8,1999 Subject:Comments on Proposed Amendments to Intertie Agreements This memorandum provides you with my comments on the proposed amendments to the Northern Intertie Agreements.As you can see,many of the comments are minor and technical in nature,or are in the nature of questions.I would also suggest that the proposed amendments be reviewed by the appropriate technical staff person at AIDEA,as a supplement to my legal review. General Comments It is my understanding that no amendments are being proposed to the Grant Transfer and Delegation Agreement,Northern Intertie System Apreement,or the Construction Management Agreement,We should confirm this with Ron Saxton.The utilities may want to considerclarifyinglanguagetotheGrantTransferandDelegationAgreementtoprovidethatthegrant funds now involve the participating utilities with respect to the southern intertie only,and GVEA with respect to the northern intertie. Intertie Grant Apreement 1.The original Intertie Grant Agreement reflected the "Fairbanks Municipal UtilitiesSystem”as a party.The amendments reflect the Fairbanks party as the "Municipality of Fairbanks,”It is my understanding that FMUS was subsequently sold.We should confirm that the Municipality is the correct successor to FMUS's interest under the Intertie Grant Agreement. 2,The word "transmission”needs to be inserted after "Fairbanks”in the second sentencetobeaddedto Section 4.1. 3.Does the last paragraph in the existing Section 4.3 require modification to provide that the Participating utilities obligations apply only to the Anchorage-Kenai Peninsula intertie intheproportionsetforthintheAttachment1,and that GVEAis to bear all remainingcostsrelated to the Healy-Fairbanks intertie? 601 West §*Avenue ©#500 ©Anchorage,Alasbz 99501-2226(907)222-7100 ¢Fax (907)222-7198 JUL 29-1999 17:15 FPR&R 987 222 7197 P.@ Grant Administration Agreement I.See comment #1 above under Intertie Grant Agreement regarding FMUS as the proper party. fol 2.The first part of the third sentence in the existing Section 1 should be modified as'ollows: AIDEA hereby accepts such appointment and agrees to act as custodian and administrator of the Intertie Grants for the benefit of the Participating Utilities with respect to the grant funds applicable to the Anchorage-Kenai Intertie,and for the benefit of GVEA with respect to the grant funds applicable to the Healy-Fairbanks Intertie,.... 3.Should the last sentence in the existing Section 2.03(b)be modified to provide that the IPG will submit the draw schedule and applicable amendments only for the Anchorage- Kenai Intertie,and GVEA will be the submitting party for the Healy-Fairbanks Intertie? 4,The references in the proposed amendments to the "Anchorage-Kenai Peninsula intertie”and the "Healy-Fairbanks intertie”should be changed to "Anchorage-Kenai Intertie” and "Healy-Fairbanks Intertie”to reflect the correctly defined terms in the original version of the Grant Administration Agreement. 5.The proposed amendment language to the second sentence of Section 4.03(b) should be modified to read as follows: Each invoice shall be referenced to a specific phase of the Anchorage-Kenai Intertie to allow AIDEA to properly charge the invoice against the appropriate project phase and to determine if payment is authorized pursuant to the Intertie Appropriation or the appropriate disbursement schedule set forth in section 4.02. The ability of AIDEA to determine if payment is authorized pursuant to the Intertie Appropriation and the disbursement schedule was included in the original section language but not in the amendment language. 'oe erred ewbabtinheinbes ane Chon ares e,AE ERC ekD ectaneneins Buen sweaseby Feat GasiadtenFevatesm:eSearee ee SaRESTapicaeaealtcanbe irailpta mi ieanadinal wrstas .JUL-29-1999 17:15 FPR&R 987?222 7197 P.86 is authorized pursuant to the Intertie Appropriation or the appropriate disbursement schedule set forth in section 4.02. See commentin #5 above.In addition,the fourth sentence in the new proposed Section 4.03(d)should be modified to read as follows,to mirror the existing languagein Section 4.03(c): If payment of an invoice is authorized in accordance with the foregoing,AIDEA shall pay such invoice within fifteen (15)days of receipt of the invoice. 7.The utilities should consider whether they want the indemnity languagein Section 6.02 modified to segregate the obligation by applicable intertie,Such a change would,however, have to preserve AIDEA's rights against all utilities for pre-amendment claims (irrespective of which intertie the claims arises out of). Project Participants Agreement .1.We should emphasize to the utilities that AIDEA's review and approval of the amendments to the Project Participants Agreement does not diminish or mitigate in any way, AIDEA's review and approval authority under the various collateral agreements. 2.See comment #1 above under Intertie Grant Agreement regarding FMUS as the proper party. 3.The proposed new Section 6(¢)(6)will need to be modified to address the outcome of the discussions related to comment #7 above under the Grant Administration Agreement section. 4,The reference to Section "7(J)”in the proposed amendment language to Section 7(a)should be revised to "7(j).” 3.It is not clear why the language "any Participant,or any agency or political subdivision of the State”was dropped in the amendment language to Section 10(b). 6.The amendment to Section 13(s)should be revised as follows: (a)Strike "the Healy-Fairbanks Intertie Account or”in the first line. _(0)Strike ",or both”in the second line.: (c)Replace "2.02”with "2.01”in the second line. 7.The proposed amendment #3 on page 9 should be clarified as follows: 3 601 Fest 5*Avenue ¢#500 ©Anchorage,Alaska 99501-2226 (907)222-7100 e Fax (907)222-7198 » JUL-29-1999 17:16 =PR&R 987 222 7197 P.a7 (a)The words "in excess of funds provided”should be replaced with "to the extent not funded,as approved by AIDEA.” (b)The words "Grant Account”should be replaced with "Healy-Fairbanks Intertie Account.” GP:mjn 4 601 West 5"Avenue @ #500 ©Anchorage,Alaska 99501-2226(907)222-7100 ©Fax (907)222-7198 TOTAL P.@? Dennis McCrohan From:Dennis McCrohan Sent:Thursday,July 01,1999 8:47 AMTo:Keith Laufer;Brian BJorkquist;Jon RubiniSubject:Northern Intertie We should consider an "at your own risk"letter to GVEA on proceeding with procurement for the Northern Intertie.The reasons are: 1.GVEA has not completed the obligations of the agreements to proceed into procurement with the Grant money. 2.GVEA is very close to their Phase 1 cap and also restricts the spending of Grant money for procurement. 3.The materials which GVEA plans to purchase initially are to significant degree dependent on the line routing.Thecabledesignstrength,the tower design,and foundation appurtenances are a function of routing. Dennis Dennis McCrohan From:Dennis McCrohan Sent:Wednesday,June 30,1999 3:47 PMTo:Brian BJorkquistSubject:RE:Northern Intertie Update Brian The tower design is specific to different soil conditions,routing,and other location specifics.It is likely that the use of theprocureditemsforoneroutewouldbelimitedforanewroute. Dennis -----Original Message----- From:Brian BJorkquistSent:Wednesday,June 30,1999 10:00 AM To:Keith Laufer Subject:Northern Intertie Update |spoke to Mary Lundquist (Fbks AAG)about the Northern Intertie case,and learned the following: 1.Nothing much has happenedin the litigation yet;but significant litigation activity is anticipated for the rest of the summer. 2.GVEA is authorized to start some construction related activities (including procurement of long lead items).DNRissuedGVEAanearlyentryauthorizationwhichpermitsGVEAtosurvey,do some early clearing,etc.TheprocurementofitemsisnotrestrictedbyDNR,but rather is done at GVEA's risk.DNR is just authorizing use of landwithinaright-of-way;risk that the ROW location may change and risk of construction is on GVEA.Also,DNR is awarethatGVEAisprocuringlongleaditems. a.While DNR has authorized early entry (and has no objection to early procurement),a separate question iswhetherAIDEAmightrestrictprocurementasadministratorofgrantmonies.It appears that procurement of certainlongleaditemsmayposenothreat.At face value,the Northern Center's litigation only challenges where the intertiemaybebuilt,not whether it may be built.If the ROW location were changed,the power lines,poles,etc.beingprocuredwouldstillbeused,only in a different location.The only apparent problem would be if a changed locationshortenedthelineoralteredrequirementssothatexcessmaterialswereacquired.That risk should be on GVEA. 3 The Northern Center for the Environment has asserted that they will soon seek a preliminary injunction to restrict or prohibit early entry activities (while not stated,this would likely including survey,clearing,and maybe procurementactivities).Anticipated activity on a preliminary injunction motion may delay the briefing schedule on the appeal (see below). 4.The briefing schedule is as follows: a.Northern Center's opening brief is due July 6.They have requested a two week extension. b.The State's (DNR)and GVEA's briefs will be due 30 days afterward. c.The State and GVEA will seek expedited consideration of this appeal.The case was assigned to JudgeBeistline,which bodes well for that goal (J.Beistline tends to be more willing to expedite matters than certain otherFbks.judges).Mary hopes for a decision by November,but that may be optimistic. d.Mary anticipates that GVEA would take the lead in defending any preliminary injunction motion,as GVEAwillsuffertheharm;Mary is not certain whether DNR will have any role defending against a preliminary injunctionmotion.Mary will defend DNR's decision to issue the current proposed ROW,and GVEA will add whatever theychoosetoadd.There is no plan to divide or share that briefing responsibility. !will let you knowif |hear anything more. 5/26/99 DRAFT Northern Intertie Status Golden Valley Electric Association (GVEA) Benefits 1.The Northern Intertie provides three main benefits.These are: Improves the reliability of energy transmission between Healy and Fairbanks. Eliminates the current energy transfer restriction between Healy and Fairbanks. Enhances GVEA's diversified use of coal fired energy from the Healy Clean Coal Project,gas fired energy from the Anchorage bowl utilities,and hydroelectric energy from AEA's Bradley Power. Status and Unresolved Issues 1.The Project Participants Agreement allowed any participant in the Northern Intertie, excluding GVEA,to withdraw from the project up to the "decision date.”The decision date occurred when Chugach Electric Association (CEA)designated the final route for the Southern Intertie.The Enstar route for the Southern Intertie has been selected by CEA.GVEA has declared the decision date to be November 1,1998. All participants have elected to withdraw,leaving GVEA with 100%ownership of the Northern Intertie. GVEA wants to proceed immediately with procurement when the Record of Decision (ROD)is issued and any litigation resolved.Currently,the Department of Natural of Resources (DNR)has ruled in favor of the project but the ruling has been appealed by environmental groups,delaying the issuance of the ROD.While it is likely that DNR will not reverse their previous action,it is quite possible that environmental litigation will follow. GVEA must submit to AIDEA for approval a budget for procurement and construction. GVEA must demonstrate to AIDEA the ability to raise all amounts necessary to complete the project.No funds for these purposes may be disbursed until AIDEA approval is obtained.GVEA has not submitted a budget to AIDEA. GVEA must have a legal opinion from their respective counsel that GVEA has the requisite intent and legal capacity to bear 100%share of the project costs.No action to our knowledge has been taken by GVEA to accomplish this requirement. To the extent required,Alaska Public Utilities Commission (APUC)/(Regulatory Commission of Alaska (ROC))approval is required prior to the expenditure of the grant monies.AIDEA requested that GVEA provide an opinion from their counsel regarding any obligations arising from the Agreements,which require APUC/ROC approval. GVEA has applied to the APUC/ROC for approval. Page 1 of 2 Costs and Schedule cc: The budgeted cost is approximately $73,000,000.The initial source of funds for the project is a $43.2M State grant provided by 1993 legislation and funding from GVEA. AIDEA is authorized to provide bond financing up to $60,000,000.No finance plan has been submitted by GVEA to AIDEA. GVEA expenditures to date are approximately $4,600,000.GVEA expenditures,prior to procurement and construction,are capped by the Agreements to $6,640,000.Extensive litigation will cause GVEA to exceed the ceiling. Keith A.Laufer,Financial and Legal Affairs Manager Page 2 of 2 C P.@2 |e Direct Phone (907)222.7113 Direct Facsimite (907)232-7197 E-Mail RUBiJS@loater.com MAY-26-1999 11:@9 FPR&R 987 222 7197 Foster PEppER RuUBINI @ REEVES LLC A LIMITEYW Lianetiry COMPany dp May26,1999 VIA FAX (503)226-0079 and U.S.MATL RonSaxton,Esq.Ater Wynne LLP Suite 1800 GC. 222 5.W.Columbia Portland,OR 97201-6618 Dear Ron: This letter follows my recent telephone message in response to your inquiry regarding the proposed amendment of the Northern Intertie Agreements. My colleague,Glen Price,should complete his technical review of the proposed contract amendments in the near future.I will be able to offer our technical comments in early June,once Randy Simmons returns from vacation. The collateral issue I referenced in the telephone message concerns the effect of the proposed revisions on the possible inclusion of fiber-optic lines on the Northern Intertie.As you know,AIDEA has not resolved whether the grant permits the inclusion of fiber-optic lines,and if so,how the economic benefits would be fairly allocated.That said,fiber-optic discussions raise the issue of the extent towhichtheotherparticipatingutilitiesareawareofthepotential'economicramificationsoftheenhancement,so that their election to not participate in the Northern Intertie constitutes a knowing waiver of potential use or economic benefits. Do you have any information or thoughts on the extent to which the participating utilities have considered the financial or use privileges associated with the potential fiber-optic enhancement? Sincerely, feje \WANCEXCINCLIBNTS\AIDEAS9-GEN\CORRESPONDENCEISAXTON LEITER NORTHERN INTERTIE_DOC CV rH a 601 Wesr Frere AVENUE Sufre $00 ANCHORAGE Alaska 99501-2226 Telephane (907)222-7100 Facsimile (907)222-7198 Website WWW.FOSTER.COM ANCHORAGE Alaska BELLEVUE Washingsan PORTLANE Ovegan SEATTLE Washington TOTAL P.G2 AVK-¢2Y-¥Y IMU 14:4z AGU FALKBANKS FAX NO.4512985 P,02 +e «AUR-27-99 TUE 08:16 AM 1 JOMMISSIONER'S OFC FAX NO.907 46 38 SPEARSodbaaete JuAeRsKy wy how Offices Sreten 4100 1420 Feyth AvenueSeucstte,WA 9£tOl (40H)2237000 (40D 229-7707 P,02 File IN THE SUPERIOR COURT FOR THE STATE OF ALASKA FIRST JUDICIAL DISTRICT AT JUNEAU NORTHERN ALASKA ENVIRONMENTAL CENTER and SIERRA CLUB, Appellants Case No. Y.NOTICB OF Midtiler's Orns. STATE OF ALASKA,DEPARTMENT OF JUNBAU NATURAL RESOURCES,and JOHN T.SHIVELY,in his official capacity as APR 26 1999 Commissioner thereof,vorAppelices'warner nese eee ) Northen Alaska Environmeatal Centor and Sierra Club hereby appeal from the (1)Decision on Remand,ADL 415854,granting public utility right-of-way to Golden Valloy Blectric Association,entered February 22,1999 by the Department of Natural Resourcca;and (2)denial of reconsideration,dated March 26,1999.The current address of Northem Alaska Environmental Center is 218 Driveway Street,Fairbanks,Alaska 99701-2806,Tho current address of Sierra Club is 214 East Sth Avenue,Suite 205,Anchorage,Alaska 99501. DATED this _2 day of April,1999. EARTHIJUSTICE LEGAL DEFENSEFUND LANE POWELL SPEARS LUBEKSKY LLP es eeLoe py Jhor AenThomas8,Waldo £r Michael B.KingABANo.9007047 o"WSBA No,14405 Attorneys for Appellants Steven C,Davia WSBA No.27834 325 Fourth Street Attomeys for AppellantsJuncau,Alaska 99801 1420 Fifth Avenue,Suite 4100 ,Seattle,Washington 98101 NOTICE OF APPEAL HYK-C9-¥Y INU 14:43 AGU FAIKBHNAS FHA NU.451298 Pr.US _*e AVR-27-99 TUE 08:17 AM [ SONMISSIONER'S OFC FAX NO.907 468 *""6 P,03 ei yoo 2 onde mere -GANB .-POWBLE .SPRARS JLUBENSKY, wt Law OfficesSufta419044%Piyih Avenue Sita.WA PIF (704)223-7000 QUA)228-7167 TN THE SUPERIOR COURT FOR THE STATE OF ALASKA FIRST JUDICIAL DISTRICT AT JUNBAU NORTHERN ALASKA ENVIRONMENTAL CENTER,and SIERRA CLUB, Case No. STATEMENT OF FOINTS ON APFBAL Appellants Vv. } STATE OF ALASKA,DEPARTMENT OF |;NATURAL RESOURCES,and JOHN T.)SHIVELY,in his official capacity aa ;Coramiesioner thereof } Northern Alaska Environmental Center ("NAEC”)aud Sierra Club intend to rely on the following points on appeal: 1.The Department erred in granting the right-of-way at issue in this appeal by failing to consider which of the various alternative routca would be of greatest economic benefit to the state and the development of its resources under AS 38.05.850(a). 2.The Department ared by failing to make a best intercet finding ag required wider AS 38.05.035(¢), 3.The Department erred when it concluded that the right-of-way was not an Interest in land,and that the right-of-way remains revocable after construction of the Intortic. 4,The Department erred by relying excessively on a flawed decisionmaking process of the federal government and the private applicant. tt i MH APR-29-99 THU 14:43 AGO FAIRBANKS FAX NO,4512985 P,04 BPR-27-99 TUE 08:17 AM D ONMISSTONER'S OFC FAX NO.907 465 3 P.04 DATED this_26 day of April,1999. EARTHIUSTICE LEGAL DEFENSE FUND LANE POWELL SPBARS LUBERSKY LLP By Sp:(-_wt,bee --.By.Sar -J,bse.Thomas §.Waldo for Michael B.KingABANo.9007047 WSBA No.14405 Attomeys for Appellant Steven C,Davis Northern Alaska Environmental Center WSBA No,27834 Attorneys for Appellant325FourthStrectNorthernAlaskaEnvironmental CenterJuneau,Alaska 99801 1420 Fifth Avenue,Suite 4100Seattle,Washington 98101 POW BLE ..STBARS JLUBRRSKY, iy Low Ojtee Suits 4400 1429 FV Avenue Scutile,WA STATEMENT OF POINTS ON APPEAL Page 2 9519) (109 22-7000 (audp 223-7107 APR-29-99 THU 14:47 AGO FAIRBANKS FAX NO.4512985 P,11 "2 + APR-27-99 TUE 08:19 AM 1 -ONMISSIONER'S OFC FAX NO,807 48 16 PB,il *» CERTIFICATE OF SERVICE I certify that on April 26,1999,I sent the NOTICE OF APPEAL,STATEMENT OF POINTS ON APPEAL,MOTION OF NONRESIDENT ATTORNEYS FOR PERMISSION TOPRACTICEandENTRYOFAPPEARANCE,via hand delivery or first class,postage pre-paid mail to: Bruce M.Botellio Attomoy General of Alaska Box 110300 Juncau,AK.99811-0300 (via hand delivery) John T.Shively Commissioner of the Department of Natural Resources 400 Willoughby Ave.,5th Floor Juncan,AK 99801-1724 (via hand delivery) Michael P.Kelly President and CEO Golden Valley Electric Association PO Box 71249 Fairbanks,AK 99707 (via first class mail) Petor H.Haller Ater Wynne LLP 601 Union Street,#5450 Seattle,WA 98101 (via first class mail) LU Lae Sarah Keeney,Legal St¢retary Earthjustice Legal Defense Fund 325 Fourth Street Sancau,Alaska 99801 |e Dennis McCrohan From:Brian Bjorkquist [Brian_Bjorkquist@law.state.ak.us]Sent:Friday,April 23,1999 3:48 PMTo:dmccrohan@aidea.alaska.net;klaufer@aidea.alaska.net;rsimmons@aidea.alaska.netSubject:Northern Intertie FYI Earthjustice Legal Defense Fund (formerly Sierra Club LegalDefenseFund)reportedly will file suit in Juneau on Monday tochallengeDNR's decision on the location of the NorthernIntertie.(or so Tom Waldo from Earthjustice informed SteveWhite,AAG in Juneau).It was unclear whether this would be aneeaction,or an adminstrative appeal (probably theatter). fvDennisMcCrohan From:Brian Bjorkquist [Brian_Bjorkquist@law.state.ak.us]Sent:Friday,April 23,1999 3:59 PMTo:dmccrohan@aidea.alaska.net;klaufer@aidea.alaska.net;rsimmons@aidea.alaska.netSubject:More Northern Intertie More FYI, For more information on the Northern Intertie challenge,seeNorthernCenterfortheEnvironment's web page site at: http:/Avwww.mosquitonet.com/ naec/intertie/index.html Dennis McCrohan From:Christel PettySent:Monday,April 12,1999 10:29 AMTo:'Jerri McPherson' Cc:Dennis McCrohan Subject:Northern Intertie Invoice 1998 Jerri,|have processed your invoice no.45 and 50,they will be paid this week.|also spoke with Dennis McCrohan ourDeputyDirectorofEnergyregardingtheduplicateandothercharges.We would like to see the back-up (invoice copies)for the Birch Horton charge of $22,984.66 the Chugach Electric charge of $11,154.84 (not just the handwritten JE)and theUSross)charges of $21,242.62.Please let me know if you have a problem with this.Thank you.Christel (Tel:907-269- 1. NORTHERN INTERTIE STATUS Golden Valley Electric Association (GVEA) Benefits The purpose of the Northern Intertie is to improve the reliability of energy transmission of Bradley Lake and gas-fired opportunity energy from Anchorage to Fairbanks and additionally from the Healy Power Station to Fairbanks.Another purpose is to eliminate any Capacity restrictions between Healy and Fairbanks inhibiting Healy Clean Coal Project and Healy Unit 1 energy,and opportunity energy from Anchorage,flowing to Fairbanks. The primary beneficiary is Golden Valley Electric Association (GVEA)since to date,energy flow has been predominantly to the north. Original State consultant studies showed a benefit cost ratio of 1.4 without the State Grant for the Northern Intertie.These studies have not been updated. Status and Unresolved Issues 1.GVEA has completed all environmental engineering necessary for the Environmental Impact Statement and preliminary engineering work.The Bureau of Land Management (BLM)has issued a positive Record of Decisions (ROD). Environmental groups have appealed the BLM ROD and requested and received from BLM an extension to the appeal period.The BLM may affirm the ROD,request changes by GVEA,or reject the ROD. The Project Participants Agreement allows any participant,excluding GVEA,to withdraw from the project prior to the decision date.The decision date is defined as a date certain after which the Southern Intertie route and cost studies are complete.GVEA has notified the Participating Utilities that the decision date has occurred and requested a decision on each utility's participation.All Participating Utilities,excluding GVEA,have withdrawn from the Northern Intertie but the multiple Intertie Agreements have not been amended. The Department of Natural Resources (DNR)must issue a Right-of-Entry permit.DNR has indicated that this will be done by early March 1999.Environmental groups may appeal this decision. A confirmation letter from legal counsel of each Participating Utility was required by the Agreements confirming the legal capacity of each utility to enter into the necessary Agreements and bear their proportional share of the project costs.This will now be required only from GVEA. An opinion letter from legal counsel of each Participating Utility was required by the Agreements regarding any obligations connected with the Intertie Agreements that require Alaska Public Utilities Commission (APUC)approval.This will now be required only from GVEA. 7.A Construction Management Agreement among all the participants must be executed designating and defining GVEA's role as Construction Manager.This will now not be required. 8.A budget of the Northern Intertie must be submitted to AIDEA for approval prior to procurement and construction.No budget has been submitted. Cost and Schedule 1.The Northern Intertie Grant is for $43,200,000.The current anticipated cost is $75,000,000 including a battery storage system in Fairbanks.No funding plan for the balance has been provided. 2.Expenditures to date from the Grant paid by AIDEA to GVEA are $2,904,000. 3.Construction will start after the issues above are resolved and the ROD has been affirmed. If GVEA receives the BLM ROD and the State Right-of-Entry this spring,and no stay is granted or litigation commenced,procurement will start during the summer of 1999.The Intertie is expected to be in service by early 2001. ont SE .'todretadExp2 KPH Mergen KE Her yor ibd CHER Exp Dennis McCrohan 2/12/99 System:2/10/99 2:56:03 PM AK Industrial Development Auth Page:1 'User Date:2/10/99 DETAILED TRIAL BALANCE FOR 1999 User ID:CPETTY General Ledger Ranges:From:To:\eDate7/1/98 6/30/99 Account T-902-51400-000 T-902-51400-000 Sorted By:Company Subtotal By:No Subtotals Include:Posting,Inactive,Zero Balance/No Trx "Inactive Account Account Beginning Balance Description Referemce Trx Date Jrnl No.Source Doc Debit Credit Net Change Ending Balance T-902-51400-000 GVEA PROJECT EXPENSES HFI $0.00 9/16/98 18,521 PMTRX $86,786.24 glGVEAPurchases6oo!6/98 SVCS 9/16/98 18,522 PMTRX $78,080.69 Qa ' GVEA Purchases 5/98 SVCS 9/16/98 18,523 PMTRX $60,134.58 GVEA Purchases 4/98 SVCS 11/18/98 19,639 PMTRX $74,699.76 4 GVEA Purchases 7/98 SVCS Totals:$299,701.27 $0.00 $299,701.27 $299,701.27 Grand Totals:$0.00 $299,701.27 $0.00 $299,701.27 $299,701.27 Total Accounts:1 2:55:57 PM2/10/99 Account Description Transaction Journal Beginning B Date Entry / Batch ID Description T-902-51400-000 9/29/97 12/3/97 12/17/97 2/4/98 3/25/98 3/25/98 4/22/98 5/6/98 6/24/98 Total Accounts: GVEA PROJECT EXPENSES HFI 11,636 GVEA 12,740 GVEA 13,029 GVEA 13,979 GVEA 14,970 GVEA 14,971 GVEA 15,499 GVEA 15,852 GVEA 16,704 KPMG 1 Grand Totals: PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases alance $0.00 Totals: $0.00 7/1/97 Detailed Trial Balance through 6/30/98 Debit $100,731.99 $75,043.23 $17,155.76 $269,387.98 $18,443.46 $227,226.55 $77,161.89 $82,063.98 $5,000.00 $872,214.84 $872,214.84 AK Industrial Development Auth Credit $0.00 $0.00 Net Change $100,731.99 $75,043.23 $17,155.76 $269,387.98 $18,443.46 $227,226.55 $77,161.89 $82,063.98 $5,000.00 $872,214.84 $872,214.84 Ending Balance $872,214.84 $872,214.84 2:55:50 PM . 2/10/99 Account Description Transaction Journal Beginning Balance Date Entry / Batch ID Description T-902-51400-000 8/23/96 8/23/96 8/23/96 8/29/96 12/18/96 12/18/96 12/18/96 12/18/96 12/18/96 12/18/96 12/18/96 2/26/97 2/26/97 3/31/97 5/16/97 5/16/97 6/20/97 Total Accounts: GVEA PROJECT EXPENSES HFI 3,449 GVEA 3,453 GVEA 3,454 GVEA 3,494 GVEA 5,768 GVEA 5,769 GVEA 5,770 GVEA 5,771 GVEA 5,772 GVEA 5,773 GVEA 5,774 GVEA 7,154 GVEA 7,155 GVEA 8,175 GVEA 8,689 GVEA 8,690 GVEA 9,404 KPMG 1 Grand Totals: PMTRX Purchases PMVVR Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases PMTRX Purchases Totals: $0.00 $0.00 7/1/96 Detailed Trial Balance through 6/30/97 Debit $75,032.61 $5,532.41 $9,822.55 $10,515.17 $44,018.61 $3,075.33 $9,019.77 $12,503.39 $10,621.03 $12,368.42 $109,108.18 $19,194.35 $6,171.91 $105,865.09 $39,895.36 $8,000.00 $480,744.18 $480,744.18 AK Industrial Development Auth Credit $75,032.61 $75,032.61 $75,032.61 Net Change $75,032.61 ($75,032.61) $5,532.41 $9,822.55 $10,515.17 $44,018.61 $3,075.33 $9,019.77 $12,503.39 $10,621.03 $12,368.42 $109,108.18 $19,194.35 $6,171.91 $105,865.09 $39,895.36 $8,000.00 $405,711.57 $405,711.57 Ending Balance $405,711.57 $405,711.57 . 2:55:39 PM AK Industrial Development Auth Beginning Balance 2/10/99 Account Description Transaction Journal Date Entry / Batch ID Description T-902-51400-000 7/1/95 7/31/95 7/31/95 7/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 4/12/96 4/12/96 6/30/96 Total Accounts: GVEA PROJECT EXPENSES HFI 2,667 31 31 31 36 36 36 36 36 736 Grand Totals: 960717 $0.00 CORR MAPPING T9506001 19507 P-APOQ00010 19507 P-APO00011 19507 P-AP000012 19512 P-AP000022 19512 P-AP000023 19512 P-AP000024 19512 P-aP000025 195172 P-AP000026 PMTRX Purchases PMTRX Purchases PMTRX Purchases Vend-GVEAI Vend-GVEAI Vend-GVEAI Vend-GVEAI Vend-GVEAI Vend-GVEAI Vend-GVEAI Vend-GVEAI Totals: $0.00 7/1/95 Detailed Trial Balance through 6/30/96 Debit $150,360.68 $86,983.73 Inv No $57,017.79 Inv No $8,840.49 Inv No $6,567.82 Inv No $106,169.53 Inv No $8,160.44 Inv No $3,994.02 Inv No $34,785.37 Inv No $20,580.95 $65,315.37 $24,184.81 $572,961.00 $572,961.00 Credit $0.00 $0.00 Net Change $150,360.68 $86,983.73 $57,017.79 $8,840.49 $6,567.82 $106,169.53 $8,160.44 $3,994.02 $34,785.37 $20,580.95 $65,315.37 $24,184.81 $572,961.00 $572,961.00 Ending Balance $572,961.00 $572,961.00 2/10/99 92:55:32 PM Account Transaction Date T-902-51400-000 10/31/94 1/31/95 6/30/95 6/30/95 Total Accounts: . AK Industrial Development Auth Detailed Trial Balance 7/1/94 through 6/30/95 Description Journal Beginning Balance Debit Entry / Batch ID Description GVEA PROJECT EXPENSES HFI 159 162 167 323 1 Grand Totals: $0.00 1410 $667,484.34 P-GJ001002 GVEA INV 1&2 CK#161 1501 $99,439.44 P-GJ001002 GVEA CK #1667 1506 $150,360.68 P-APO00009 Vend-GVEAI Inv No 79506001 MAPPING CORRECTION Totals:$917,284.46 $0.00 $917,284.46 Credit $150,360.68 $150,360.68 $150,360.68 Net Change $667,484.34 $99,439.44 $150,360.68 ($150,360.68) $766,923.78 $766,923.78 Ending Balance $766,923.78 $766,923.78 Dennis McCrohan From:Christel Petty Sent:Friday,January 15,1999 9:20 AM To:Dennis McCrohan Ce:Valorie Walker Subject:N-intertie |spoke to Dave Calvert and he confirmed that unofficially all the participants have opted out of the N-Intertie except GVEA.He said until the IPG meets and adopts these changes that the bills are still to be forwarded and signed by him.|willcontactJerriMcPherson@GVEAandrequestdocumentationforthe1998invoice. .Cle ALASKA INDUSTRIAL DEVELOPMENT |)AND EXPORT AUTHORITY =>A @@E-=ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM TO:D.Randy Simmons Executive Director Keith A.Laufer Financial and Legal Affairs Manager LoFROM:Dennis V.McCrohan,P.E.ADeputyDirector-Project Development and Operations DATE:October 21,1998 SUBJECT:Northem Intertie Procurement and Construction |have revisited the conditions for proceeding with grant disbursement and AIDEA funding.The attached October 8,1998,letter from Golden Valley Electric Association (GVEA)to Chugach Electric Association,Inc.(CEA)is a preliminary step towards expending grant funds for the procurement and construction of the Northern Intertie.The letter requests each participant to declare whether it wants to remain or withdraw from the Northern Intertie project.The withdrawal provision comes from the Alaska Intertie 1993 Project Participants Agreement Section 4(b)(3). The Project Participants Agreement allows any participant in the Northern Intertie,excluding GVEA,to withdraw from the project up to the "decision date”.The decision date is defined as a date certain after which the Southern Intertie route and cost studies are complete on which a final decision will be made to proceed or not proceed with construction along a specific route. CEA has designated the ENSTAR route for the Southem Intertie.GVEA has selected a decision date of November 1,1998.We do not know if the Participants Group or GVEA unilaterally determined the decision date.The Alaska Intertie Project Participants Agreement Section 6(e)3,7,and 8(a)1 require an approved budget and schedule by the Participants for the project prior to proceeding with construction.We do not know if this has occurred. GVEA will want to proceed immediately with procurement when the ROD process is complete and any litigation resolved.The capital cost is anticipated to be about $73M.The primary source of funds for the project is a $43.2M State grant provided by 1993 legislation.According to the Grant Transfer and Administration Agreement,AIDEA is the administrator of this fund. . Memorandum October 21,1998 Page 2 The main requirements for use of the fund monies are defined in the Intertie Grant Agreement, the 1993 Alaska Intertie Project Participants Agreement,and the Grant Administration Agreement.AIDEA is a signatory to the Intertie Grant,Grant and Administration,and Grant Transfer and Administration Agreements. The additional funding required by GVEA is therefore about $30M.The 1993 legislation authorized AIDEA to issue bonds up to $60M for the Northern Intertie.Foster Pepper's attached draft letter of February 4,1995,discusses the conditions under which AIDEA could be a fund source and issue bonds for the project. The attached AIDEA letter of July 14,1995,discusses the requirements for grant disbursement and for financing by AIDEA.The critical issues are: 1.All utility participants must agree to matters regarding design and construction management including project cost and schedule,oversight,cost control,and financing each participant's share of the project costs.The Intertie Participants Group must submit to AIDEA for approval a proposed budget for procurement and construction.Each utility must demonstrate to AIDEA the ability to raise all amounts necessary for project completion.This condition arises from the Grant Transfer and Delegation Agreement Section 2.4(e).No funds for these purposes may be disbursed until AIDEA approval is obtained.This condition arises from the Grant Administration Agreement Section 4.02(a).Neither has occurred.The utilities must contract with GVEA to design and construct the line.The Agreement intended for this purpose is the Construction Management Agreement,which to our knowledge has not been signed.This condition arises from the Intertie Grant Agreement Section 5. 2.The ownership structure,defined in the Intertie Grant Agreement,must be consistent with the legislation if AIDEAis a funding source.This was a legal opinion of Foster Pepper and has been satisfied by legislation. 3.Each participating utility must have a legal opinion from their respective counsel that each have the requisite intent and legal capacity to enter into a binding obligation to bear their share of the project costs.This condition arises from the Grant and Transfer and Delegation Agreement Section 2.4(e),and the Grant Administration Agreement Section 4.02.(b).This was discussed in the Foster Pepper letter.No action to our knowledge has been taken by the utilities to accomplish this requirement. 4.To the extent required,APUC approval is required prior to the expenditure of the grant monies.This condition arises from the Grant Transfer and Delegation Section 2.4(d)and the Grant Administration Agreement Section 4.01(b)and 4.02(b).AIDEA requested that each utility provide an opinion from their counsel regarding any obligations arising from the Agreements,which require APUC approval.No such opinions have been obtained. However,GVEA has applied to the APUC for blanket approval for all the utilities.The basis for this approach was the withdrawal clause. In summary,the following requirements for grant disbursement have not been satisfied: e Construction Management Agreement not complete; Memorandum ”October 21,1998 Page 3 e Budget and schedule for AIDEA approval not submitted; e Binding obligation of each participant not submitted; e Opinions regarding APUC pre-requisite approval not submitted. For AIDEA funding,these same conditions,excluding the Construction Management Agreement,must be satisfied. Attachments - ;sLe ad uth tas th_)-s GOLDEN VALLEY ELECTRIC ASSOCIATION INC.PO Box 71249 «Fairbanks,Alaska 99707-1249 *907-452-1151 October 8,1998 .ce lolsen thea hes DVM RAL Gene Bjornstad General Manager Wwe nwerw yard te Chugach Electric Association,Inc.m ect loreP.O.Box 196300 ..vinites GAQ iwAnchorage,AK 99519-6300 vache dad: )Aone RE:Northern Intertie Dear Gene: The Record of Decision (ROD)for the Northern Intertie was issued by the Bureau of Land Management (BLM)and published in the Federal Register on September 21, 1998.Ona parallel path,the decision to issue the State right-of-way permit was signed by the Director of the Department of Natural Resources on September 29,1998.Both the ROD and the State ROW permit are subject to appeal for thirty days after issuance. It is likely that the Northern Alaska Environmental!Center will appeal both decisions. We are confident that the decisions are sound and will be supported in a timely manner on appeal. We would like to proceed with final design now and begin ordering material and clearing ROW as soon as the appeal process is complete.We anticipate construction to begin in the highlands between the northern foothills of the Alaska Range and Healy during summer 1999.Construction on the western Tanana flats north of the Alaska Range will begin after freeze-up in 1999.The Intertie and Battery Energy Storage System (BESS) will be energized and placed in service by year-end 2000. In January,1994 all the Railbelt utilities executed the Intertie Participants Agreement. This agreement and the October,1993 Intertie Grant Agreement designate GVEA as Construction Manager and obligate each utility to proceed with funding and construction oversight.While each utility is obligated to fund its share of construction cost,the Participants Agreement contains the provision that your utility may opt out after one year of operation.GVEA has no opt-out rights and is ultimately obligated to step up to the shares of any participant who opts out after one year. Although the campaign to build the Northern and Southern Interties was waged on the simple premise that Railbelt utilities could participate in both lines and would enjoy ownership and corresponding rights roughly in proportion to their Bradley Lake shares, the situation has changed.Certain events and conversations that have taken place during the past several years convince us that one or more of the southern utilities may wish to be relieved of all obligations related to the Northern Intertie,including the obligation to participate for the initial year of operation. VW SS .Letter to:IPG Page 2 October 8,1998 GVEA's costs will obviously be far less in the first and subsequent years of operation if all participants stay in.However,we have concluded that attempting to force any utility to participate may delay the project,complicate financing and make governance of the Northern Intertie construction and operation more difficult.Now that the Record of Decision and State right-of-way permit decision have been issued,it is our intent to ask the IPG to meet within three weeks to seek approval to proceed with final design.As soon as the ROD and State ROW permit appeal processes are complete,we will ask the IPG to enter Phase II and to approve material ordering and construction. |would like to be able to report that all the agreements have been executed by all participants and that everyone is excited about beginning construction.However,we recognize that some utilities may wish to reconsider their 1994 decision and not participate.Simply put,it is now time for each of you to decide whether your utility wants to participate in the Northern Intertie project.To assist you in your decision,the GVEA Board has authorized me to discuss with any interested utility means to allow withdrawal prior to financing,construction and completion of the one-year commitment. Conversely,as Construction Manager we are requiring each utility wishing to continue as a participant to execute the Construction Management Agreement immediately. GVEA intends to remain absolutely neutral relative to your participation.While we welcome your participation,we shall bear you no animosity should you withdraw. Please realize that your withdrawal may require the approval of all other participants and that prior to GVEA's ultimate step-up,other participants may wish to exercise rights. to step up to a portion of your share. We now need to move quickly on construction and financing fronts.To stay on schedule and minimize budget impacts of further delay,|need to hear from each of you prior to November 1,1998,that you are continuing to participate (and have signed the Construction Agreement)or that you want to trigger the process of withdrawing.If you have any questions,please contact me or Ron Saxton.|would appreciate your providing a copy of this letter to your Board Chairman. Mel.' = Michael P.Kelly President &CEO cc:Robert Hansen Steve Haagenson Ron Saxton,Ater Wynne Randy Simmons,AIDEA :le ALASKA INDUSTRIAL DEVELOPMENT e_AND EXPORT AUTHORITY «_ @-ENERGY AUTHORITY 4&0 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /561-8050 FAX 907 /561-8998 July 14,1995 Mr.Thomas R.Stahr General Manager and Chairman IPG Municipal Light &Power 1200 East First Avenue Anchorage,Alaska 99501-1685 Subject:-_Intertie Financing Dear Mr.Stahr: |am writing in response to your letter to me dated June 13,1995,relating to the recent Intertie Participants Group (IPG)action to begin work on the southern intertie.|am pleased with IPG's desire to initiate work on the southern intertie.Your letter also provides a timely opportunity to assess the progress made to date on the intertie projects. Initially,|would like to note that through informal discussion with the various participants,it is AIDEA perception that although fair progress has been made on preliminary engineering and related tasks on the Northern Intertie,many fundamental issues remain unresolved on both intertie projects.|believe we have reached a juncture where such issues need be specificallyaddressedandresolvedinordertomaintainprogressontheintertieprojects. With the foregoing objectives in mind,|invite you to respond to the following.NaeFirst,my letter to you dated November 2,1994,addressed the intended scope of the intertie SB! project and confirms the view that the intertie must have the benefits and functionality envisioned under the AEA feasibility study.Your response of January 12 on behalf of the IPG accepted this view in principle,though it left for resolution in "construction agreements"such critical issues as whether such a line would be developed in phases,or to what extent each participating utility would be responsible for project costs.|understand that the referenced agreements have not as yet,been adopted by the participating utilities.|believe a date should be set by which such issues will be resolved,and |invite your suggestion as to an appropriate deadline. Second.In my letter of November 2,1994,I noted that AIDEA asked its bond counsel,(Foster, Pepper &Shefelman law firm),to address whether the ownership structure provided for under the Intertie Grant Agreement would enable AIDEA to issue bonds to finance all or part of the Participant's share of project costs.|recently received a draft legal opinion which concludes that,for purposes of a public financing,AIDEA would require a legislative revision to the underlying debt-issuance authorization (Sec.29 and 30,Ch.18,SLA 1993),since that authorization references intertie ownership by,respectively,Golden Valley Electric Association (GVEA)and Chugach Electric Association (CEA).1!add that counsel also notes that the Mr.Thomas R.Stahr July 14,1995 Page 2 ownership structure set out in the Intertie Grant Agreement would,assuming specific legislative authorization,enhance the use of tax-exempt financing. There are,of course,several different ways to proceed in response to the legal opinion.For example,the utilities may maintain the current ownership structure and simply finance the participant's share absent AIDEA involvement.Alternatively,the utilities may want to revert back to the ownership structure specifically envisioned by the underlying legislation,which would enable AIDEA to be the issuer without further legislative action.Finally,the utilities may prefer that AIDEA seek legislative approval of the requisite revision to Sections 29 and 30. Vvnile |believe such approval would be viewed as ministerial if supported by all utilities,| recognize that,particularly absent full consensus among the utilities on the various unresolved issues,the prospect of legislative involvement may be troubling.- |would appreciate an immediate response whether the IPG requests that AIDEA seek legislative action to facilitate an AIDEA financing under the current ownership structure.If no legislative action is desired,please advise how the IPG intends to proceed and how each participant intends to finance its proportionate share of costs. Third.Item No.4 in our respective letters of November 2,1994 and January 12,1995, accressed the enforceability of the various agreements.While |appreciate that final project” cests are not as yet known with certainty and,perhaps more importantly,significant issues with substantial economic ramifications remain for resolution in the "construction agreements,” nevertheless,|believe it essential to confirm that each of the participating utilities have the requisite intent and legal capacity to enter into a binding obligation to bear their proportionate share of the project costs in accordance with the ownership interests established in the Intertie Grant Agreement and related documents.- As questions continue to arise in informal discussions regarding these matters,|request an unqualified opinion letter from legal counsel for each of the participating utilities confirming the legal capacity of each entity to enter into such agreements and further confirming that the obligations arising under said agreement,including the obligation to bear a proportionate share of project costs,are fully enforceable.|also request that counsel for FMUS and the City of Seward address the applicability of any requirement of voter approval with respect to these financial obligations. Fourth.Both the Grant Administration Agreement and the Grant Transfer and Delegation Agreement envisioned prompt notification of which matters and obligations arising in connection with the development and financing of the interties need be submitted to the Alaska Public Utilities Commission (APUC).As you know,to the extent such approval is required,APUC approval is a precondition to the expenditure of grant monies.|believe it timely to reach a common understanding of prospective APUC matters.Accordingly,counsel for each of the participating utilities should also address in the requested opinion letters of counsel which,if any,of the obligations arising in connection with the various intertie agreement,require APUC consideration. The Authority believes the time has come for the participating utilities to resolve basic questions of ownership,management and participation in the intertie projects.While |appreciate that the "unreasonably delayed”standard under Section 3.03 of the Grant Administration Agreement Mr.Thomas R.Stahr July 14,1995 Page 3 does not offer a "bright line”test,|am concerned that,absent substantial progress on these core development issues in the near future,the availability of grant monies is subject to review. In light of the foregoing,the Authority believes it would be inappropriate to authorize the release NowoffullPhase1fundingonthesouthernintertiebeforecoredevelopmentissuesareresolved|;Accordingly,the Authority will make available $500,000 in grant funds for initial work on the oft:velsouthernintertie.No additional funds will be advanced absent settlement of the outstanding |@ differences among the participating utilities or,in the alternative,execution of a reimbursement agreement in the event that the final development of the intertie is not undertaken.Similarly, the Authority intends to restrict use of grant funds on the northern intertie to the pending engineering and permitting work,until a comparable resolution of core development issues are resolved. |look forward to working with you and the other participating utilities toward development of the intertie projects. Sincerely, William R.Snell Executive Director cc:Jim Ayers,Chief of Staff,Office of the Governor Wilson Hughes,AIDEA Board Member WRS:bif:ks hlall\bjfA\board\stahripg oo COME \DENTVE FOSTER PEPPER &SHEFELMAN * A Law PARTNERSHIP INCLUDING PROFESSIONAL SERVICE CORPORATIONS 1111 THIRD AVENUE SUITE 34906 BELLEVUE.WAS-4INGTON OFFICE SEATTLE.WASHINGTON 98101 PORTLAND.OREGON OFFICE (206;451-0500 (206)447-440)($03)221-0607 TELECOPIER 1206)455-5487 ; TELECOPIER (503)221-1510 aN DIRECT DIAL:(206)447-8067 (206)447-9700 -(206)247-9283 x February 8,1995 William R.Snell EGEIWE)Executive Director mo ia "QG5AlaskaIndustrialDevelopment&FEB 19 159 Export Authority Alaska Industrial Developmert 480 W.Tudor Road Anchorage,AK 99503 Jonathan Rubini,Esq. 602 West Fifth Avenue,Suite 500 d omAnchorage,AK 99501 Vo akh hod 4 tracRe:Electric Power Intertie Financing Sky Cok Dear Riley and Jon:Wen MAS Enclosed is a draft letter that summarizes the conclusions we have reached based on our work thus far on the referenced matter.We hope this is in useful form for your purposes,and, in any event,we wanted to provide you with some tangible evidence of our efforts in reviewing these questions. and Export Authority 2/r34> Very truly yours, FOSTER PEPPER &SHEFELMAN Bese dnlWilliamG.Tonkin WGT:djr cc:Hugh Spitzer Dan Dixon ;"G Pin keunnnweOpweAgeurrrAyDRCEEY\oud DRAFT February 4,1995 William R.Snell Executive Director Alaska Industrial Development &Export Authority 480 W.Tudor Road Anchorage,AK 99503 Re:Preliminary Conclusions on Review of Potential Intertie Financing by AIDEA Dear Riley: The purpose of this letter is to briefly summarize the conclusions that our firm has reached following our review of the documents you and Jonathan Rubini furnished to us last fallrelatingtotheelectricaltransmissionintertiesforwhichtheAlaskaLegislaturein1993SLACH.18 (the "bond authorization statute")and 1993 SLA CH.19 (the "grant appropriation statute"), among other things,authorized AIDEA to issue bonds and appropriated certain grant funds,subject to the terms of those statutes. The documents reviewed included the Intertie Grant Agreement dated October 26,1993,by and among the participating utilities (described below),the State of Alaska,Department.ofAdministration,and AIDEA;the Grant Transfer and Delegation Agreement dated November 5,1993,by and among the same parties; the 1993 Alaska Intertie Project Participants Agreement (the "Participants Agreement")dated January 24,1994,by and among'Alaska Electric Generation &Transmission Cooperative,Inc.,The Municipality of Anchorage d/b/a Municipal Light and Power ("ML&P"),Chugach Electric Association,Inc.,The Municipality of Fairbanks d/b/a Fairbanks Municipal Utilities System ("FMUS"),Golden Valley Electric Association,Inc.,The City of Seward d/b/a Seward Electric System ("SES")(collectively,the "participating utilities"),and Homer Electric Association,Inc.,and Matanuska Electric Association,Ince.(the "additional parties");and the_Grant-AdministrationAgreementdatedAugust30,1994,by and amongAIDEAandtheparticipatingutilities.For convenience,ML&P,FMUSandSESaresometimesreferredtoasthe"municipal utilities,"and the participating utilities other than ML&P,FMUS and SES aresometimesreferredtoasthe"private utilities." 0169379.01 William R.Snell February 8,1995 Page 2 We also made a preliminary review of certain Alaska statutes other than the bond authorization statute and the grant 'appropriation statute and applicable provisions of the InternalRevenueCodeof1986,as amended (the ""Code"),and certain regulations that are currently applicable,or that are proposed tobeapplicable,to tax-exempt bonds,including the proposed regulations on the definition of private activity bonds under section 141 of the Code that were published in the Federal Register on December 30,1994. 1.Qwnership Structure.The principal question that arisesunderthebondauthorizationstatuteiswhetherAIDEAisauthorized by the terms of that statute to issue bonds to finance the cost ofintertieprojectsthatareownedbytheparticipatingutilitiesas tenants in common,with each participating utility holding an undivided percentage ownership interest in all of the real andpersonalpropertycomprisingaproject,as required by the Participants Agreement. The question arises because section 29 of the _bondauthorizationstatuteprovidesinpartthatAIDEA may issue bonds to finance the acquisition,design,and construction of apower transmission intertie of at least138kilovoltsbetweenHealyandFairbanksandowned,forthebenefitofalltheutilitiesparticipatinginthe intertie,by Golden Valley Electric Association,Inc. (Emphasis ours.) Similarly,section 30 of the bond authorization statute provides in part that AIDEA may issue bonds to finance the acquisition,design,and construction of apower transmission intertie of at least138kilovoltsbetweenAnchorageandtheKenaiPeninsula to be owned,for the benefit of all of the utilities participating in the interties,by Chugach Electric Association,Inc,(Emphasis ours.) At the same time,section 5(a)of the Participants Agreement provides: Ownership As Tenants In Common.The Participants shallbeownersofeachSegmentoftheProject(including all personal and real property interests thereof)as tenantsincommon,with undivided interests and obligations withrespecttoallProjectSegmentassetsandliabilitiesintheproportionateamountsoftheirrespectiveParticipants'Shares.Except as otherwise provided 0169379.01 William R.Snell February 8,1995 Page Clearly, 3 hereunder,the Participants shall share in the ProjectSegments's benefits,burdens,and risks only in proportion to their respective Participants's Shares,notwithstanding that the IPG [the Intertie Participants Group]may select one or more individual Participants to manage,design,build,finance,operate,and/or maintain the Project Segment or portions thereof on behalf of the Participants collectively. this provision of the Participants Agreement does notprovideorcontemplatethatGoldenValleyElectricAssociation, ("GVEA"),will "own"the northern segment of the intertieproject"for the benefit of"all of the participating utilities, and also does not provide or contemplate that Chugach Electric Inc. Association,Inc.("Chugach"),will "own"the southern segment oftheintertieproject"for the benefit of"all of the participating utilities.Although the Participants Agreement is not explicit onthepoint,under general real property law,title to property being acquired by persons as tenants in common would be conveyed to thosepersonsinthenamesofalltenantsincommonastotheir respective percentage ownership interests. participating utilities. We considered whether it would be possible to interpret the bond authorization statute in a manner that would result in treating ownership of the intertie project by the participatingutilitiesastenantsincommonasthelegalequivalentofownership by GVEA or Chugach,as applicable,for the benefit of theHowever,that interpretation,we believe, would give essentially no meaning to the portion of the bond authorization statute that requires the project to be "owned by" either GVEA or Chugach,as applicable.At a minimum,to invest those words with any meaning,we believe legal title to the real and personal property comprising the projects would have to betakenbyeitherGVEAorChugach,as applicable,which then wouldresultineachparticipatingutilityhavingabeneficialownership interest in the project. with to share the benefits, That kind of ownership structure arguably would be consistentthesecondsentenceofsection5(a)of the Participants Agreement,which makes it clear that each participating utility isburdensandrisksoftheprojectonlyin proportion to its participant's share (or percentage of ownership). However,even that sentence,though it makes express reference to the fact that one or more participating utilities may be selected to manage,design,build,finance,operate and/or maintain theprojects"on behalf of the Participants collectively,"fails t °make any reference to the possibility that less than all of tne |participating utilities would hold title to the project. 0169379.01 William R.Snell February 8,1995 Page 4 We also considered whether treating the existing ownership structure under the Participants Agreement as the legal equivalent of the kind of ownership structure contemplated by the bondauthorizationstatutewouldbesupportedbyanylanguagecontained in the grant appropriation statute,on the theory that both laws were enacted at the same time and both dealt with power transmission interties.However,reference to the grant appropriation statute actually appears to reinforce aninterpretationofthebondauthorizationstatutethatwouldrequire the project to be owned by one of the designated participatingutilities,rather than by all of the participating utilities as tenants in common.This is because section 1 of the grant appropriation statute provides,e.g.,"for payments as a grant under AS 37.05.316 to Golden Valle lectric Association enefit of all the utilities participating in the intertie...." (Emphasis ours.) As will be discussed below,the ownership structure currently provided by the Participants Agreement is helpful,if notessential,to the ability to reach favorable conclusions on other important legal questions,principally (i)the question whether the provision in section 10(d)(1)of the Participants Agreement requiring each participating utility to meet its Annual Payment Obligations,Energy Charges and Assessments "whether or not the Project is completed or its operation is terminated,interrupted orsuspendedinwholeorinpart,"is valid under Alaska law,and (ii) the question whether the shares of the project held by the municipal utilities may be financed with tax-exempt bonds. Therefore,we believeit would be preferable to amend the bond”authorization statute in a manner that makes it consistent with the _&xisting "ownership-structure established 'by the participating|utilitiespursuant-te--the-Participants Agreémént,rather than tochangethe_ownership structure.For example,the bondauthorizationstatutecouldbeamendedtoprovidethatAIDEAmay issue bonds to finance power transmission interties "owned by the participating utilities as tenants in common."Absent such achangeinthebondauthorizationstatute,we would be unable to provide an approving opinion on bonds issued by AIDEA to financetheprojecthavingthecurrentownershipstructure(which,as noted above,may be the optimum structure for all other purposes), especially in view of the legal standard that bond counsel mustapply,i.e.,an approving opinion cannot be rendered unless it is determined that it would be unreasonable for a court to hold to the contrary. 2.Validity of Section 10(d)(1)of Participants Agreement. As mentioned above,another important legal question is whethereachoftheparticipatingutilitiesmaylawfullyagree,as provided 0169379.01 William R.Snell February 8,1995 Page 5 in section 10(d)(1)of the Participants Agreement,to make therequiredannualpaymentsregardlessofwhethertheProjectis operational.In Chemical Bank v.WPPSS ("WPPSS"),99 Wn.2d 772, 666 P.2ad 329 (1983),the Washington Supreme Court held that Washington public utility districts and cities were not authorized to enter into a joint financing agreement similar to theParticipantsAgreementcontainingaso-called "dry hole"provision requiring the participants to make payments regardless of whether the projects were operational. In WPPSS,the court reasoned that,while each of the participating municipalities had statutory authority to purchase electricity,the "unconditional obligation to pay for no electricity is hardly the purchase of electricity,"but rather was an agreement to purchase project capability.Id.at 784.The Washington municipalities also were authorized under state law to construct,acquire and operate electric generating facilities.However,the Washington court held that these provisions did notauthorizetheconstructionoracquisitionof"a project in which the participants did not have an ownership interest."Id.at 785. The court noted that,under the participants'agreement involved inWPPSS,the participating municipalities did not retain an ownership interest in the project.Moreover,based on provisions of theparticipants'agreement relating to management of the joint undertaking,the court concluded that the participating municipalities "did not retain sufficient control over the project to constitute the equivalent of an ownership interest."Id,at 785.Thus,the agreements of the municipalities were held to be ultra-vires and void. The participants in the intertie projects here consist of municipal utilities operated by home rule cities and privateutilitiesoperatedbyelectriccooperatives.Unlike themunicipalitiesinWPPSS,Alaska heme rule municipalities have considerable autonomy.In particular,under Article x,Section 11oftheAlaskaConstitution,a home rule city may exercise alllegislativepowersnotprohibitedbylaworcharter.We havereviewedAlaskastatutesandthechartersofthemunicipalitiesof Anchorage,Fairbanks and Seward,and found no provisions that would prohibit those municipalities from entering into the Participants Agreement. Electric cooperatives are authorized by AS 10.25.020 to "generate,manufacture,purchase,acquire,accumulate,and transmit electric energy."(Emphasis ours.)By analogy to the WPPSS analysis,the electric cooperatives also may be required to have an ownership interest in the project. 0169379 .01 William R.Snell February 8,1995 Page 6 If the tenants-in-common ownership structure currently provided by the Participants Agreement is retained,eachparticipatingutilitywouldhaveanactualownershipinterestin the project,and the principal basis for the WPPSS holding would not exist here.If the ownership structure were changed to comply with the bond authorization statute as currently written,the participating utilities other than GVEA and Chugach would not have an actual ownership interest in the project.In that case,an ownership interest might be implied based on the degree ofmanagementcontrolovertheprojectexercisedbytheparticipating utilities through the Participants Agreement.However,we cannot conclude with certainty that it would be unreasonable for a court to hold to the contrary on that issue. As one of the conditions to the issuance of any bonds to finance the project,AIDEA should require each participatingutilitytoprovidetoAIDEAanopinionofcounselstatingthatthe participant has full legal authority to enter into the Participants Agreement,and that the terms of the Participants Agreement (including an explicit reference to section 10(d)(1)thereof)represent legal and valid obligations of the participating utility. and are enforceable against it. 3.Potential Tax-Exempt Financing of Portions of the Interties Owned and Used by Municipal Utilities.We believe that the portions of the interties that will be owned and used by the municipal utilities (i.e.,by ML&P,FMUS and SES)can be financed with tax-exempt governmental bonds,subject to the favorable resolution of various subsidiary issues that are briefly summarized below.We base this preliminary conclusion primarily upon existing Treasury Regulations §1.103-7(b)(5)and Example (13)under that regulation,IRS Private Letter Ruling 9247012 (the so-called "Grant County Public Utility District"ruling,and Proposed Treasury Regulations §§1.141-6 and 1.141-7.The latter proposed regulations on the definition of private activity bonds provide,in essence,that proceeds of tax-exempt bonds may be specifically allocated to the expenditures for a discrete portion of a mixed usefacility,which may consist of an undivided ownership interest inanoutputfacility,distribution facilities or any similar utilitysysten.The Preamble to the proposed regulations specifically recognizes the changing nature of the electric generation andtransmissionindustry,and notes that the proposed regulations attempt to address those changes by,e.g.,providing guidance on allocations of use of transmission facilities. The following subsidiary federal tax issues would have to be favorably resolved before the issuance of any tax-exempt bonds. First,the exact undivided percentage ownership shares of the municipally-owned portions of the interties would have to be >0169379.01 William R.Snell February 8,1995 Page 7 finally determined and be reasonably expected to remain fixed in those portions for the term of the bonds.This means that the procedures contained in the Participants Agreement allowing certain utilities to withdraw from participation in one or both segments of the interties,and allowing or requiring other utilities toincreasetheirsharesaccordingly,must have fully run their course.Only then will it be possible to determine the extent ofthediscreteportionsoftheprojectthataretobeownedbythemunicipalutilitiesandpermittedtobefinancedwithtax-exempt bonds. The use of the project also must be consistent with the percentage ownership interests held by the municipal utilities andfinancedwithtax-exempt bonds.In this respect,we would need to confirm our understanding of the provisions of section 11 of theParticipantsAgreement,which appear to provide that use of the project,at least when capacity is or may be constrained,must beavailabletotheparticipatingutilitiesinaccordancewiththeirrespectiveparticipantshares.Thus,it appears that the relative extent of use of the project by private and municipal utilities can be expected to be consistent with the respective ownership shares of the private and municipal utilities,but this would have to be confirmed. The Participants Agreement provides that GVEA will be the O&M Manager of the northern segment of the project and Chugach will be the O&M Manager of the southern segment of the project.GVEA and Chugach are treated as private businesses under section 141 of the Code.Unless it can be determined that neither of the O&M Agreements contemplated by the Participants Agreement constitutes a "management or service contract"for the purposes of the private business use test under Section 141 of the Code,it would be necessary to alter the duration and compensation and termination provisions of those contracts to conform with the requirements of Proposed Treasury Regulations §1.141-3(c)for "qualified management contracts"that will not be treated as private business use by those O&M Managers.For example,one of the requirements for a management contract providing that 100%of the manager's compensation during the term of the contract will be based on a periodic fixed fee is that the term of the contract may not exceed the lesser of 50%of the expected useful life of the related property or 15 years. However,it may be possible to determine that neither of the O&M Agreements is a "management contract"for these purposes underProposedTreasuryRegulations§1.141-3(c)(6)(vi),which providesinpartthat: 0169379.01 *« William R.Snell February 8,1995 .Page 8 A contract to provide for the operation of a mixed usefacilitydescribedin1.141-6(b)(2)(i)(B)(relating tocertainundividedownershipinterests[in an output facility,distribution facilities or a similar utility system}])is not a management contract if the only compensation is the reimbursement of the actual and direct expenses paid by the service provider.(Emphasis ours.) Section 10(b)of the Participants Agreement provides in part that the project operating budget shall include costs attributable to overhead or administrative and general costs of the O&M Manager...only to the extent that said costs are approved by the IPG before they are incurred,are reasonably incurred for labor directly employed by that O&M Manager in performance of its duties under the O&M Agreement,and would not have been incurred but for the activities undertaken as O&M Manager. It is not entirely clear whether the compensation payable to the O&M Manager pursuant to the O&M Agreement thus contemplated by the Participants Agreement is limited solely to "reimbursement of the actual and direct expenses paid by the service provider [O&M Managerj]"as required by the Proposed Treasury Regulations.It does appear,however,that the participating utilities do desire to strictly limit the amounts payable to the O&M Manager,and perhaps the O&M Agreement itself can limit compensation payable to the O&M Manager in a manner that would allow the O&M Agreements to be disregarded for purposes of applying the private business test under section 141 of the Code. As you know,there are numerous other requirements that must be satisfied for interest on bonds to be,and remain,tax-exempt under the Code,and,for the purposes of this preliminary analysis,we assume those other requirements,could be satisfied in ordinarycourse.These would include all applicable arbitrage requirements, for example.We also would have to confirm,based on opinions of counsel for the participating utilities,that the IPG itself would not be treated as an association taxable as a corporation under the Code,as intended by the participating utilities.Otherwise,the project would be treated as used for a private business use by that association,with adverse consequences for the ability to issue tax-exempt bonds for any portion of the project. 0169379.01 William R.Snell February 8,1995 Page 9 : 4.Approval of Project and Agreements by Alaska Public Utilities Commission. Under Section 4.01(b)of the Grant Administration Agreement, _aisbursement of the grant funds is conditioned on receipt by AIDEA of written notice that the participants have determined and agreed upon which contractual obligations related to the Intertie Grants and Intertie Funds must be submitted to the Alaska Public Utilities Commission for its review and approval. Section 4.02(b)of the Grant Administration Agreement also provides that grant funds will not be applied to reimburse costs incurred for Phase II activities,...until...(b)final approval, not subject to further judicial appeal,of matters submitted to the Alaska Public Utilities Commission related to the financing or use of the intertie(s).(Emphasis ours.) As discussed above,the participants consist of municipal utilities and private utilities,both of which may or may not be "public utilities"subject to the jurisdiction of the Alaska Public Utilities Commission (the "PUC")depending on whether the utility meets any of the various requirements for an exemption under the public utilities statute (AS 42.05).Utilities that are generally 'exempt from the public utilities statute are not exempted from the requirement of a obtaining from the PUC a "certificate of convenience and necessity"under AS 42.05.221 through 42.05.2811. AS 42.05.311 provides that a public utility may for areasonablecompensationpermitanotherpublicutilitytousedistributionortransmissionfacilitiesundercertain circumstances.If the public utilities fail to agree upon thejointuseorinterconnectionoffacilitiesortheconditionsfor compensation,either public utility may apply to the Puc for an order requiring the interconnection.AS 42.05.321.So long as each of the participants agree to the terms of the Participants Agreement,the PUC would not have jurisdiction over the Participants Agreement under this provision. Pursuant to AS 42.05.431(b),any "wholesale power agreement between public utilities is subject to advance approval"by thePuc.Assuming that some (if not all)of the participants are regulated public utilities,the Participants Agreement would besubjecttoadvanceapprovalofthePUCifitisa"wholesale poweragreement."Unfortunately,the term "wholesale power agreement"is 0169379.01 William R.Snell February 8,1995 Page 10 not defined in the statute;nor has it been interpreted by the Alaska courts. To comply with Sections 4.01(b)and 4.02(b)of the Participants Agreement,the participants,among other things,must determine whether a "certificate of convenience and necessity"must be obtained from the pPUC.for the intertie projects.The participants also mustdetermine whether the Participants Agreement is a "wholesale power agreement"subject to advance approval of the PUC,and whether any other aspects of the projects are subject toPUCapproval.Section 4.02(b)of the Grant Administration Agreement prohibits the disbursement of funds until all required approvals are final,subject to no further judicial appeal,and the same condition should be imposed on the issuance of any bonds tofinancetheproject., 0169379.01 DRS KL /J NT Fle COMa Wwe?)M Sdn Pub ,ea orUnited-States 'Department oft I riorBUREAUOFLANDMANAGEMEN41998 Alaska State Office aska Industrial Develo | 222 W.7™Avenue,#13 and Export AuthoringAnchorage,Alaska 99513-7599 ” FF091732 1793 (910) SEP |4 1998 Dear Reader: The Bureau of Land Management (BLM)is pleased to present you with a copy of the Record of Decision (ROD)for the Golden Valley Electric Association Northern Intertie Project.The ROD documents the Bureau's decision to issue a right-of-way grant to GVEA.The mitigation measures which will be developed into stipulations to be incorporated into the right-of-way grant are contained in the ROD. The BLM received 35 written comments from the public and other agencies during the review period on the FEIS.An internal review of the comments received necessitated some minor changes to two of the mitigation measures and deleting one.The changes and deletion are addressed in the ROD. This ROD may be appealed to the Interior Board of Land Appeals,Office of the Secretary as explained at the end of this document.If an appeal is taken, strict adherence to the procedures stated in the ROD must be followed. My thanks to everyone who has provided comments to the BLM during this process.Your comments assisted us in identifying the important issues for the EIS.I also thank the other agencies that have participated in this process. If you have question about this document or the process,please contact Gary Foreman at (907)474-2339 or 1-800-437-7021. Sincerely, lle. Tom Allen State Director,Alaska United States Department of the Interior BUREAU OF LAND MANAGEMENT Alaska State Office 222 W.7th Avenue,#13 Anchorage,Alaska 99513-7599 FF091732 1793 (910) RECORD _OF DECISION Right-of-Way FF091732 Golden Valley Electric Association Northern Intertie Project I.INTRODUCTION On May 13,1996,Golden Valley Electric Association (GVEA)filed an application with the Bureau of Land Management (BLM)for a right-of-way (ROW) grant pursuant to Title V of the Federal Land Policy and Management Act (FLPMA)of 1976 (43 U.S.C.1761),for the construction,operation,and maintenance of a 230 kV power transmission line between Healy,Alaska and Fairbanks,Alaska.This power transmission line is referred to in this document as the Northern Intertie Project and is assigned case file number FF091732. The proposed transmission line ROW would generally be 150 ft.wide and between 90-170 miles long depending on the route alternative selected.The width may vary in areas of dense black spruce to protect the line from fire. Tower types,height,and spacing will depend upon access constraints,right-of-way width,and mitigating measures identified for a specific area.A detailed description of the tower assemblies is contained in Chapter 2 of the DEIS.No new access roads are proposed for.the construction or maintenance of the line.Existing roads will be used where available.Helicopter supported construction will be used where access is not available.Right-of- way Clearing will be kept to a minimum.The line is designed to allow wildfires to "burn through".However,areas of dense black spruce will have to be cleared up to 300 ft.because of the high heat generated when they burn.: The line will transmit the power generated in Healy by the Healy Clean Coal Project and that generated in South Central Alaska.The substation in Healy will be modified to accommodate the increased power generation.A new substation will be constructed at the load center in south Fairbanks,the terminus of the line.A 40 megawatt Battery Energy Storage System (BESS) will also be constructed at the terminus site.The existing Intertie is a 138 kV transmission line which operates at near capacity year-round. Construction of a second intertie will meet the increasing demands for power, and improve the transmission reliability of electric service by providing separate transmission lines. The proposed project crosses lands owned by the State of Alaska,State selected lands,lands reserved for military use,and private land.The BLM has management jurisdiction on the military lands on actions not associated with military use.A right-of-way may be granted on these lands with concurrence from the military. The BLM has been tasked with lead agency responsibility for the preparation of the Environmental Impact Statement (EIS)for the entire project,including State lands.The EIS is prepared in compliance with the requirements of the National Environmental Policy Act (NEPA)of 1969 and the Council on Environmental Quality (CEQ)regulation for implementing NEPA (Title 40,Code of Federal Regulations,Parts 1500-1508).The U.S.Army,Alaska (USARAK),the Department of Agriculture,Rural Utilities Service (RUS)are cooperating agencies as defined by NEPA and CEQ.Consulting agencies as defined by NEPA and CEQ include the U.S.Fish and Wildlife Service (USF&WS),State of Alaska, Department of Fish and Game (ADF&G),State of Alaska,Department of Natural Resources (ADNR)and the U.S.Army,Corps of Engineers (COE).:These agencies formed an interagency working group which guided the NEPA process on this project.Private land issues will be handled through negotiations between GVEA and the land owner.The EIS has been prepared through a third-party contractor (Dames &Moore)under guidance provided by BLM. The environmental review process for the Northern Intertie project began in February 1994.After meetings with state,local and federal agencies,RUS and GVEA released the Macro-Corridor Study/Project Alternative Report (MCS/PAR)in July 1994.Public meetings were held in September 1994 in Healy,Fairbanks,and Ferry.Based on public input,additional alternatives were developed and the comment period extended.A revised MCS/PAR was issued in December 1994.In response to GVEA's formal application for this power line in May 1996 an Environmental Analysis (EA)was prepared which analyzed the impacts of eight route alternatives and the no action alternative. Public meetings were held in Fairbanks,Healy,and Nenana in August 1996. The final EA was issued in December 1996.Based on concerns expressed by the public and agencies reviewing the EA,it was decided to prepare an EIS in May 1997.Additional scoping meetings were held in Fairbanks,Healy,Nenana,and Anderson in June 1997.Additional public meetings were held in August 1997 to better define the range of alternatives.A Preliminary Draft EIS was issued for agency review in October 1997 with the Draft EIS for public review and comment being issued in December 1997.Public hearings on the Draft EIS were held in February 1998,in Fairbanks,Healy,Nenana,and Anderson.After review of public and agency comments,an abbreviated Final EIS was issued in June 1998 incorporating agency responses to the comments received. II.Alternatives A.Alternative Formulation Alternative identification for the project formally started in 1994 when RUS began a Macro-corridor study.These alternatives were used as a starting point when BLM and RUS jointly developed an Environmental Assessment for the project. During agency coordination and public scoping for the EA the alternatives were refined,and new alternatives suggested.The Rex/South route was developed during these public scoping meetings. When the BLM decided to complete an EIS for the project,the alternatives from the EA were carried forward.Agency coordination and public scoping resulted in further refinement and additions to the range of alternatives. Option B,the Chicken Creek by-pass was developed at this time. To insure that an appropriate range of alternatives was being studied,the BLM held three additional public meetings.The public was asked to assist the BLM in identifying additional viable alternatives,and to identify current alternatives that were redundant,or for other reasons did not merit further study in the EIS.These meetings resulted in three entire route alternatives and portions of a fourth being dropped.No additional routes were suggested.A DEIS which fully analyzed seven route alternatives and the No Action alternative was prepared. During the public comment period for the DEIS some additional routes and segment combinations were suggested.After review by the BLM and other members of the interagency working group,it was determined that the newly suggested alternatives either did not meet the needs of the project or did not resolve issues:already addressed by the existing range of alternatives. B.Alternatives Considered and Analyzed. Alternative routes examined either follow the Parks Highway corridor or utilize portions of the Tanana Flats to the east.All of the alternatives would require a new substation in South Fairbanks (Wilson Substation),and an upgrade to the Healy substation. Alternatives that utilize portions of the Tanana Flats and enter Fairbanks by crossing the Tanana River at Goose Island would provide a direct connection to the new Wilson substation. Alternatives that enter the west side of Fairbanksat the Gold Hillsubstationwouldrequireanadditional20to25milesofnewtransmission line construction to deliver power to the Wilson substation.Additionally, an upgrade to the Gold Hill and North Pole substations and the development of a new substation at Fort Knox would be required.Following is a listing and brief description of the alternatives that were analyzed in the DEIS and FEIS.A more thorough description of the alternatives can be found in Chapter 2 of the DEIS. No Action Alternative:This alternative assumes that the Northern Intertie would not be constructed. Old Intertie Route:This route would follow the existing 138 kV transmission line to the Gold Hill substation.The route then utilizes the Fort Knox Gold Mine power line,develops a new line to North Pole,then utilizes the existing line from North Pole to Fairbanks and connects to the Wilson substation. Option A -Railroad ROW:This alternative is a refinement to the Old Intertie Route and utilizes the Railroad ROW through the Goldstream Valley and Tanana Valley State Forest and would connect to the Gold Hill substation. The route then utilizes the Fort Knox Gold Mine power line,develops a new line to North Pole,then utilizes the existing line from North Pole to Fairbanks and connects to the Wilson substation. North Route:This route would follow the Nenana River north then would pass the east side of Clear Air Force Station and would cross the Tanana River east of Nenana.The North Route then would go around Ester Dome and connect to the Gold Hill substation.The route then utilizes the Fort Knox Gold Mine power line,develops a new line to North Pole,then utilizes the existing line from North Pole to Fairbanks and connects to the Wilson substation. South Route:The South Route parallels the Nenana River on the east side of the river,through Ferry,and then passes along the east side of Clear Air Force Station.The route then parallels the Tanana River on the south sideoftheriverandcrossestheTananaattheGooseIslandcrossing.ThisalternativethenconnectstotheWilsonsubstation. Rex/South Route:This route runs northeast from Healy past Walker Dome.It then turns generally north and passes along the east side of Clear Air Force Station.The Rex/South route would then parallel the Tanana River on the south side until crossing the Tanana River at Goose Island and connecting to the Wilson substation. Option B -Chicken Creek By-Pass:This is an optional alignment to the Rex/South Route and replaces the section that runs west of Rex Dome.This route would turn to the northwest and pass between Chicken Creek and Windy Creek.It would reconnect to the Rex/South Route near Clear Air Force Station. Tatlanika Route:This alternative passes by Walker Dome and the east side of Rex Dome.It then generally heads north,crossing the Wood River,and would parallel the south side of the Tanana River until the river crossing at Goose Island and connecting to the Wilson substation. Cc.Environmentally Preferred Alternative Seven alternatives and two segment options were carried forward for analysis in the EIS.After review of the various alternatives the BLM has determined that the Selected Alternative is also the agency's Environmentally Preferable Alternative. When considering only the physical and biological impacts,a route close or adjacent to the Parks Highway and existing transmission line would be environmentally preferred.However,the entire scope of the Human Environment must be considered.When the impacts associated with residential areas and other private lands,mining operations,archeological/historic sites,and scenic quality,are considered,the Rex/South route becomes anenvironmentallypreferredalternative. Impacts to the biological and physical environment are largely mitigable, whereas the impacts to residential areas and other land use conflicts are difficult to mitigate and in some cases cannot be mitigated. III.Decision The decision of the BLM is to issue a Federal Land Policy and Management Act ROW grant (FF091732)to GVEA.The selected route alternative for the project is the Rex/South route as described in the DEIS and FEIS.This grant pertains only to those lands administered by or under the jurisdiction of the BLM.The Alaska Department of Natural Resources,the Alaska Mental Health Trust Office,and the Fairbanks North Star Borough will issue decisions regarding this project utilizing their particular procedures.The grant will be issued for the purposes of construction,operation,maintenance and termination of one 230 kV transmission line on public lands managed by the BLM.The transmission line will originate at the Healy substation in Healy, Alaska,and terminate at the Wilson substation in Fairbanks,Alaska. The width of the ROW will be 150 feet (75 feet each side of centerline) except where dense stands of black spruce are encountered.In areas of dense black spruce the ROW will be a maximum of 300 feet (150 feet each side of centerline). The term of this ROW grant will be 30 years and is subject to renewal.In accordance with 43 CFR 2801.1-1(i)the grant will require periodic review by the Authorized Officer after the twentieth year and at regular intervals thereafter not to exceed 10 years. As a basis for this decision,the BLM prépared and released the FEIS of June, 1998.The EPA published a notice of availability of the FEIS (EIS NO. 980227)in the Federal Register on June 19,1998. The ROW grant will be subject to the mitigation measures developed in the FEIS and brought forward and described in this ROD.The grant will also be subject to the appropriate Bureau standard stipulations and conditions contained in Bureau Manual 2801 and BLM Manual Handbook H-2801-1. Iv.Mitigation and Monitoring All of the mitigating measures developed in the EIS will be implemented and appropriate stipulations will be included in the ROW grant.Two changes to mitigating measure #31 have been made in response to comments:from USF&WS and USARAK.USARAK was added to the list of agencies that would help develop the monitoring plan.The second change states that GVEA would be required to implement additional mitigation as needed based on the results of the monitoring study.A change has been made to mitigation measure #30 to delete the word "Spheres"after aerial markers.Specific requirements for aerial markers will be defined in the mitigation and monitoring plan and stipulated in the grant.Item 12 of Sec.2.4.6 of the DEIS will not be carried forward as Mitigation for this project.This item is not mitigation,merely a statement of fact. A.Mitigation Measures Incorporated as Design Features: The following features have been incorporated by GVEA into the proposed action in order to reduce the potential for adverse environmental effects during project construction,operation,and maintenance. 1.Prior to construction,all personnel will be instructed on the protection of ecological,paleontological,and cultural resources.To assist in this effort,the construction contract will address federal and state laws regarding vegetation (including wetlands),wildlife (including protected species),and cultural resources,as well as stressing the importance of these resources and the purpose and necessity of protecting them. 2.In accordance with state and federal regulations,land managers will coordinate with the State Historic Preservation Office (SHPO). Cultural resources will continue to be considered during project implementation in areas that are classified as having cultural resource potential by the land managers and the SHPO.This will involve surveys to inventory and evaluate cultural resources within the ROW and any impacted areas outside of the ROW,such as access roads and construction equipment yards.In consultation with the appropriate land managing agencies and the SHPO,specific mitigation measures will be developed and implemented to mitigate any identified adverse impacts.These may include project modifications to avoid adverse impacts,monitoring of construction activities,and data recovery studies.In the event of inadvertent discoveries of cultural or paleontological resources during construction,such construction will be stopped until the resources are evaluated by a qualified specialist. 3.Prior to construction,site-specific fuel hazard reduction criteria will be developed by ADNR Division of Forestry and the BLM Alaska Fire 10. 11. 12. 13. 14. Service (AFS)to protect the power line while allowing for burn through.These criteria will suggest the minimum amount of clearing or other treatment needed to protect the line from fire. No construction camps will be established along the ROW.Construction crews are expected to be able to find housing within communities along the Parks Highway,particularly in Healy,Nenana,and Fairbanks. Construction crews will be transported to work sites daily using appropriate vehicles. All construction-related waste,including trash and litter,garbage, other solid waste,petroleum products,and other potentially hazardous materials,will be properly handled in accordance with state and federal regulations and permit requirements and removed to a permitted disposal facility. The areal limits of construction activities and access will be clearly marked.No permanent discoloring agents will be applied to rocks or vegetation to indicate survey or construction activity limits. The ROW will be aligned in coordination with appropriate landowners and managers,including mining and military operations,to minimize the potential adverse effects on current and future land uses. To minimize.potential environmental impacts during construction, vehicle trips along the ROW will be kept to a minimum.To the extent practicable,construction equipment will be left within the project area rather than driven out on a daily basis.Servicing of equipment will be done within state and federal guidelines. Clearing of streamside vegetation (as approved by the authorized officer)will only be done to the extent necessary to allow access for construction and maintenance equipment and to provide clearance for wires.Clearing within these areas will be conducted by hand. Use of the transmission line ROW for access to remote areas will be discouraged by leaving brush within the ROW.Where the ROW crosses streams or trails,a screen of vegetation will be maintained to reduce access to the ROW from these areas. At river and trail crossings,towers will be placed in a manner that will minimize visual impacts.Clearing will be minimized and existing vegetation (excluding tall trees)left within the ROW,where deemed appropriate for mitigation of visual impacts.Care will also be taken to minimize long,straight ROWs,skylining of structures,and other Situations which increase visual impacts in areas that are considered to have high visual sensitivity. All trees will be felled and left in place.The appropriate agency will make a determination if a significant salvage value exists and if salvage of the trees will be necessary. In construction areas where ground disturbance is significant or where recontouring is required,surface restoration would occur as required by the land owner or land management agency.The method of restoration would consist of returning disturbed areas back to their natural contour and revegetating with native species. In areas where soils and vegetation are particularly sensitive to disturbance,existing access roads will not be widened or otherwise upgraded for construction and maintenance,except where repairs are necessary to make existing roads passable.If authorization for 15. 16. 17. 18. 19. 20. 21. B. existing access does not exist,then appropriate permits will be obtained. To minimize disturbance to vegetation,drainage patterns,stream channels,and streambanks,new access will be built to the extent practicable at right angles to streams and washes.Crossings of incised streams will be done in a manner which avoids disturbance or sloughing of stream banks.Temporary bridges (structural,snow,or ice) will be employed where bank damage cannot be avoided. Structures will be placed so as to avoid sensitive features as much as possible,including riparian areas,water courses,and cultural sites. The structures will be located 200 feet from named or designated streams where possible;however,at the Tanana River crossing, structures may need to be sited within 200 feet of the Tanana River. The lower 10 feet of guy wires on all towers will be marked with devices to enhance their visibility. Dulled metal finishes will be used on all towers,and on the wires where applicable. GVEA will respond to complaints of radio or television interference generated by the transmission line by investigating the complaints and implementing appropriate mitigation measures. To minimize environmental impacts while maintaining standard operating guidelines,GVEA will visually inspect the route by helicopter twice per year,typically in March and September.Operations and maintenance problems identified on the Tanana Flats will typically be addressed by a small repair crew flown out to the tower site(s)by helicopter before spring thaw or after fall freeze up.With the exception of emergency repair situations,maintenance operations on the Tanana Flats will be avoided or modified during critical periods to minimize impacts onwildlife. GVEA will notify the general aviation public of the presence of the new intertie and ensure that the project is noted on the appropriate Federal Aviation Administration (FAA)aeronautical charts.Special emphasis will be placed on the towers and wires crossing the Tanana and Nenana Rivers.Handouts with a detailed description of the power line routing showing tower size and location of towers over 100 feet will be provided.These handouts would be made available in all flight service stations and fixed base operators at airports throughout the state. Handouts will be placed at aerial ports of entry where aircraft normally clear customs coming from Canada.These handouts will be supplied for a 2-year period. Selectively Committed Mitigation Measures These mitigating measures apply only to specific impact location that were identified in the EIS. 22. 23. No permanent access will be constructed in the Tanana Flats.Winter access for construction will occur only after there is a minimum of 12 inches of snow on the ground and a 12-inch depth of freeze.There will be no blading or disturbance of the vegetation mat. Stream crossings on the Tanana Flats will be accomplished by constructing an ice bridge across the stream or by placing and removing a temporary bridge,such as an open truck bed,across the stream and removing it after construction.. 24. 25. 26. 27. 28. 29. 30. 31. 32. Cc. River crossings will be marked to assure military and civilian aviation safety.Towers from the Tanana River crossing to Salchaket,and as needed from Salchaket to Nenana,will be marked with color/IR reflectors on the south side of the towers.Towers at the Tanana River crossing will be painted red and white,and marked with strobe lights. Raptor surveys will be conducted in identified areas of concern along the selected route prior to construction to document Golden Eagle,Bald Eagle,and other raptor nest locations within 330 feet of the ROW. A 330-foot buffer zone will be identified around all Bald Eagle and Golden Eagle nests.Construction or ground clearing will not be allowed within this buffer zone.Human activities will not be allowed within or through this buffer zone during the nesting period. Construction or ground clearing will not occur within 2 miles of all active Peregrine Falcon nests. Except for emergency repairs,construction and maintenance.activitieswillnotoccurfromApril15throughJune15withinROWSegments7,16, and 22.Helicopter construction activities will avoid active swan nests from May 1 through August 31 along the entire ROW by a minimum distance of 1 mile. Transmission line design will minimize the potential for Trumpeter Swan and Sandhill Crane collisions by ensuring that:a)transmission line wires (other than the static line)will be strung on one horizontal 'plane rather than in multiple,vertical stacks;b)phase wires will be of the same diameter;and c)wires will be well marked where they cross major rivers.Other areas identified as having a high potential for conflicts with Trumpeter Swans and other waterfowl will be marked. Aerial Markers will be installed on static wires at spans that cross the Nenana,Tanana,and other named rivers.These markers will be used in other areas when deemed necessary to reduce hazards to aviation and birds. GVEA will conduct a 3-year post-construction monitoring study on selected portions of the transmission line to evaluate bird collision mortality along selected portions of marked and unmarked segments of the transmission line,in consultation with the BLM,USFWS,USARAK,and ADF&G.Following the 3-year monitoring effort,GVEA and the agencies will evaluate the study and determine the need for additional marking devices.GVEA will be required to implement additional mitigation as needed based on the results of the study.Any additional monitoring will be the responsibility of the concerned agency. To allow for safety and engineering concerns,all trees higher than 10 feet may be cleared within 75 feet of the centerline.Clearing to ground level up to 150 feet either side of the centerline will be allowed in areas where large stands of black spruce occur and a danger from forest fires is expected. Additional Mitigation Measures Developed in the EIS. The following mitigation measures were developed during the EIS process and are not part of GVEA's design features.The following mitigation measures will be brought forward as stipulations in the ROW grant. 33.Where necessary,thermosyphons will be used at foundations to stabilize ground temperatures in areas of warm permafrost. 34.Periodic maintenance of cleared segments within the ROW will be limited to winter time activities when there is 12 inches of snow on the ground and 12 inches of freeze in the soil. 35.The edges of the ROW,where cleared,can be undulated to help the cleared areas blend with surrounding vegetative patterns. 36.Where possible,the ROW will use natural openings in the vegetation and reduce the need for clearing. 37.Brush cutting and clearing in wetland areas will be conducted by hydroaxe or hand. 38.Construction activities near anadromous fish streams will be timed to avoid salmon runs. 39.The ROW should be located at least .75 miles from the boundary of the Larry Drop Zone to ensure jumper safety. D.Implementation and Monitoring The BLM,after reviewing the mitigation measures.developed in the EIS,has decided that all mitigation measures will be implemented.This will be done as stipulations to ROW grant FF091732.These stipulations will be implemented by the BLM on those lands under the administration and jurisdiction of the BLM. Other agencies will be issuing permits for this project on lands within their administration and jurisdiction.These agencies will utilize the mitigation measures developed in the FEIS and implement appropriate mitigation on lands under their administration.This will be done through their decision processes. There has been a great deal of coordination during the EIS process with these agencies,and the mitigation measures were developed as a result of that coordination.The other agencies will determine how implementation will eccur on lands within their jurisdiction. Alaska Department of Natural Resources and Alaska Mental Health Trust Office are considering entering into a Memorandum of Understanding with the BLM that would have the BLM monitor and implement the mitigation measures for lands under their jurisdiction. Following is a table that describes how BLM intends to implement and enforce the mitigation for the project.The first column identifies the mitigation measure by number as presented in Sec.IV A,B,and C of this document.The second column describes the timeframe when the measure would be enforced. This is described as preconstruction,construction,and post construction. The third column describes the particular action that will implement the measure,The last colum identifies the agencies or entities that will have oversight,or might provide professional and technical expertise to the BLM regarding the implementation of the mitigation measures. A detailed implementation and monitoring plan will be developed.This plan will be developed by the BLM through consultation and assistance from the interagency working group.The details of the monitoring plan will provide the specific stipulations of the ROW grant. TimeframeMitigating Action Oversight/ Measure #Enforcement 1 Pre-construction Meeting/training BLM 2 Pre-construction -Field Survey BLM/ Construction Monitoring Contractor 3 Pre-construction Field Survey BLM/AFS/ADNR-DOF 4 Pre-construction Field Inspection BLM Construction Monitoring 5 Pre-construction Field Inspection BLM Construction Monitoring Post-construction 6 Pre-construction Field Inspection BLM Construction 7 Pre-construction Field Survey BLM/USARAK/ADNR 8 Construction Field Inspection BLM Monitoring 9 Pre-construction Field Survey BLM Construction Field Inspection 10 Pre-construction Field Survey BLM Construction Field Inspection 11 Pre-construction Field Survey BLM/ Construction Field Inspection Contractor 12 Pre construction Field Inspection BLM Construction 13 Construction Field Inspection BLM/ Post-construction Monitoring Contractor 14 Pre-construction Field Survey BLM Construction Field Inspection 15 Pre-construction Field Survey BLM Construction Field Inspection 16 Pre-construction Field Survey BLM/ Construction Field Inspection Contractor 17 Construction Field Inspection BLM Post-Construction 18 Pre-construction Field Survey BLM/ Construction Field Inspection Contractor 19 Post-Construction Investigation/GVEA Determination 20 Post-Construction Monitoring BLM 21 Construction Monitoring BLM Post-Construction 10 22 Pre-construction Field Inspection BLM Construction Monitoring Post-Construction 23 Pre-construction Field Inspection BLM Construction Post-Construction 24 Pre-construction Field Survey BLM/USARAK Construction Field Inspection 25 Pre-construction Field Survey BLM/ Contractor 26 Pre-construction Field Survey BLM/ Construction Monitoring Contractor Post-Construction 27 Pre-construction Field Survey BLM/ Construction Monitoring Contractor 28 Construction Field Survey BLM Monitoring 29 Pre-construction Field Survey BLM Construction Field Inspection 30 Pre-construction Field Survey BLM/USARAK Construction Field.Inspection 31 Pre-construction Field Survey BLM/USF&WS/ADF&G Construction Field Inspection USARAK Post-Construction Contractor 32 Pre-construction Field Survey BLM/AFS Construction Field Inspection Post-Construction 33 Pre-construction Field Survey BLM/ Construction Field Inspection Contractor 34 Post-construction Field Inspection BLM 35 Pre-construction Field Survey BLM Construction Field Inspection 36 Pre-construction Field Survey BLM Construction Field Inspection 37 Pre-construction Field Inspection BLM Construction Monitoring Post-Construction 38 Construction Field Inspection BLM 39 Pre-construction Field Survey BLM/USARAK Construction Field Inspection Vv.Rational for the Decision In making the decision the BLM took into consideration agency legal mandates and public concerns expressed in the EIS process. 11 The decision to implement the selected alternative meets the described purposes and needs of the project. A.Agency Rational 1.The selected alternative provides for a second path for electrical power generated at Healy and South-Central Alaska to Fairbanks. 2.The selected alternative gives a direct route and connection to the applicants load center in south Fairbanks avoiding disruptions to Fairbanks residents who would be directly impacted by routes entering Fairbanks from the west. 3.The selected alternative avoids disruptions to residents of Nenana,- Anderson,and Healy who would be directly impacted by routes following the Parks highway. 4.The selected alternative provides more power to meet the increasingdemandintheFairbanksarea. 5.The selected alternative increases reliability of electrical transmission by requiring less reliance on single 'source generation and equipment. 6.The selected alternative allows for maintenance of equipment without loss of transmission capability. 7.The selected alternative reduces dependency and use of local oil fired generation resulting in lower emissions in a non-attainment area. 8.The selected alternative will reduce power line losses from 13 megawatts to 4 megawatts.This is enough electricity to power over 1000 homes. 9.The selected alternative provides increased capacity sharing and deferral of new generation facility construction. 10.The selected alternative increases access to more economical energy generated in Healy and southcentral Alaska. 11.While the selected route does utilize undeveloped land it keeps the project within areas used for commercial timber operations,military uses, trapping,hunting,snowmobile and airboat use. 12.The selected alternative reduces land use conflicts and impacts to private lands in accordance with Executive Order 12630 dated March 15,1988. The selected alternative also avoids locating a high energy transmission line near existing residences. 13.The selected alternative reduces costs up to $30 million over alternatives that enter the west side of Fairbanks. 14.Through the analysis performed during the development of the EA and EIS it has been determined that no significant impacts are expected to occur as a result of implementing the selected alternative.Mitigation measures that were developed based on public input and assistance from other agencies will further reduce the impacts of the selected alternative. 15.Section 7 consultation with the U.S.Fish and Wildlife Service has determined that no Threatened and Endangered Species will be effected by the selected alternative. 12 16.The selected alternative is not expected to significantly restrict subsistence resources or uses in the area. 17.The selected alternative has less biological impact than the applicants originally preferred route.Even though the selected alternative increases expenses by $1.2 million,the BLM has decided that the reduction in environmental impacts off-sets the additional costs. 18.The selected alternative best meets the needs of the State of Alaska, Department of Natural Resources,which,depending on alternative,manages approximately 51%to 62%of the lands affected by the project.The selected alternative is also the choice of the ADNR. 19.The analysis has shown there are no significant impacts to floodplains and wetlands.The COE and USF&WS were members of the interagency working group for this project and have helped identify impacts and develop mitigation related to floodplains and wetlands concerns. 20.The mitigation listed in Sec.IV A,B,and C,has been developed and adopted to minimize impacts from the project. B.Public Comments on FEIS During the 30 day review period for the FEIS,the BLM received 35 comments on the FEIS.Of these comments,three were from governmental agencies,13 were in favor of the preferred alternative,and 19 were opposed.A petition with approximately 1,100 signatures was submitted with one of the letters opposing the preferred route.These comments are available for review at the BLM Northern Field Office. Public comments received on the FEIS showed differing views.Some of the commenters felt that the Rex/South route was the best route environmentally while others felt that a route along the existing transmission line would be environmentally preferable. The comments received showed concerns regarding a wide range of issues including,private land conflicts,costs associated with the project, wildlife habitat,aviation safety,use of undisturbed areas,wetlands,scenic views,and recreational values. The comments received on the FEIS were similar to those received on the DEIS and were addressed in the FEIS.There was one newly presented issue regarding one of the mitigation measures.This comment expressed concerns that felling trees and leaving them in place might lead to increased spruce bark beetles around the ROW. Discussions with ADNR Division of Forestry indicate an increase in spruce bark beetles is highly unlikely because the alignment of the Rex/South Route does not impact an appreciable amount of white spruce,which is the forest type primarily attacked by the spruce bark beetle.The spruce bark beetle could be a concern if the transmission line was routed through the Bonanza Creek Experimental Forest (segment 25)due to the higher concentration of white spruce in that area. VI.ANILCA Section 810(a)Finding The proposed action will not significantly restrict subsistence uses.No reasonably foreseeable and significant decrease in the abundance of harvestable resources or in the distribution of harvestable resources,and no reasonably foreseeable limitations on harvester access will result from the proposed action (see attached evaluation). 13 VII.Appeals Process This decision may be appealed to the Interior Board of Land Appeals,Office of the Secretary,in accordance with the regulations contained in 43 CFR, Part 4 and the enclosed Form 1842-1.If an appeal is taken,your notice of appeal must be filed with the Bureau of Land Management,Alaska State Office, 222 West Seventh Avenue,#13,Anchorage,Alaska 99513-7599,within 30 days from receipt of this decision.Failure to file the notice of appeal with the Bureau within the time allowed is a jurisdictional defect and will result in dismissal of the appeal.In order to avoid dismissal of the appeal,there must be strict compliance with the regulations.The appellant has the burden of showing that the decision appealed from is in error.Copies of the notice of appeal must also be submitted to each party listed below and to the Office of the Regional Solicitor,Alaska Region,U.S.Department of the Interior, 4230 University Drive,Suite 300,Anchorage,Alaska 99508-4626,at the same time the original documents are filed with this office. The Departmental regulations in 43 CFR 4.21 (58 FR 4939,January 19,1993)provide that parties entitled to file an appeal may filea request for a stayoftheeffectivenessofthisdecisionduringthetimethattheappealis being reviewed by the Board.The request for a stay must accompany your notice of appeal submitted to the Bureau of Land Management (BLM)and Regional Solicitor's Office,and a copy of both documents must be served on the Interior Board of Land Appeals,Office of Hearings and Appeals,4015 Wilson Boulevard,Arlington,Virginia 22203,at the same time they are submitted to the BLM.A copy of the request for a stay must also accompany each copy of the notice of appeal submitted to the parties listed below as parties to be served.A request for a stay is required to show sufficient justification based on the standards listed below. Standards for Obtaining a Stay If you request a stay,you have the burden of proof to demonstrate that a stay should be granted. Except as otherwise provided by law or other pertinent regulation,a petition for a stay of a decision pending appeal shall show sufficient justification based on the following standards: (1)The relative harm to the parties if the stay is granted or denied, (2)The likelihood of appellant's success on the merits, (3)The likelihood of immediate and irreparable harm if the stay is not granted,and (4)Whether the public interest favors granting the stay. Adverse parties of record who must be served with a copy of the appeal and statement of reasons are: Mr.Mike Kelly Golden Valley Electric Association P.O.Box 71249 Fairbanks,Alaska 99707 14 VIII.Signature This document constitutes my Record of Decision as the Bureau of Land Management Authorized Officer,for the Golden Valley Electric Association right-of-way application FF091732 for the Northern Intertie 230kV Power line Project,in accordance with the Federal Land Policy and Management Act and the regulations under Title 43,Code of Federal Regulations,Part 2800. Am lllow /Z of 78TomAllen State Director,Alaska State Office Bureau of Land Management 15 ANILCA Section 810 Evaluation and Finding Case File:FF091732 EIS Number:EPA#980227 Applicant:Golden Valley Electric Association,Fairbanks,Alaska. Location:The study area for the proposed action encompasses an area that extends from Healy,just west of the Nenana River to Ferry,then east of the Nenana River to Nenana,north to Goldstream Valley,northeast to the Fort Knox mine and then south to North Pole.The area then cuts diagonally from the North Pole substation,following the Tanana River to Goose Island,then south of the Tanana River nearly to the Wood River,and south to Healy, passing across Walker Dome.The study area is covered on the Livengood,Fairbanks and Healy quadrangle maps. Proposed Action:Construct,operate and maintain a 230kV transmission line from Healy to Fairbanks utilizing the Rex/South Route as described in theNorthernIntertieProjectDEISandFEIS. Finding:The proposed action will not significantly restrict subsistence uses.No reasonably foreseeable and significant decrease in the abundance of harvestable resources or in the distribution of harvestable resources,and no reasonably foreseeable limitations on harvester access will result from the proposed action. Fisheries: 1.Expected reduction in harvestable resources. No reduction in harvestable fishery resources is expected due to the proposed action.Construction and maintenance activities at anadromous fish streams will be timed to avoid salmon runs. 2.Expected reduction in availability of resources due to alterations in resource distribution,migration,or location. No alterations in availability of fishery resources are expected to occur from the proposed action. Wildlife: 1.Expected reduction in harvestable resources. No reduction in harvestable wildlife resources is expected due to the proposed action.Construction and maintenance activities in the upland portions of the route will be conducted along existing access and on the lowland portions of the route will be conducted during the winter after there is a minimum of 12 inches of snow on the ground and a 12-inch depth of freeze.Therefore activities related to the proposed action during moose calving will be limited.Except for emergency repairs,construction and maintenance activities will not occur from April 15 through June 15 within ROW Segments 7,16,and 21,which will additionally limit disturbance to calving moose and waterfowl. 2.Expected reduction in availability of resources due to alterations in resource distribution,migration,or location. No reduction in availability of wildlife resources is expected from the proposed action.Distribution and movement patterns may be temporarily disturbed adjacent to the ROW during construction or maintenance,however activity will be of short duration in any one location. Other subsistence resources: 1.Expected reduction in harvestable resources. No reduction in other resources is expected from the proposed action. Some vegetation will be removed from the ROW but will mostly be limited to resources not used for subsistence.Some clearing may increase short term availability of berries. 2.Expected reduction in availability of resources due to alterations in resource distribution,migration,or location. No reduction in availability of other resources is expected from the proposed action. Access:. 1.Expected limitation in access of subsistence users resulting from the proposed action. Access may be improved along existing trails and roads in the uplands, however,no new access will be constructed and mitigation measures are designed to minimize the use of the ROW for access.No limitation on access by subsistence users will result. Other lands: Seven route alternatives and a no-action alternative were analyzed in the EIS.The preferred alternative crosses less area used for subsistence purposes than the more western alternatives. Other alternatives: there is no other mode of construction and maintenance that would have less affect on subsistence uses and resources.The proposed method of construction,operation and maintenance will not significantly restrict subsistence opportunity.Construction,operation and maintenance of the zlectrical right-of-way will be done in the most environmentally sound manner. Other comments: Under ANILCA Title VIII uses of subsistence resources by qualified rural residents on federal public lands is mandated.This evaluation includes lands selected by the State of Alaska and selections by Native Corporations under the Alaska Native Claims Settlement Act.The Evaluation and Finding determines that under ANILCA,PL 96-487,subsistence uses would not be significantly restricted by the construction,operation and maintenance of a 230kV transmission line,as proposed. Fomi 1842-1 . ,UNITED STATES (February 1985)DEPARTMENT OF THE INTERIOR BUREAU OF LAND MANAGEMENT INFORMATION ON TAKING APPEALS TO THE BOARD OF LAND APPEALS DO NOT APPEAL UNLESS 1.This decision is adverse to you, AND 2.You believe it is incorrect IF YOU APPEAL,THE FOLLOWING PROCEDURES MUST BE FOLLOWED 1.NOTICE OF APPEAL ....Within 30 days file a Notice of Appeal in the office which issued this decision (see43CFRSecs.4.411 and 4.413).You may state your reasons for appealing,if you desire. 2.WHERE TO FILE NOTICE OF APPEAL...Bureau of Land ManagementAlaskaStateOffice 222 W.7th Ave.,#13Anchorage,AK 99513-7599 SOLICITOR REGIONAL SOLICITOR ALSOCOPYTO ....ALASKA REGION U.S.DEPT.OF THE INTERIOR 4230 UNIVERSITY DRIVE SUITE 300 .ANCHORAGE AK 99508-4626 3.STATEMENT OF REASONS ..Within 30 days after filing the Notice of Appeal,file a complete statement of the reasons why you are appealing.This must be filed with the United States Department of the Interior.Office of the Secretary,Board of Land Appeals,4015 Wilson Bivd., Arlington,Virginia 22203 (see 43 CFR Sec.4.412 and 4.413).If you fully stated your reasons for appealing when filing the Notice of Appeal,no additional statement Is necessary. SOLICITOR REGIONAL SOLICITORALSOCOPYTO....ALASKA REGION U.S.DEPT.OF THE INTERIOR 4230 UNIVERSITY DRIVE SUITE 300ANCHORAGE.AK 99508-4626 4.ADVERSE PARTIES ....Within 15 days after each document is filed,each adverse party named in the decision and the Regional Solicitor or Field Solicitor having jurisdiction over the State in which the appeal arose must be served with a copy of:(a)the Notice of Appeal,(b)the State- ment of Reasons,and (c)any other documents filed (see 43 CFR Sec.4.413).Service will be made upon the Associate Solicitor,Division of Energy and Resources,Wash- ington,D.C.20240,instead of the Field or Regional Solicitor when appeals are taken from decisions of the Director (WO-100). S.PROOF OF SERVICE ....Within 15 days after any document is served on an adverse party,file proof of that service with the United States Department of the Interior,Office of the Secretary, Board of Land Appeals,4015 Wilson Blvd.,Arlington,Virginia 22203.This may con- sist of a certified or registered mail ''Return Receipt Card''signed by the adverse party (see 43 CFR Sec.4.401(c)(2)). Unless these procedures are followed your appeal will be subject to dismissal (see 43 CFR Sec.4.402).Be certain that all communications are identified by serial number of the case being appealed. NOTE:A document is not filed until tt ts actually received in the proper office (see 43 CFR Sec.6.40}a)) SUBPART .-...2--OFFICE HOURS;TIME AND PLAUc "OR FILING Sec.1821.2 1 Office hours of State Offices.(a)State Offices and the Washington Office of the Bureau of Land Management are open to the public for the filing of documents and inspection of records during the hours specified in this paragraph on Monday through Friday of each week,with the exception of those days where the office may be closed because of a national holiday or Presidential or other administrative order. The hours during which the State Offices and the Washington Office are open to the public for the filing of documents and inspection of records are from 10 a.m. to 4 p.m.,standard time or daylight saving time, whichever is in effect at the city in which each office is located. Sec.1821.2--2(d)Any document required or permitted to be filed under the regulations of this chapter,which is received in the State Office or the Washington Office, either in the mail or by personal delivery when the office is not open to the public shall be deemed to be filed as of the day and hour the office next opens to the public. (e)Any document required by law,regulation,or decision to be filed within a stated period,the last day of which falls on a day the State Office or the Washing- ton Office is officially closed,shall be deemed to be timely filed if it is received in the appropriate office on the next day the office is open to the public. "U.S.GPO:1961-673-016/46019 Dennis McCrohan From:Dennis McCrohan Sent:Thursday,September 10,1998 3:50 PM To:Keith Laufer;Randy Simmons Subject:NOrthern Intertie Randy The schedule for the environmental impact statement for the Northern Intertie is as follows: 1.ROD will be signed tomorrow September 11. 2.It will be noted in the Federal Register on September 18.3.The appeal period is 30 days.4.The period to rule on an appeal is a maximum of 45 days. So if there is no litigation after the appeal,the procurement and construction could start the first week in December.GVEAhasalwaysintendedawinterconstruction. The conditions precedent to AIDEA releasing funds for procurement and construction are: 1.The Construction Management Agreement must be signed by all participants.To my knowledge,a draft only exists. 2.The ownership structure must enable AIDEA to issue bonds.This has been resolved. 3.Each participating utility must provide an unqualified opinion letter from their legal counsel confirming their legalcapacitytoenterintosuchbindingagreementstobeartheirshareofprojectcosts.To my knowledge,no action has beentaken. 4.To the extent required,each participating utility must obtain APUC approval or provide opinion letters from their legalcounselastowhatobligationsrequireAPUCapproval.GVEA has asked the APUC,copied AIDEA,for a ruling that APUCapprovalfortheparticipatingutilities,excluding GVEA,is not required at this time since each utility can withdraw from theprojectuptooneyearafterCommercialOperation.AIDEA has taken no position on this approach.To my knowledge,theAPUChastakennoaction. Please let me know if any additional information is needed. P,01/01Oo14AMJUL-28-98TUE07eer ame °a = e . wi my Gea °:t :Si ee og t .:Dae an cao »+oon rr °046,i oe 7 .' Dally NewS -Miner” ewe ne ee le . :Sate ee 2 5 noe et °:Ay °'ol,:*wo & peak ete tee ea bre SRE re . 9 . . hf - * «%e a i 2 oe 8 é re i ,«ps See BR fa.2 "be :-b -_by :__.Monday,July 27, =-- _eevrete 'Jul p aby 1998 caallins A tt . :|Date-7/2.8_|sabes™FromRowCo.Phone#Fax#7671Post-it®FaxNoteToVarniwCo/Dept.Phone#Fax#Power line decision coming up |By STEVE KADELStaffwriter -The Bureau of Land Manage-ment is expected this week to fi-nslize its choice of.a routerm:ugh the Tanana Flats for theernintertiepowerline. .7,ab ythe -Rex/Sot : &That jrputé-goes north from© 3 {o the Tanana River,then &Blong the fiver's gouth side.7.2."cage REBeicaF The Northern Alaska Environ-She that GVEA's rate mental Center continuedtoraise payers haven't been told whatconcernsabouttheproject,filing they will be paying for theapetitionopposingtheproject.South route On Jy ee ae.Ba edition ta providing mortcepted.The petition included sig.Porc:the 230-kilovolt line willnaturesofmorethan1,000 provide greater ;reliability forAlaskaresidentswhoopposed BLM's choice.. : Sylvia Ward,executive di-rector of the Fairbanks center,said the group is concerned aboutunnecessarytheroutewouldcausetotheundeveloped"wildlife habitat in the TananaFlatsandAlaskaRangefoothills. electrical service toandcommercialbusinesses inFairbanks,accordingto the BLM.But an electrical engineer theNorthernAlaskaEnvironmentalCentercommissionedtoreviewtheproject.disagreed with thatassessment.oo "William Stephenson of Mar-"Also,the route endangers air-tinez,Calif.,wrote in a letter toplanepilotsandmigratorybirds,BLM project leader Garyshesaid.Foreman that the EIS fails to_"The final document fails to document a "reliability shortfall”ive.commit to specific mitigation _of power in the Fairbanks area.plans to protect wildlife or pre-.."On the contrary,.customer.out-vent it from becoming a road or "iages'and inconveniences ..seemtrailacrossthese.undeveloped ;"relatively.minor,”Stephensona"£43,patd Saree trad Sore .wee,og ce eva? Dennis McCrohan From:Dennis McCrohan Sent:Thursday,April 16,1998 9:51 AM To:Keith Laufer;Randy Simmons;Brian BJorkquist;Marcus Wood Subject:Northern Intertie Prior to our April 15,1998 dispatch meeting with GVEA,we discussed the status of the Northern Intertie with Brad EvansandMarvinRiddleofGVEA.The Northern Intertie is the transmission line,electrically parallel to the existing transmissionlinebetweenHealyandFairbanks,which would relieve the capacity restriction created by HCCP operation and alleviatetheneedforrunningNorthPoleoilturbinesforspin. They indicated that a ROD on the EIS is expected in late May or June but they feel certain there will be an appeal andprobablylitigation. Dennis ALASKA INDUSTRIAL DEVELOPMENT =xANDEXPORTAUTHORITYa @@™ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM Requetatodt'by, TO:D.Randy Simmons ELS va KAC Executive Director .",\uctuLeKopsernccta SAP OPFROM:Dennis V.McCrohan,P.E.. -ty wenDeputyDirector-Project Development and Operations DORAN " Date:tember 24,1997ateSeptember24,Nps) SUBJECT:Northern and Southern Interties Board Status Report Northern Intertie Attached is a summary status report prepared by Golden Valley Electric Association (GVEA). GVEA is the project manager for the Northern Intertie on behalf of the Intertie Participants Group (IPG). GVEA had scheduled approval of its Environmental Assessment (EA)for spring 1997 and intended to proceed with construction in the fall of that year.As noted in the status report,the <Bureau of Land Management has now required an Environmental Impact Statement (EIS)in lieu of the EA which extends the total project schedule by approximately one year.The Record of Decision for the EIS is scheduled for March 1998 allowing construction to begin in the fall of 1998. GVEA's expenditures to date are approximately $1.8 million,which is considerably below the <<$6.64 million approved for permitting,preliminary engineering,and procurement activities.The total cost for the project isestimated to be $75 million. Critical issues which AIDEA must address on this project are: e APUC approval requirements for all participants prior to release of Phase 2 funds for procurement and construction e Preparation of a Plan of Finance approved by all Participating Utilities with confirmation of each Utilities'obligations prior to release of Phase 2 funds Memorandum September 24,1997 Page 2 e Approval of a Construction Agreement among the Participating Utilities These issues and other related issues will be addressed in the Immediate Needs Energy Assessment. Southern Intertie Attached is a summary status report prepared by Chugach Electric Association (CEA)for the Southern Intertie.CEA on the behalf of the IPG is the project manager for the Southern Intertie. The Southern Intertie is proceeding with all necessary work for their Environmental Impact Statement (EIS). _The EIS is anticipated to be complete in 1999.Engineering would start immediately thereafterwithconstructionanticipatedtostartin2001.The projectedcosts of the Southern Intertie rangefrom$119 million to $139 million depending upon the electrical configuration and the route.Since the issue of the attached CEA status report,CEA has dropped the Quartz Creek routefromconsideration.° To date,CEA has committed approximately $4.6 million.It is anticipated by AIDEA that CEAAIDEAhasapprovedfundingfromthegrantuptoaceilingof$5.1 million for ElS related es |5willseekadditionalfundingovertheceilingforthisphasefromAIDEA. Critical issues for AIDEA on this project include the Plan of Finance and the Construction Agreement similar to the Northern Intertie and: e Receipt and review of updated benefit cost analysis for the project from CEA e Receipt of APUC approval for the project based upon 100%CEA ownership Please let me know if any additional information is needed.ELS Attachments (SQunrs ela NeuchyAM NORTHERN INTERTIE Healy to Fairbanks 230 kV Line / 40 MW Battery Energy Storage System Status Report --July 9,1997 Project Description The Northern Intertie is a 230 kilovolt overhead electrical transmission line of approximately 100 miles in length,to be initially operated at 138 kV,which will provide a second tie between Healy and Fairbanks.The project also includes a Battery Energy Storage System which will supply 40 megawatts of power into the system for approximately 20 minutes.The Northern Intertie is designed to:1)increase the electric transmission capacity to transfer power from Healy and southern Railbelt generation sites to Fairbanks;2)provide an opportunity for the reconstruction of the existing intertie without disconnecting Fairbanks from Railbelt transmission grid;3)reduce losses for transfers of power north of Healy;4)improve reliability of service on the Fairbanks area and the Railbelt as a whole;and 5)decrease the need for spinning reserves in Fairbanks by providing a 40 megawatt BESS in Fairbanks. This project will improve the ability of Golden Valley and all other Railbelt utilities to provide the lowest cost,most reliable service to their customers. Environmental The comment period for the Environmental Assessment (EA)and the draft Finding of No Significant Impact (FONSI)closed Friday, February 21,1997.BLM extended the time for comments by two weeks to allow for additional comments as we reviewed the appropriate course of action.BLM received a total of about 140 comments. Golden Valley and Dames and Moore have been working with the Bureau of Land Management (BLM)and State of Alaska Department of Natural Resources reviewing comments received during the Environmental Analysis comment period. Based on public controversy and agency comments,the Bureau of Land Management has chosen to "take the project to the next higher step, which is an Environmental Impact Statement (EIS).”Due to the extensive work already completed for the Environmental Assessment, which effectively created an EIS quality document,the EIS process is expected to be completed in 9 -11 months.The time extension estimate from BLM is mainly based on mandatory time frames for review,public notice and comment periods. BLM and Golden Valley have executed a Memorandum of Understanding (MOU)for the EIS.Golden Valley has requested proposals from interested third party contractors for preparation of the EIS.BLM will review and approve qualified third party contractors,and Golden Valley will select an approved contractor. The Notice of Intent was published in the Federal Register on May 27,1997 which started a public scoping period.The public scoping process included four public meetings in Fairbanks,Healy,Anderson and Nenana,from June 23 to June 26.BLM facilitated the meetings and helped identify impacts and issues that were of concern to the public.Written comments on the public's issues will be received until July 11,which is the close of the scoping period. In late July the BLM may have public meetings to review all potential routes and reduce the number of options to be carried forward in the EIS.The reduced number of routes will allow for more detailed analysis on the remaining viable routes. The Draft Environmental Impact Statement is scheduled to be issued for public review and comment on September 15.The 60 day comment period will end is planned to end November 15.The final EIS is scheduled to be issued on January 15,1998 with the Record of Decision provided on March 2,1998. General Project Both the transmission line designer,Dryden &LaRue,and the BESS/ substation designer,Power Engineers have been asked to review all tasks which are non-route specific and can be completed without risk prior to the EIS Record of Decision (ROD).Both contractors have reviewed their portion of the project and provided the requested tasks.The tasks have been incorporated into the Project Schedule, which is also included in this IPG Report. Battery Energy Storage System All of the BESS supply contractors have been asking when the specification will be available.Now that a specific delay time has been stated,this time will be used to issue and complete the BESS bidding process and have a BESS Contractor selected for award as soon as the ROD is issued.The BESS Specification from Power Engineers is proposed to be issued in two parts:Technical and Commercial.The Technical Specification will cover all technical aspectsof the BESS such as power conversion system,controller logic for battery type and life,system studies to verify the final required MVAR capacity,verified number of outages and respective value of energy required.The Commercial Specification will address 2 issues such as life cycle costs,warrantees,optional cost for contractor O&M on a year by year basis,lease back options and financing options.This two step process will be very similar to the process used for the Kenai SVS procurement,and provides verification that the contractors have technical competence prior to having a price proposal. Wilson Substation There have been several questions from BESS suppliers as to why the Wilson substation and the BESS are included in the same turnkey construction contract.The Wilson substation design effort and BESS Specification have always been in the Power Engineers scope of work, but it may be appropriate to separate the substation design from the BESS and bid major equipment,and labor plus minor material contracts for the Wilson Substation construction.The BESS portion of the work would end at the high voltage side of the step-up transformer. Healy Substation The design work for the Healy breaker bay addition at Healy Substation will be requested from engineers.Dryden &LaRue may have an advantage in this effort as they have recently completed a substation bay design for the Healy Clean Coal Project which will be adjacent to the new breaker bay addition.This advantage from prior experience is anticipated to be seen in a reduced cost proposal. Transmission Line The transmission line,assuming the Agency recommended route in the Environmental Assessment,could be separated into three or four major portions.The Tanana River crossing and the portion north of the Tanana River could be constructed with one contract using standard techniques with the possible exception of the southern river crossing tower.The Tanana Flats section will be constructed in the winter season and could be divided in two or left as one section.Early completion payment may be considered as an incentive to schedule crews to work around the clock on the Tanana Flats sections it will maximize equipment usage,maximize use of winter construction season,and since artificial lighting will be required whether the work is done at day or night during the short winter daylight hours. The remaining portion of the line located in the foothills and along the Usibelli road could be constructed during summer months using more standard equipment.The project completion is now projected for November 4,1999. Exhibit C -Construction Budget Northern Intertie PHASE 1]-DESIGN $3,620,000 General Expenses $100,000 Environmental Assessment $155,000 DVG Survey System $440,000 Archaeological Investigation $100,000 Wetland Survey $35,000 Field Surveying /Staking $510,000 _Line -Engineering and Design $695,000 Geotechnical Phase 1 $500,000 Easements and Land Rights $575,000 Meteorological Study $30,000 Substation/Energy Storage System Design $400,000 System Studies for Scoping $30,000 APUC or REA Approval $50,000 Develop Finance Plan PHASE 2 -PROCUREMENT and CONTRACTING $130,000 Transmission Line Bids Major Equioment $40,000 Construction Labor Contracts $50,000 Substation/Energy Storage System Bids Major Equipment $20,000 Construction Labor Contracts $20,000 PHASE 3 -CONSTRUCTION $71,250,000 Geotechnical Phase 2 $1,000,000 Transmission Line Construction Wilson to Rex Trail $27,590,000 Healy to Rex Trail $12,600,000 Construction Management $560,000 Right of Way Clearing $1,000,000 Substation Wilson Substation Turnkey $4,000,000 Healy Substation $450,000 Construction Management $50,000 Energy Storage System Turnkey Installation $24,000,000 Northem Intertie Project Total $75,000,000 HF-INV.XLS Northern Intertie -Healy to Fairbanks Line ]-Jul-97 F =Final Total Contract Allocated Total Contract Total Contract Total Payments Percent CONTRACTOR Original Contingency Changes Commitment to Date Payment Dryden &LaRue $584,822.00 $58,482.20 $0.00 $643,304.20 $417,907.13 64.96% Dames and Moore,Inc EA $52,216.00 $2,524.00 $218,661.50 $273,401.50 $259,766.13 95.01% Dames and Moore Raptor Survey $13,200.00 $1,300.00 $0.00 $14,500.00 $11,159.02 76.96% Golder Associates $204,895.00 $38,981.50 $201,939.00 $445,815.50 $378,728.61 84.95% Land Field Services (Ownership)$12,970.00 $1,297.00 $0.00 $14,267.00 $12,270.15 86.00% Nortech Surveys $196,700.00 $0.00 $39,840.00 $236,540.00 $228,500.00 96.60% Power Technologies Inc $17,610.00 $0.00 $30,590.00 $48,200.00 $28,184.61 58.47% Northern Land Use $80,595.00 $8,058.40 $7,902.00 $96,555.40 $96,527.70 99.97% Richmond Meteorological $20,480.00 $2,048.00 $5,709.00 $28,237.00 $23,069.05 81.70% Power Engineers,Inc.$280,117.00 $28,011.70 $0.00 $308,128.70 $53,263.73 17.29% Land Field Services (Land Rights)$143,846.00 $14,384.00 $4,428.00 $162,658.00 $61,655.78 37.91% Alaska Biological Research $17,388.00 $1,739.00 $34,598.80 $53,725.80 $53,341.70 99.29% Bureau of Land Management Sec.5100 $25,000.00 $5,000.00 $30,000.00 $60,000.00 $60,000.00 100.00% AeroMap US,Inc.$93,000.00 $7,100.00 $0.00 $100,100.00 $81,927.00 81.85% CONTRACT TOTALS $1,742,839.00 $168,925.80 $573,668.30 $2,485,433.10 $1,766,300.61 Page 1 Northern Intertie Project Schedule Task Name Start Date Effort Duration End Date 188 1904 1985 1998 1997 1998 1898 ni aa af a2 f a3 a a [|az [a 7 aa ai az [a3 |aa a |a |a a4 a [|a [a J aa a [|a2 [a [a [LY Accept Project Northern tntertle 230 kV Transmission Line 12/1193 6,783.71d|1,497.00d/11/4/99 I A NorthENDOF Environmental Process 4211193 255.89d;1,094.00d)4/1/98 ]Enviror 1 Process Select Ait Routes 12/1193 4.59d 220.00d)10/12/94 Select Substation Site 47/94 3.96d 192.00d)10/17/94 Select Energy Stor Sites 117/04 1.934 192.00d|10/17/04 to E'S +Project Administration (EA)214194 245.41d 818.00d/4/29/97 Project Administration (EA) LA [BLM approves Conractor L\_NOAWwEPA +EIS PROCESS 5/9/97 Od 226.00d;4/4/98 []EIS PROCESSilAANOAWEPA| Design/Construct Substations 124193 651.66d|1,292.00d|1/13/99 lt :::: ]Design/Construct Substations Design BES &Substations 114/94 219.41d}1,262.00d/1/13/99 ee ]Design BES &Substations Prepare RFP for Design 114/94 0.54di 3.00d|1/18/94 EB Prepare RFP for Design Evaluate Design Proposals 2/18/94 2.25d)3.00d|2/23/94 B Evaluate Design Proposals IPG Approves Sub.Design Firm 4/29/94 1,00d!100d)4/29/94 1 IPG Approves Sub.Design Firm Finalize Design Contract -NTP 8/24/94 1.510)3.00d|8/26/94 Fineize Design Conttact -NTP +BESS 515/97 Od 428.00d)1/13/99 ( :' ]BESS +North Star Substation Design 413195 213.81d 944.00d/9/23/98 ]North Star Bubstation Design +Material Procurement 4/9/98 Od 150.00d/8/11/98 []Material Procurement Substation Modification -Healy 12/1/93 432.554)432.55d|8/18/95 lg yh y EE «6©-Substation Modification -Healy lasue Notice-to-Proceed +Geotechnical Studies 212194 22.35d|22.00d/3/4/94 of Geotechnical Studies |LA Reteese Right-of-Way Apply For Easements/Permits 8/8/94 4.45d 942.00d|4/30/98 1 J Apply For Easements/Permits Land Rights Acquisition 8/8/94 4.45d 942.00d!4/30/98 -]Land Rights Acquisition Agency Permits (BLM,ADL,etc.)5/8/96 4.45d)490.00d)4/15/98 Agency Permits (BLM,ADL,etc.) +Property Acquisitions 3/5/98 Od 41.00d)4/30/98 °CC]Property Acquisitions Alternative Land Use Study 8/8/04 Od!30.00d|9/19/94 SEEM Attornative Land [se Study Release Right-of-Way 4/30/98 Od Od]4/30/98 A Release Right-of-Way +Centerline Aerial Survey &Mapping 9/16/96 176.00d 458.00d/7/8/98 i i ]Centerline Aerial Survey &Mapping Issue Notice-to-Proceod | Line -Engineering and Design 12/6/93 437.29d|1,325.00d)3/5/99 -}Line -Engineering and Design Design RFP 12/8/93 4.00d|4.00d]12/9/93 L pesign REP Evaluate Design Proposals US/94 24.50d;11.00d)1/19/94 GM Evatuate Design Proposals Select Design Firm 1118/94 2.00d 4.00d)1/21/94 HF Select Design Firm {PG Approves Award 125194 Odi 1.00d]1/25/94 1 IPG Approves Award Finalize Design Contract 1/26/04 4.00d 4.00d!1/31/94 B Finalize Design Contract Issue Notice-to-Proceed 211194 Od Od)2/1/94 AL issue Notice-to-Proceed Meteorological Study 6/1194 Od 90.00d|10/6/94 SEE Meteorologich!Study Soll Investigations on 138kV &Healy Sub.5/15/97 Od 100.00d}10/6/97 gations on 138kV &Healy Sub. i +LiIne Design/Project Administration 24194 402.79d}1,286.00d)3/5/99 Pot ' ]Line Destgn/Project Administration Right-of-Way Clearing 4/1/98 Od!239.00d/3/11/99 []Right-of-Way Clearing eee i sO -Open Clearing Bide-Fists +Bid Tanana Flats 9/15/98 Od:23.00d/10/15/98 oo Bid Tanana FlatsAwardClearingContract-Fats Open Clearing Bids -Foothitis +Bid Alaska Range Foothills 4/1198 od 24.00d|5/4/98 4 Bid Alaska Range Foothills ee eg ee a ee ee oe ;an Awerd Clearing Contract -Foothitie ROW Clearing 5/19/98 od 205.00d|3/11/99 f ]ROW Clearing Clear Tanana Fiats 10/30/98 Od)90.00d)3/11/99 Clear Tanana Flats Clear Foothills 5/19/98 Od 55.00d)8/5/98 SARGERAS 9 Clear Foothits +Line Construction Contracts 5/1198 4.65d 82.000)8/26/98 Line Construcdon Contracts oe .|'Aw/\p)idivatasti(EinetINGE)Maree tet 9)Contract LA [Open Material Bids +Materials 10/20/97 2.05d 270.00d}11/13/98 LC ]}Matbrials |AX Award Material Contract +Construction Management 8/28/98 od 228.000)7/23/99 l ]Construction Mana --a en a |ove Erection +Link 1 Construction -Foothills 7123/98 2,504.25d 122.50d)1/18/99 Link 4 Construction -Foothills +Link 2 Construction -Flats 11/16/98 2,710.88d)195.88d)8/24/99 [}Llnk 2 Constru Energize Line 8/24/99 8.00d|2.00]8/26/99 1 Energize Line Final Inspection 8/26/99 6.25d §.00d/9/2/99 BB Final inspection Accept Project 9/2/99 Od!Od]9/2/99 A Accept Project _ENDOFPROJECT °4114/99 od al 11/4/99 A ENO ALASKA INDUSTRIAL DEVELOPMENT =AND EXPORT AUTHORITY = qm ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 June 20,1997 Mr.Mike Kelly General Manager Golden Valley Electric Association P.O.Box 71249 Fairbanks,Alaska 99707-1249 SUBJECT:AIDEA Board Update Northern Intertie Dear Mr.Kelly: Our Board has asked that staff provide an update on the status of the Northern and Southern Intertie.|will discuss this matter with Mr.Steve Haagenson.The status report should be at an executive summary level from Golden Valley.Material from Power Engineer's or your IPG monthly reports could be attached if necessary.|suggest a brief discussion including an introduction,budget and schedule,accomplishments to date,and potential critical future milestones or problems which may require interagency,administrative,or legislative guidance or actions.It would be presented in our August Board meeting so a draft is needed by mid July. Please call me if you have any questions. Sincerely,- BM Cob-Dennis V.McCrohan,P.E. Deputy Director -Energy cc:D.Randy Simmons,Executive Director Steve Haagenson,GVEA Anchorage Daily News OE coe eer pete coe eB RB ea te BL TU Seen go aM he | '|:troute,said Gary Foreman,BLM's project |-."About half of allwritten comments came' t also were submitted.,ti:?%)<*GY'...*.Most of those involved concerns the power# Masa,we aar aBLMshelves.power line |to.conduct more studies|'The Associated Press .thor we 2.€as where the environmental assessment;i |.FAIRBANKS'-Construction ofa'$75-«didn't address things as adequately as we :million 'high-capacity.power:line from.would have liked to see.”.... "Eyer'Healy to Fairbanks has been delayed until"...Past public.testimony indicates some'next year:.The.Bureau of.Land Manage-:.people.disagree that a second power.line |...ment has decided to conduct more environ-?.should be built on a route "different from-'mental studies'and take more public |com-__the existing line.The EIS process will 're-."ment on the intertie route.'..consider all suggested routes,including the.A combination of public controversy 'and5 existing path.|'unanswered environmental 'questions .©Because the final routé hasn't been 'des-_drove the federal agency to plan further re-.:ignated,Golden Valley can't do much pre"search on the effects of::Golden Valley "liminary work,:said Steven Haagenson,..Electric Association's.Proposed |100-mile the utility's manager of engineering,ser.”,Power line.>.-LSE vices.j fey Bp iter:_BLM requested "éan-environmental im-..-"We're not going to go out and 'do design:aypactstatement,'a more in-depth analysis ..,work when we.do not have the final route,”-;that includes additional public testimony,,he said."We want to move on construction;'after,finishing"its environmental assess-:'wbut minimize risk,oslo?"ement::That:'will delay the Project at leas rd Oka Haagenson 'said.hezwasn't 'surprised.by-*"eight months..;+0)GBILM'S decision.pisencininbarewibeenaibnbn haapes¢.}BLM.recomimiended iin 'January that the,,The secondf|power line,along witha bank.:#230-kilovolt Jine be built along the western «:of.batteries-in:Fairbanks,-would:reduce.”iedge of the:Tanana Flats and south 'of they,short "nuisance”power outages in the area,..|.'Tanana River.-After that recommendation,* .he'said.'Transmission losses'will:be're-:.|{BLM:received about -.170 written com-. duced by about eight Megawatts,enough to*|"ments,with only,20 supporting the selectéd.:"Power",500.houses..'as SOMES gepeeemeteAL -Smanager for the intertie.Several petitions-'from'people.living Outside,Foreman.said,ssa AS [Some people are uneasy with the pro-"line would have on 4a state.homestead.area.|ie still,”"Foreman gaid."And there are ar-'.a 5aa7aevagroebeycrnoanBsiepr4aneed "retwet Dennis McCrohan From:Randy Simmons Sent:Friday,March 14,1997 3:36 PM To:Dennis McCrohan;Jonathan Rubini Subject:FW:Intertie From:Katelyn Ohmer Sent:Friday,March 14,1997 3:21 PM To:Keith Laufer;Randy Simmons Subject:Intertie Update from L: 1)Ramona is going to introduce the legislation. 2)She got a commitment from Bert Sharp that if another project is added to the bill,the Majority would kill it. Fi |< Dennis McCrohan From:Randy Simmons Sent:Friday,March 14,1997 7:29 AM To:Dennis McCrohan;Keith Laufer Subject:FW: FYI From:Jonathan Rubini [SMTP:RubiJ@FOSTER.com] Sent:Thursday,March 13,1997 8:16 PM To:rsimmons;'Simmons,Randy' i spoke with jim baldwin about whether we "need"an amendment to the intertie grant appropriation.jiim and i say no,but....there is always a problem and a degree of uncertainness when the underlying transaction is as novel as here. that said,jim and i both feel the grant transfer agreement was valid, so any effort to "amend"the grant appropriation probably raises more questions than it answers.i will confirm with fps that the grant appropriation would not have any bering on a revenue bond issue (can't think why it would). 03/12/97 12:48 5032260079 ATER WYNNE (1 002 ,eX pens ATERWYNNE -soy tite 0HEWITTPortland,Orcgon 97201-6618 03)226-1191DoDSONpax(509)296-0078 &SKERRITT,LLP ATTORNEYS AT LAW VIA FACSIMILE VLO DUM TO:Randy Simmons AIDEA FROM:Ron Saxton DATE:March 12,1997 RE:Status of Northern Intertie Environmental Assessment The comment period for the environmental assessment closed Friday, February 21,1997.BLM received about 100 comments.In addition,they have decided to extend the comment period for an additional two weeks. BLM is currently determining the appropriate next step.We will let you know as we learn more. cc:Keith Laufer,Alaska Attorney General's Office 1-ALS\2381aa/.rnem Sratrle,Washington (206)623-4711 Fax (206)467-8405 ©San Prancisca,Califormia (415)421-4143 Fax (415)¥69-1263 3712/97 11:47a | Ce vemis AN ACT Authorizing Bonds and Loans to Participating Utilities to Finance the Acquisition, Design,and Construction of Power Transmission Interties Be it enacted by the Legislature of the State of Alaska: Sec.1.Sections 29 and 30 of 19,SLA 1993 is repealed. Sec.2 The Alaska Industrial Development &Export Authority may issue revenue bonds for the benefit of the utilities participating in that intertie,or for such subsidiaries or other entities formed by one or more participating utilities,to jointly finance the acquisition,design,and construction of a power transmission intertie of at least 138 kV between Healy and Fairbanks.the total principal amount of the bonds may not exceed $60 million. Sec.3 The Alaska Industrial Development &Export Authority may issue revenue bonds for the benefit of the utilities participating in that intertie,or for such subsidiaries or other entities formed by one or more participating utilities,to jointly finance the acquisition,design,and construction of a power transmission intertie of at least 138 kV between Anchorage and the Kenai Peninsula.The total principal amount of the bonds may not exceed $60 million. EAC FEB 21°97 @2:15PM FEB 21 °97 @7:SGAM G' ADMINISTRATION Fide: 6Y *GOLDEN VALLEY ELECTRIC ASSOCIATION INC.Box 71249,Fairbanks,Alaska 99707-1249,Phone 907-452-1151 February 21,1997. 'The Honorable Bert Sharp Senator,State of Alaska . 'State Capitol Rm 514 Juneau 99801-1182 Dear Bert: As.we discussed,the other Railbelt utilities have voted'to seek a narrow technicalfix which wouldpermitcondominiumownershipandAIDEAfinancingoftheNorthernIntertie,We vill not fighttheirefforts.We have spoken with Randy Simmons at AIDEA who said they would prefer to wait to see if you and Ramona would look favorably on such legislation before they support it Please let us know if we can help in any way.- Best regards,Ly reMichaelP.Kelly _General Manager ce:Interior Delegation = GVEA Board of Directors - 45-16-1997 B3'44PM FROM Seward Engr &Utilities TO 19672693844581 P.@2 :MINUTES INTERTIE PARTICIPANTS GROUP January 22,1997 CALL:TO ORDER Chairman Calvert called the mecting of the IPG to order by teleconference at 9:00 a.m.Attendance included Gene Bjornstad,Mike Kelly,Wayne Carmony,Norm Story,Tom Stahr,Dave Calvert,and Roger Kemppel.PROPOSAL FOR LEGISLATIVE "FIX"TO ALLOW AIDEA FINANCING OF INTERTIE The IPG discussed the proposal for a legislative "fix”to allow AIDEA financing of intertie lines. The motion was made and seconded to approve the proposal (attached)and send it to Randy Simmons,Executive Director of AIDEA,with a letter from Chairman Calvert (attached) requesting the Legislature to amend the two grants for the Northem and Southern Interties to allowforAIDEAfinancing.Voice vote passed the motion unanimously, NEXT.MEETING The next meeting was scheduled on March 25,1997 at Municipal Light &Power. ADJOURNMENT The motion;'was made and seconded to adjourn.Motion approved. Dave Calvert,Chairman Attest: Wayne Carmony,Secretary-Treasurer ;,-[BA0797 "3:25p7 @3-18-1997 @3:44PM FROM Seward Engr &Utilities TO 19@72693044581 Pas LP.G Agenda | JANUARY 22,1997 i Teleconference-9:00 AM ; 1.|Pops tira a te AIDA SaniyedeAaAiAorBodemdLanaPacingUioFacetsAan,'Desiga and Constraction of Power Tranamimian Interties'Section 1.Section 29 tad 30 of FICS for CS fc"Seante Bill No.126 (EIN)is fepesled.:2.The Alaska Intuscial Development é:Export Authocity may isme tad sndSecupaerterintoloanswiththeutilitiesprrtisipatinginthstLotertictofiancethescquisition,design,and construction of 2 power transmission Intértis of atleast138KVbetweenHealyandFairbaniceThototalpricpalamoéatofthebondsaodloansmaynotexceed$60 million. 'Seedon3.'The Alaska Industrial Develogment&ExportAuthiy may sme iondaandexterfoloarawiththewilesparangintha!Interxtis to thsandconstnictionofxpowaertrantmissionIntertinofatacquisition,design,least 138 KV between Anchorage and the Kenai Peninaila.The total princspalamountofthebondsandloausmaynotexceed$60 milfion. [3/10/97 _3:49p|eA = Ce.Vennis AN ACT Authorizing Bonds and Loans to Participating Utilities to Finance the Acquisition, Design,and Construction of Power Transmission Interties . Be it enacted by the Legislature of the State of Alaska: Sec.1.Sections 29 and 30 of 19,SLA 1993 is repealed. Sec.2 The Alaska Industrial Development &Export Authority may issue revenue bondsforthebenefit of the utilitiesparticipatingin that intertie,or for suchsubsidiariesorotherentitiesformedbyoneormoreparticipatingutilities,to jointly, finance the acquisition,design,and construction of a power transmission intertie of atleast138kVbetweenHealyandFairbanks.the total principal amount of the bonds may not exceed $60 million. Sec.3 The Alaska Industrial Development &Export Authority may issue revenue bonds for the benefit of the utilities participating in that intertie,or for such subsidiaries or other entities formed by one or more participating utilities,to jointly finance the acquisition,design,and construction of a power transmission intertie of at least 138 kV between Anchorage and the Kenai Peninsula.The total principal amount of the bonds may not exceed $60 million. LAC Dewnt S 0-LSO7S50\E Nonny Speer HOUSE BILL NO. IN THE LEGISLATURE OF THE STATE OF ALASKA TWENTIETH LEGISLATURE -FIRST SESSION BY REPRESENTATIVE BARNES Introduced: Referred: A BILL FOR AN ACT ENTITLED | "An Act relating to revenue bonds issued by the Alaska Industrial Development and Export Authority.for interties between Healy and Fairbanks and between Anchorage and the Kenai Peninsula;and providing for an effective date." BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: *Section 1.Section 29,ch.18,SLA 1993,is amended to read: Sec.29.The Alaska Industrial Development and Export Authority may issue revenue bonds for the benefit of the utilities participating in the intertie,or for the benefit of the subsidiaries or other entities formed by one or more participating utilities,to jointly finance the acquisition,design,and construction of a power transmission intertie of at least 138 kilovolts between Healy and Fairbanks [AND OWNED,FOR THE BENEFIT OF ALL OF THE UTILITIES PARTICIPATING IN THE INTERTIE,BY GOLDEN VALLEY ELECTRIC ASSOCIATION,INC].The principal amount of the bonds may not exceed $60,000,000. *Sec.2.Section 30,ch.18,SLA 1993,is amended to read: -1- New Text Underlined [DELETED TEXT BRACKETED] ewfFeNAakhWDN=bh[-]0-LSO750\E Sec.30.The Alaska Industrial Development and Export Authority may issue revenue bonds for the benefit of the utilities participating in the intertie,or for the benefit of the subsidiaries or other entities formed by one or more participating utilities,to jointly finance the acquisition,design,and construction of a power transmission intertie of at-least 138 kilovolts between Anchorage and the Kenai Peninsula [TO BE OWNED,FOR THE BENEFIT OF ALL OF THE UTILITIES PARTICIPATING IN THE INTERTIES,BY CHUGACH ELECTRIC ASSOCIATION,INC].The principal amount of the bonds may not exceed $60,000,000. *Sec.3.This Act takes effect immediately under AS 01.10.070(c). -2- New Text Underlined [DELETED TEXT BRACKETED] LAW OFFICES OF KEMPPEL,HUFFMAN AND ELLIS A PROFESSIONAL CORPORATION ROGER R.KEMPPEL 255 E.FIREWEED LANE,SUITE 200 RICHARD R.HUFFMAN DONALD C.ELLIS -Avg AG EXEBERSKA 99503-2025ro.5 ®"]pe *:tos "el E:v Ri ORY (907)277-1604 ANDREW J.FIERRO BOBBY DEAN SMITH BEeecea crane February 21,1997 FEB 2 4 1997 WRITER'S E-MAIL ADDRESS:trk@khe.com Alcwtia Indust4/Davelopirant te OVMnogESarit' D.Randy Simmons and Ex,¥Ke Executive Director ; Alaska Industrial Development &Export Authority 480 W.Tudor Road Anchorage,AK 99503 VIA FACSIMILE:269-3044 Dear Mr.Simmons: Dave Calvert,Chairman of the Intertie Participants Group,earlier forwarded to you a proposed "technical fix”to existing intertie legislation to allow AIDEA to jointly finance the Participants'additional cost of the Northern and Southern Tieline projects.As you know,the Intertie Participants Group voted in favor of this legislation with one abstention,that being GVEA. Notwithstanding GVEA's abstention during that voting process,however,Mike Kelly,General Manager of GVEA,subsequently informed the Interior legislative delegation that GVEA will not oppose this legislation.I have enclosed a copy of a letter from Mr.Kelly to Senator Bert Sharp on this issue.I believe that letter,together with the affirmative support of all of the other Intertie Participants,clearly indicates that the Railbelt utilities will not be at odds with each other in Juneau with respect to this legislation. As Mr.Calvert indicated to you yesterday,the Intertie Participants believe this legislation needs to be introduced as quickly as possible.As you know,the Intertie Participants plan to be in Juneau starting the first of March and plan to begin discussing this legislation with their legislators at this time. I have enclosed a copy of the proposed legislation within which I have included the reference to revenue bonds and deleted the reference to loans as your staff indicated was desirable. I would appreciate it if you and your staff would review this proposed legislation as quickly as possible and provide us with any comments you might have early next week so that we can finalize this proposal. Sincerely yours, KEMPPEL,HUFFMAN AND ELLIS,P.C.4 (>t wa.is'<orm Seema Roger R?Kemppel 'Ika Row Enclosures:Letter from Michael P.Kelly Dw to Bert Sharp Cetin Par in ANYccw/encls:Dave Calvert,IPG Chairman : Proposed legislation 'pew md fs\ARECA\1997TielineLegis\2-21-97\F Sv GOLDEN VALLEY ELECTRIC ASSOCIATION INC.Box 71249,Fairbanks,Alaska 99707-1249,Phone 907-452-1151 February 21,1997 'The Honorable Bert Sharp Senator,State of Alaska State Capitol Rm 514 Juneau 99801-1182 Dear Bert: As we discussed,the other Railbelt utilities have voted to seek a narrow technical fix which would permit condominium ownership and AIDEA financing of the Northern Intertie.We will not fight their efforts.We have spoken with Randy Simmons at AIDEA who said they would prefer to wait to see if you and Ramona would look favorably on such Jegislation before they support it. Please let us know if we can help in any way, Best regards,| Mad Michael P.Kelly General Manager ce:Interior Delegation GVEA Board of Directors AN ACT Authorizing Bonds and Loans to Participating Utilities to Finance the Acquisition,Design,and Construction of Power Transmission Interties Be it enacted by the Legislature of the State of Alaska: Sec.1.Sections 29 and 30 of 19,SLA 1993 is repealed. Sec.2.The Alaska Industrial Development &Export Authority may issue revenue bonds with the utilities participating in that intertie,or with such subsidiaries or other entities formed by one or more participating utilities,to jointly finance the acquisition,design,and construction of a power transmission intertie of at least 138 kV between Healy and Fairbanks.The total principal amount of the bonds and loans may not exceed $60 million. Sec.3.The Alaska Industrial Development &Export Authority may issue revenue bonds with the utilities participating in that intertie,or with such subsidiaries or other entities formed by one or more participating utilities,to jointly finance the acquisition,design,and construction of a power transmission intertie of at least 138 kV between Anchorage and the Kenai Peninsula.The total principal amount of the bonds and loans may not exceed $60 million. Filo @ Main Office (907)224-3331 @ Police (907)224-3338 @ Harbor (907)224-3138 oh er @ Fire (907)224-3445 Bp we @ Fax (907)224-3248 -CITY OF SEWARD P.O.BOX 167 SEWARD,ALASKA 99664 January 22,1997 Randy Simmons Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage,Alaska 99503 Dear Mr.Simmens: Several months ago,your predecessor,Mr.Snell,requested the Intertie Participants Group to provide him with their position on requesting the legislature to amend the two grants for the Northern and Southern Interties to allow for AIDEA financing.At that time,the IPG felt it would be appropriate to wait until this legislative session to address the issue. Attached is a resolution passed by the Intertie Participants Group (IPG)on January 22,1997 addressing the possible AIDEA financing issue.We will be checking with the original sponsors of the legislation,Ramona Barnes and Bert Sharp,to insure that they are comfortable with the proposed revision.However,we wanted to make you aware of the IPG action and give you the opportunity to comment.The ideal situation would be for AIDA to sponsor this legislation as an administrative change. Please call me at 224-4071 is you need any additional information. aChicane. Dave Calvert Chairman,IPG ce:Mike Kelly Gene Bjornstad Tom Stahr Wayne Carmony Norm Story wWvvspee'DRAFT |wy Commend 02/10/97 STATE OF ALASKA Ko thTHEALASKAPUBLICUTILITIESCOMMISSIONBeforeCommissioners: | Sam Cotten,Chairman James Posey Alyce A.Hanley Dwight D.Ornquist Tim Cook Saks Soe eajotte"Application by Golden Valley Electric Association,Inc.for Authority to Participate in theeeceeeeaesOwnershipoftheNorthernIntertieProject.ieeeSeee Application for Authority to Participate in the Ownership of the Northern Intertie Project Golden Valley Electric Association,Inc..(GVEA)hereby applies to the Alaska Public Utilities Commission for approval of its full participation in,and ownership of,the proposed 230 kV electric transmission intertie to be constructed between Healy and Fairbanks,Alaska (the Northern Intertie Project).The Alaska Industrial Development and uthority (AIDEA),custodian and administrator of the grant appropriation that the Alaska Legi approved for construction of the Northern Intertie Project,requires Commission approval,ef GVEA's participation prior to releasing funds for construction.Although GVEA's ultimate share of this project could be as low as 15.41%,or as high as 100%,the agreements described below will not result in such a final determination until after the project is constructed and operated.Therefore,GVEA seeks approval of its participation up to a 100%ownership level.This application is being filed in accordance with Section 42.05 of the Alaska Statutes. I.INTRODUCTION The North American Electric Reliability Council (NERC)found that the proposed Northern Intertie "...is needed for the reliability of electric supply to the Fairbanks area."This need for additional transmission interconnection lines between major load centers and their generation facilities was substantiated by a number of different studies and assessments recently undertaken concerning the Alaska Railbelt interconnected electric utility systems.In response to those recosomendations,the Alaska Legislature approved certain grants and other funding for five electric interties located throughout the State during its 1992-1993 Legislative Session.The subject of this filing is one of those electric transmission interties;the proposed Northern Intertie Project (Healy-Fairbanks). Page |-Application for Authority of GVEA Wy)ow hyn fr feu fe ae Dad vadba Hoe4.O. DRAFT 2/10/97 ired GVEA and the other Participating Utilities to pay fortheStategrant,the Legislature rec otthern Intertie which exceed the grantallofthedesignandconstructio&described below,all Partcipaangr Uelimes except GVEA and the Fairbanks MunicipalUtilitiesSystem(FMUS),bave the limited right to withdraw from participation in the Northern Intertie Project after the line is in opcration.Beeause GVEA intends to purchase the rights to serve FMUS customers (See APUC Docket 96-120),and that;as a result,GVEA may be ultimately responsible for all of the Participating Utilities'obligations! 1 hilanrrevad Commission approvaljis required byAIDEApriortofundsbeingdisbursedforconstruction-related activities.\. i.NOTICES "J Notices for this matter should be sent to: Michael P.Kelly - General Manager Golden Valley Electric Association Box 71249 Fairbanks AK 99707 with a copy to: Ron Saxton Kirk Gibson Ater Wynne Hewitt Dodson &Skerritt 222 SW Columbia Suite 1800 Portland OR 97201 Mm.BACKGROUND A,Historical Overview Studies of the benefits resulting from the construction of northern and southem Railbelt interties have been done for the Alaska Energy Authority (AEA)by Decision Focus, Inc.(DFID,NERC and Power Technologies,Inc.,(PTI).These studies culminated in a final report being prepared by AEA (the Railbelt Intertie Feasibility Study).With respect to the Northern Intertie,AEA's study conchided that the life-cycle benefits of the intertie project would exceed its projected costs by a substantial margin.GVEA's own studies indicate a Page 2 -Application for Authority of GVEA DRAFT 2/10/97 benefit/cost ratio of 2.52.See §1.4 Project Benefits,GVEA's Northern Intertie Environmental Analysis,dated December 4,1996. In 1993,the Alaska Legislature appropriated $43.2 million from the Railbelt intertie reserve for funding of a grant to GVEA for design and construction of a power transmission intertic of at least 230 Y3¥kV between Healy and Fairbanks.This grant was tobeusedbyGVEAforthebenefitofallutilitiesparticipatingintheNorthernIntertieProject. The group of utilities making up the Participating Utilities in the Northern Intertie Project are:GVEA,FMUS,Alaska Electric Generation &Transmission (AEG&T),Municipal Light &Power (ML&P),Chugach Electric Association,Inc.(Chugach),and Seward Electric System (SES).Homer Electric Association (HEA)and Matanuska Electric Association (MEA),as members of AEG&T,are parties and are referred to as Additional Parties. B.The Agreements Five associated agreements address a Participating Utility's rights and duties in addition to dealing with the manner in which the Northern Intertie will be constructed, operated,and maintained.These agreements are:the Intertie Grant Agreement,the Grant Transfer and Delegation Agreement,the Intertie Grant Administration Agreement,the Participant's Agreement and the Construction Management Agreement (collectively referred to as the Intertie Agreements).The subject matter of these agreements are summarized below: Intertie Grant Agreement -The purpose of this agreement is to satisfy the statutory conditions precedent to the Department of Administration's (DOA) transfer of the grant funds and to provide for the expeditious transfer of such funds to the grant recipients for the purpose of partial funding of the design and construction of the Northern Intertie and the new electric transmission line between Anchorage and the Kenai Peninsula (Southern Intertie).This agreement sets forth:1)the ownership percentages of each Participating Utility based on the relationship of the Participants'1990/1991/1992 three-year average non-coincident peak demand to the sum of the Participating Utilities' 1990/1991/1992 three-year average non-coincident system peak demands (note: the Participating Utilities can agree to a different allocation method);2)the rates to be charged users of the Interties;3)the assurance of access to resources,economy energy transactions,etc.,for all users of the Interties;and _4)the manner ii which funds are to be released by AIDEA.This agreementwasexecutedbyDOA,AIDEA,and all Participating Utilities effective October 1993.See Attachment 1. Grant Transfer and Delegation Agreement -This agreement.expresses DOA's and AIDEA's intention to enter into the Intertie Grant Agreement,designates AIDEA as the custodian and administrator of the State's grant appropriation,delegates all of DOA's powers and duties associated with the administration of the grant Page 3 -Application for Authority of GVEA =u DRAFT 2/10/97 appropriations to AIDEA and sets forth the requirements that must be satisfied before the grant funds can be disbursed (terms to be included in a Grant Administration Agreement).This agreement was executed by DOA,AIDEA and the Participating Utilities effective November 1993.Sze Attachment 2. Intertie Grant Administration Agreement -This agreement was entered into to satisfy certain statutory conditions precedent to DOA's transfer of the intertie grants pursuant to Sections 1 and 2 of Chapter 19,SLA 1993;the Intertie Appropriation.This agreement provides that:1)the Intertie Grants are to be transferred to AIDEA for the benefit of the Participating Utilitics, and that certain conditions are to be met prior to AIDEA releasing any of the grant funds to the Participating Utilities;2)the Participating Utilities shall commit to forming an Intertie Participants Group to oversee the construction of the interties and address grant expenditure matters;3)DOA and AIDEA agree to enter into a Grant Transfer and Delegation Agreement under which the Intertie Grants are transferred to AIDEA as custodian and administrator of the Intertie Grants;and 4)the Participating Utilities and AIDEA enter into a Grant Administration Agreement setting forth the terms and conditions to be satisfied by the Participating Utilities in order for there to be a disbursement of the Intertie Grants and the carrying out of AIDEA's obligations with respect to the Intertie Grants.The agreement also includes milestone schedules setting forththeactivitiestobeaccomplishex the interties.Receiptof ission approval is part of Phase fT This agreement was executed by ici ities effective Aupust 1994.See Attachment 3. Participant's Agreement -This agreement sets forth the terms and conditionsunderwhichtheParticipatingUtilitieswillown(as tenants in common)the intertie facilities and how they will exercise the rights and bear the responsibilities of such ownership.This agreement provides generally that: 1)each Participant's rights to Project capacity and responsibility for Project costs shall be determined as set forth in this agreement based on that Participant's respective share of each intertie;2)a Participant's share of the project can be changed and the requirements which must be met for such a change to occur;3)each Participant,other than GVEA and FMUS,shall have a limited automatic right of withdrawal from participation in the Northern Intertic Project after the initial year of operation (including the process to be used for reallocation of that percentage share);4)there shall be a managing proup called the Intertie Participants Group (IPG)which is charged withmakingdecisionsandcarryingoutintertieprojectactivities;5)a Participant will serve as Construction Manager for each intertie project (GVEA is the Construction Manager for the Northern Intertie)and shall be responsible for the design and construction of the intertie;and,6)a Participant will serve as the O&M Manager for each intertie project (GVEA is the O&M Manager for Page 4 -Application for Authority of GVEA DRAFT 2/10/97 the Northern Intertie).This agreement also sets out the manner in which the Project capacity can be used during periods when constraints exist.This agreement was executed by AIDEA and the Participating Utilities effective January 1994.See Attachment 4. Construction Management Agreement -The purpose of the ConstructionManagementAgreementfortheNorthernIntertieistodetailGVEA's responsibilitics as Construction Manager and the procedures necessary to assure that the IPG provides oversight of the design and construction of the Northern Intertie Project.This agreement covers the IPG's responsibilities with respect to oversight of GVEA,the scope of the project,construction budect issues,funding activities,invoicing and payment,etc.This agreement is in the process of being executed and currently has the signatures of five parties.The incomplete execution process of this document has no effect on the proposed GVEA obligations for which GVEA seeks approval.See Attachment 5 for a copy of the agreement. C.Ownership Percentages Under the terms of the Participant's Agreement,a Participating Utility's right to Project capacity and corresponding responsibility for Project costs are initially to be shared as follows: Initial Share of Project for Participating Utilities Participating Utility Percentage GVEA 15.41 FMUS ) 4.70 AEGET 25.79 of which: HEAE MEA- 11.60 14.19 ML&P 22.43 CEA 30.23 Page §-Application for Authority of GVEA DRAFT 2/10/97 SES 1.44 As noted earlier,under the terms of the Intertie Agreements,all Participating Utilities except GVEA and FMUS have the limited right to withdraw from participation in the Project.If there is a withdrawal,the withdrawing Participant's share of the Project must first be offered to the other Northern Intertie Participating Utilities in proportion to their respective Participant's Shares.Any portion which remains must be accepted by FMUS and GVEA in proportion to their respective Participant's Shares.See Section 4 of the Participants Agreement at Attachment 4 for the contract language which governs the manner in which the Participant's shares in the Project will be managed.For the purposes of this filing,the analyses assumes GVEA is responsible for 100%of the obligations of the Project given FMUS's intention to sell its service territory to GVEA. D.The Process Project design,engineering and environmental impact oa icpetaen been.AIDEA has released grant funds ffor these "preconstruction activities.”eriermg a Snaleriafs require he spproval.GVEA needs Commission approval of its participation at this timetoprovideARDEAtheassuranceofperformancenecessaryforAIDEA's release of grantfunds.Again,GVEA's 116089 guarantor role of 100%¢participation serves as AIDEA's _)security for contract performance.The milestone schedule for the Northern Intertie Projec of the Intertie Grant Administration Agreement requires that Commission approval be obtained during the Design Phase of the Project.See Schedule A-1 to the Intertie Grant Administration Agreement at Attachment 3, a GVEA secks the approval necessary to allow for construction as soon as practicable.Commission recognition and approval of GVEA's full participation in the Northern Intertie is an important step in the process of getting AIDEA to release funds for construction.GVEA desires to move the process forward in a manner which allows financing of construction to proceed,maintains the intent of the Legislature,and preserves the rights of all of the Participating Utilities. Because no other Participating Utility's obligations are final until after project construction is completed and operation of the intertie commences,other utilities regulated by this Commission are effectively on a different timeline than GVEA for seeking their respective Commission approvals. IV.PROJECT DESCRIPTION A.The Facilities Page 6 -Application for Authority of GVEA DRAFT 2/10/97 a a The Northern Intertie Project is comprised of two major components:1)a230kVtransmissionline;and,2)a 40 MW Battery Energy Storage System (BESS)facility.Cie Sein line will be operatedin parallel with the existing tranemission EVER lineetweenHealyandFairbanks.The stable limit of the aSeABaes,lines when operatedinparallelhasbeendeterminedtobe140MWdelivHbenKs;an increase of40MWoverexistingcapabilities.The BESS will provide spinning reserves!SuppOre]and #Htimprove reliability of the Railbelt system.The BESS is designed toprovideimmediateemergencyenergyduringunscheduledoutagesintheRailbeltSyeen.The purpose of supplying emergency energy through the use of BESSis to gaye Tust ane enable the utility experiencing the difficulty some time in which to bring another resource unit on line without having its customers experience a loss of power. B.The Route Federal agency under NEPA,ndEOPROTRESMOO!determine the preferred route for the intertie. The BESS is to be located in Southern Fairbanks,east of the airport.Under this arrangement,the BESS is to be adjacent to the proposed Wilson substation,one Northern Intertie terminus alternative. The Northern Intertie will be routed-on HLFEEHi its own right-of-way separate from the existing line.The route of the existing line was not chosen as a potential route for several reasons:1)the reliability of electric service is increased by using a separate corridor;2)the new intertie would not fit well into the existing corridor because of the amount of development iin the existing intertie corridor,imehiding -bundreds-of homesidete70tanvies);and 3)the availability of several feasible alternate routes.Consequently,the route:selection has been narrowed toa aaah intertie corridorcompletelyremovedfromtheexistingcorridor.A THIS WHRARCORIpESHd second,or loop;path was #recommended by NERCin 1991.The Northern is proposed to be brought into a new substationin Southern Fairbanks.This arrangement will result in two separate paths for power being transferred into the Fairbanks area,A copy of a map of the Vv.THE NEED FOR THE PROJECT The benefits generated by the development of additional electric transmission capability between Healy and Fairbanks are well-established.The existing interconnection Page 7 -Application for Authority of GVEA DRAFT |Ape2/10/97 line which serves the Norther Interior utilities is a S@-Vear-at single,limited capacity line.The development of the Northern Intertie Project will provide both increased reliability andWillreducethecostsofoveralloperationsto-GVEA by allowing reduced Tne loses andincreasedeconomyenergybenefits-fromFSi wile Sea with e Anchorage area."ThedevelopmentoftheNorthernIntertieisalsoin"AEA's bes 'interest ¢piven its ownershipintheHealyCleanCoalPlant(HCCP)b inéreasing its project revenues.FOVEEGT??Extensive studies have been performed for the Stateof Alaska and by GVEA addressing theneedfortheProjectandthebenefitswhichitwillprovidetotheRailbeltUtilitiesSystem. AEA's 1991 Railbelt Intertie Feasibility Smdy (relying on reports developed by DFI,NERC and PTT)found the expected value of total benefit to be roughly $105 million in 1996 {99%dollars based upon a range of cases resulting in benefits between $83 millionto$127 million.The AEA report noted that if a new 50 MW power plant is added at Healy, then the overall improvement in reliability could be very significant if a second Healy- Fairbanks line were added as well.AEA referenced the conclusion reached in PTI's screening study. New generation at Healy combined with a new line between Healy and Fairbanks may raise reliability of electrical service in the Fairbanks area nearly to that in the Anchorage area.With a second line between Healy and Fairbanks,and a system design that will withstand loss of a 50 megawatt unit at Healy or floss of]a line from Healy to Fairbanks,biackouts in the Fairbanks area should be far less frequent than at present. AEA Report at pp.6-13.The addition of HCCP will increase the amount of base load generation located at Healy to a total of 81 MW.HCCP iisexpected to begin eensreeeg:Lor anil Con PIS ARS aTPaigeTey,If only the existing single clcircuit line iis"available,none of this capacity willservetoreducetheamountofspinningreservesorloadsheddingcapabilitythatGVEAmustmaintainintheFairbanksareatoassuresystemreliability.?fStrengibices the lastSentence}! The Northern Intertie Project incorporates the use of BESS which will enabletheGVEARaabellsystemtowithstandthelossofthegenerationatHealywithconsiderablylessdisruptiontoitssystemthanwouldoccurpresently.BESS will be a major contributor tothereliabilityofGVEA's Repel system and other interconnected systems.For example,instead of keeping enough spinning reserves on line Sh¢-12 fel to cover potential loss of generation or transmission,the use of BESS allows time for reserve generation to besia NERC's report (also cited in AEA's report),noted that the existing single linetransmissioninterconnectionbetweentheAnchorageandtheFairbanksareasconstrainsthe sharing of generation between and among load centers and poses a significantly higher than traditional reliability risk for system-wide blackouts due to single contingency outages. Generally,a single 138 kV line of considerable length is not regarded as 2 reliable Page 8 -Application for Authority of GVEA DRAFT 2/10/97 interconnection to firm resources as remote as Healy is from Fairbanks.NERC concluded that: The proposed Healy-[Fairbanks]230 kV transmission line is needed for the reliability of electric supply to the Fairbanks area...[B]Jased on traditional planning criteria,the tie is required ta assure an adequate source-to-load path from Healy to the Fairbanks area.In fact,under traditional reliability criteria,a second transmission line between the Anchorage Bowl and the Fairbanks Heal area would likely be required..." NERC Report at p.4.See Attachment 7 for a copy of NERC's 1990 report entitled Reliability Assessment of the Railbelt Interconnected Electric Utility Systems of the Alaska Systems Coordinating Council 1990-1999. During periods when GVEA is importing non-firm energy from the Anchorage area,the support of Healy-based generation will be even more important.For example,if a single line becomes unavailable (out-of-service)at the time when GVEA is importing 23 MW of non-fixm energy and running both Healy generation plants,the GVEA system will requireanequivalentamountofbacialpgenerationonlinetoavoidextensiveloaddroppinginorder GVEA completed its analysis of the estimated benefits that it will receive from the Northern Intertie in December 1996.GVEA's report concluded that a total of $189.06 million in benefits would be experienced.This amount is comprised of an estimated $139.46 million in benefits as a result of the intertie and an estimated $49.6 million (1995 dollars)m BESS related benefits.The table below summarizes the benefits which GVEA estimates will be generated by the Northern Intertie Project. Benefits Value* Healy-Fairbanks Heaty/Patisnks Intertie Economical Energy from Increased Transmission Capability 42.70 Reduction of Transmission Losses . 38.34 Reconstruction Savings 29.60 Capacity Sharing 17.32 Page 9 -Application for Authority of GVEA DRAFT 2/10/97 Reliability Increase 11.50 Total Intertie Benefits , 139.46 Battery Energy Storage System Transmission Deferrals 15.00 Increased Transmission Capability 4.50 Capacity Deferral , 8.80 Production Expense Savings 5.10 Increased Reliability 13.60 Environmental Savings 2.60 Total BESS Benefits 49.60 Total Intertie and BESS Benefits 189.06 *Intertie benefits are in 1991 dollars,BESS benefits are in 1995 dollars. The total benefit/cost ratio of 2.52 assumes:1)a total construction cast for the Northern Intertie Project of $75 million;and 2)that the total estimated benefits of $189.06 million are achieved.Each of the benefits included in the above-table are addressed in GVEA's Environmental Assessment of the Northern Intertie and are summarized below. Economic Energy from Increased Transmission Capability ($42.70 million)-The greatest benefit of the Northern Jntertie Project would be the value of the increased transfer of economy energy from Anchorage to Fairbanks.GVEA's most economical power sources are its coal-fired generation plants in Healy and natural gas-fired generation from the Cook Inlet area.GVEA also has a 17%share of the Bradley Lake Hydroelectric plant,near Homer,on a "take or pay basis."By increasing the transfer capacity between Healy and Fairbanks,the proposed transmission line allows economic benefits to be realized from the continued substitution of the lower priced energy from southeentral (Southtentyal Alaska for locally produced energy.GVEA Page 10 -Application for Authority of GVEA DRAFT 2/10/97 has a take-or-pay contract to purchase 53 MW of power from the HCCP when it is in operation.This take-or-pay contract requires GVEA to pay for the power even if it cannot transfer it to Fairbanks.Currently there is not enough transmission capacity from Healy to Fairbanks for GVEA to transfer all of the power that will be generatedinHealy{®3 and the amount of economy energy it purchases from Reduction of Transmission Losses ($38.34 million)-Currently,approximately 13 MW of electricity is lost during the transfer of power from Healy to Fairbanks over the existing intertie,operating at 105 MW.By constmicting another intertie and splitting the electric load between the two interties,the loss between Healy and Fairbanks would be reduced to 4 MW.The net present value of these savings over the 50-year life of the Project would be approximately $38 million. Reconstruction Savings ($29.60 million)-The existing 138 kV transmission line between Healy and Fairbanks was constructedin 1967.GVEA expects to upgrade this line to 230 kV as part of the Hf te Project.Reconstruction of the existing intertie is expected to include realignment of the route in limited areas,such as near the Nenana Airport,where the existing line is close to the landing strip and floatplaneSiangtakeoff/landing area.With a second intertie in place,the existing intertiecouldbetakenoutofserviceforperiodsoftimewiththenewintertiesupplying power from the Healy generation units and seutheentral SéatHCenIFA Alaska sources. The existing line would be reconstructed over a period of five years,with the old intertie out of service as necessary. Reconstruction of the existing line without the proposed Northern Intertie would prevent Fairbanks area utilities from importing lower priced power from Healy and Anchorage during the reconstruction period.Reconstruction would still need to take place over a five-year period with the existing line being taken out of service only during low demand periods. Capacity Sharing ($17.32 million)-The increased capacity sharing between Anchorage and Fairbanks will allow for a sharing of reserve margins between Northern utilities (GVEA and FMUS)and Southern utilities (ML&P,Chugach,SES, HEA and MEA).Regional energy planning allows utilities throughout the Railbelt to buy and sell electricity as needed to make the maximum use of existing generation "sources,thereby reducing and/or delaying the need for individual utilities to build their own generation facilities to meet peak demands.A reduction in the capacity reserve margin therefore translates into a lower requirement for future plant additions, resulting im monetary and environmental savings.The capacity sharing benefit is similarly calculated in AEA's Railbelt Intertie Feasibility Study at about $17 million. Reliability Issues ($11.5 million)-Construction of the Norther Intertie would significantly improve the reliability of electric service throughout GVEA's and FMUS's service areas.GVEA currently receives up to 65%of its total power from Page 11 -Application for Authority of GVEA DRAFT 2/10/97 the Anchorage area over the existing 138 kV transmission line.FMUS currentlypurchasespowerfromtheinterconnectedsystemandhasexpressedaninterestinincreasingpurchasesfromtheotherRailbeltutilities.Currently,FMUS must pay afeetoGVEAfortransferringpowerfromtheexistingintertietotheFMUSsystem.The proposed Northern Intertie would seeFMUS with a direct connection to The AEA Study estimated that 50%of power outages in Fairbanks are transmission related and could be avoided with the proposed new intertie.Sixty-nine outages within the Last 11 years (1986-1996)are related to the Railbelt intertie transmission system between Anchorage and Fairbanks.Fifteen of these outages would be directly mitigated through construction of a second line.The impacts of the remaining outages would be reduced by the BESS. Outages result in costly losses to consumers,£0 on y through inconvenience and lostproduction,but also through equipment damagé.The economic costs of outages to residences vary widely with studies showing values from $0.21/kWh to $10.17/kWh. The same smdy showed that commercial and industrial user costs vary both among users and are more dependent on the length of the outage,with the economic costs to these users ranging from $0.07/kWh to $143.12/kWh. Based on the types of users in the service area and the average length of outages,the value of increased reliability from the reduction of transmission related outages in the AEA Study was determined to be about $11.5 million. Transmission Deferrals ($15 million)-Transmission deferral benefits consist of the costs saved by not having to install transmission line enhancements,such as reactive compensation,along the Anchorage to Fairbanks intertie and the Healy to Fairbanks intertie.If no BESS was included in the Project,reactive compensation would need to be added to several substations between Anchorage and Fairbanks to allow for the transfer of 140 MW of power,the same transmission capacity that is possible with the BESS.The Bess provides real power in Fairbanks,eliminating the need to use power produced elsewhere and transferred by transmission line to Fairbanks.EPRI estimated the benefit of transmission deferrals for the proposed BESS in Fairbanks to -be $15 million. Increased Transmission ($4.5 million)-The rating on the existing transmission line from Healy to Fairbanks is approximately 100 MW.The combined "secure"rating of the two lines together is limited to the transfer capability of the weakest line,in this case 100 MW.The Bess can supply 40 MW for twenty minutes.This increases the "secure”transmission capability to 140 MW.If 140 MW is being transferred across the two lines and one line trips off,the battery will supply 40 MW and the other100MWwilltransfertotheremainingline.The BESS gives GVEA Sad sttige Page 12 -Application for Authority of GVEA DRAFT 2/10/97 mirlcinanty time to start up local generation in Fairbanks to replace the power lostfrom'Healy or farther south.This results in a 40 MWincrease of transmission capability,valued by EPRI at $4.5 million. Capacity Deferral ($8.3 million)-The EPRI Study evaluates the needs for additional generation capacity in the future and calculates the savings associated with deferral of new generation facilities,through increased sharing of generator planning reserves. Generator planning reserves typically are determined by the utility's largest generator. The utility must have enough generation to meet demand even with the loss of its largest generator.The Railbelt Utility System allows the seven participating utilities to share generator planning reserves.Instead of GVEA looking at meeting its peak demand locally with the loss of its largest generator,GVEA can look at the entire Railbelt Utility System demand and loss of the largest generator on the Railbelt Utility System.The ability to share generator planning reserves throughout the Railbelt defers the need for new generation capacity.This benefit of capacity deferral resulting from the proposed 40 MW BESS in Fairbanks was estimated at $8.8 million by EPRI. .Production Expense Savings ($5.1 million)-Another significant benefit of the BESSisitsprovisionof40MWofspinningreservesandtheproductionexpensessaved associated with these reserves.Spinning reserves are a buffer or extra generation that is already up and running and able to respond immediately if a generator or transmission line were to trip off line.The supply of spinning reserves typically has high costs associated with the fuel needed to run a generator year-round to provide spinning reserves.The BESS provides spinning reserves through the energy stored in the battery and does not require the constant fuel use of a generator.The savings associated with this reduced production of spinning reserves by generator was estimated at $5.1 million. Increased Reliability ($13.6 million)-The EPRI Study notes that avoidance of load interruption is one of the primary benefits of a BESS for GVEA.The BESS provides a back-up for local generators,so that when a generator is lost the BESS takes its place and keeps power flowing throughout the system.The BESS also provides a back-up for power being transferred over transmission lines.This value of this increased reliability was estimated at $13.6 million by EPRI. Environmental Savings/Reduced Air Emissions ($2.6 million)-EPRI modeled the emissions that would be produced if thermal generation units were used to provide the spinning reserves provided by the BESS.Emissions were modeled for sulfur oxides (SOx),nitrogen oxides (NOx)and carbon dioxide (CO2).These emissions were selected due to the costs associated with their monitoring and control,and the recent development of markets placing a monetary value on emission reductions.The cost Page 13 -Application for Authority of GVEA DRAFT 2/10/97 gysteni,Cnn the services of an epeientSponsor retthe FinancialEngineeringCompany(FEC),to determine the impact that uadertalana sinientirecostsassociatedwithdevelopmentoftheProjectwouldhaveonthemembers ofGVEA.Niche Hubbard,the principal of FEC,prepared the estimated costs incurred byGVEAwithouttheNorthernIntertic§to those costs estimated to be incurred with theNorthernTealeMr.Hubbard found that under a base case scenario,”...the Northern Intertie shows significant benefits to GVEA even if GVEA is the sole participant and must absorb all of the costs." FEC's analyses was performed on eleven different case scenarios covering a period of twelve years.The estimated annual savings are $277,000 $383,800 for Year #1(1999)under a base case scenario.The amount of annual savings generated by the elevencasescenariosranforYear#12 (2010)range from a low of $893,000 S1°i Table ??,Summaryy oF Results,at p.20 of FEC's report at Attachment 8. FEC's report noted that its analyses did not incorporate other benefits that GVEA will enjoy as a result of the Northern Intertic such as: v The ability to perform maintenance on a de-energized line; v Reduced load shedding at times the North Pole units trip off-line during times when energy is being imported from Anchorage; v Increased reliability of power supply;and, v Decreased fuel and operating expenses incurred for spinning reserves that can be provided as a result of incorporating the battery system imto the Project. Although not quantified in FEC's report,these benefits are valuable to GVEA and the Railbelt system. In his summary of findings,Mr.Hubbard also concludes that the relatively low natural gas prices and availability of non-firm energy in the past have helped GVEA negotiate lower oil prices for fueling its oil-fired generating units located in Fairbanks.Without the intertie,Mr.Hubbard surmises that GVEA's negotiating leverage will watld be reduced.A copy of Mr.Hubbard's report is at Attachment 8. VI.CONCLUSION AND RECOMMENDATION Page 14 -Application for Authority of GVEA DRAFT 2/10/97 The need for an additional transmission interconnection line between Healy and Fairbanks is well-established and in the public interest.Commencing construction of the Project is important and should begin during the 1997 construction season.A delay serves nO one._ GVEA is effectively the guarantor and §major beneficiary of the Northern Intertie Project.As a result,GVEA wants to move the process forward in a manner which both preserves the intent of the Legislature and the rights of all of the Participating Utilities. GVEA has filed this application for Commission approval at this time in order to expedite the process and satisfy the requirements of the Intertie Grant Administration Agreement. Commission recognition and approval of GVEA's full participation in the construction, operation and ownership of the Northern Intertie is an important step in the process of getting AIDEA to release funds for construction. For the reasons set forth in this application,GVEA respectfully requests that the Commission approve GVEA's application as filed. Respectfully submitted, Ronald L.Saxton Kirk H.Gibson ATER WYNNE HEWITT DODSON &SKERRITT LLP 222 SW Columbia,Suite 1800 Portland,Oregon 97201-6618 §03/226-1191 phone 503/226-0079 fax Attorneys for Golden Valley Electric Association,Inc. Date:Monday,February 10,1997 Page 15 -Application for Authority of GVEA DRAFT 2/10/97 Attachment 1 - Attachment 2 - Attachment 3 - Attachment 4 - Attachment 5 - Attachment 6 - Attachment 7 - Attachment &- TABLE OF CONTENTS Intertie Grant Agreement Grant Transfer and Delegation Agreement Intertie Grant Administration Agreement Participants'Agreement Draft Construction Management Agreement Map of Eight Potential Intertie Routes Reliability Assessment of the Railbelt Interconnected Electric Utility Systems of the Alaska Systems Coordinating Council 1990-1999 by NERC,1990 FEC's Report on ??or real title of report Sure 1809 ATER WYNNE ,recoGreg7200-618HEWITTFaxnyne0079DODSON: &SKERRITT,LLP ATTORNEYS AT LAW FACSIMILE TRANSMITTAL NOTICE:This facsimile comtains confidential information that is being transmitted to and is intended only for tbe use of the recipient named below.Reading,disclosure,discussion,dissemination,distribution,or copying of this information by anyone other than the named recipient or his or her employees or agents is strictly prohibited.If you have received this facsimile in error,please immediately destroy it and notify us by telephone,(503)226-1191. DATE:February 10,1997 TO:_Ron Saxton -GUEST Westmark Baranof CITY/STATE:Juneau,AK ' FAX NUMBER:907/586-8315 OFFICE NUMBER:907/586-2660 FROM:Kari DOCUMENT:DRAFT Application PAGES (with COVER):_ -MESSAGE -a I just talked to Kirk.He said he's werking on the editorial comments (they're marked in the document)and he's trying to incorporate LGH's comments.He said he'll call you tonight to discuss. -DRAFT 2/10/97 Attachment 1 - Attachment 2 - Attachment 3 - Attachment 4 - Attachment 5 - Attachment 6 - Attachment 7 - Attachment &- oc rod © TABLE OF CONTENTS Intertie Grant Agreement Grant Transfer and Delegation Agreement Intertie Grant Administration Agreement Participants'Agreement Draft Construction Management Agreement Map of Eight Potential Intertie Routes Reliability Assessment of the Ratlbelt Interconnected Electric Utility Systems of the Alaska Systems Coordinating Council 1990-1999 by NERC,1990 FEC's Report on ??or real title of report DRAFT 2/10/97 The need for an additional transmission interconnection line between Healy and Fairbanks is well-established and in the public interest.Commencing construction of the Project is important and should begin during the 1997 construction season.A delay serves no One. GVEA is effectively the guarantor and §major beneficiary of the Norther Intertie Project.As a result,GVEA wants to move the process forward in a mamer which both preserves the intent of the Legislature and the nights of all of the Participating Utilities. GVEA has filed this application for Commission approval at this time in order to expedite the process and satisfy the requirements of the Intertie Grant Administration Agreement. Commission recognition and approval of GVEA's full participation in the construction, operation and ownership of the Northern Intertie is an important step in the process of getting AIDEA to release funds for construction. For the reasons set forth in this application,GVEA respectfully requests that the Commission approve GVEA's application as filed. Respectfully submitted, Ronald L.Saxton Kirk H.Gibson ATER WYNNE HEWITI DODSON &SKERRITT LLP 222 SW Columbia,Suite 1800 Portland,Oregon 97201-6618 503/226-1191 phone §03/226-0079 fax Attomeys for Golden Valley Electric Association,Inc. Date:Monday,February 10,1997 Page 15 -Application for Authority of GVEA =VvVve DRAFT 2/10/97 STATE OF ALASKATHEALASKAPUBLIC UTILITIES COMMISSIONBeforeCommissioners:Sam Cotten,Chairman ,James Posey - Alyce A.Hanley Dwight D.Ornquist Tim Cook fare"Application by 'Golden 'Valley Electric ™soca.Inc.for Anthonty to Participate in the Application for Authority to Participate in the Ownership of the Northern Intertie Project Golden Valley Electric Association,Inc..(GVEA)hereby applies to the Alaska Public Utilities Commission for approval of its full participation in,and ownership of,the proposed 230 kV electric transmission intertie to be constructed between Healy and Fairbanks,Alaska (the Northern Intertie Project).The Alaska Industrial Development andExportAuthority(AIDEA),custodian and administrator of the grant appropriation that the Alaska Legislature approved for construction of the Northern Intertie Project,requires Commission approval of GVEA's participation prior to releasing funds for construction. Although GVEA's ultimate share of this project could be as low as 15.41%,or as highas 100%,the agreements described below will not result in such a final determination until after the project is constructed and operated.Therefore,GVEA seeks approval of its participation up to a 100%ownership level.This application is being filed in accordance with Section 42.05 of the Alaska Statutes. I.INTRODUCTION The North American Electric Reliability Council (NERC)found that the proposed Northern Intertie "...is needed for the reliability of electric supply to the Fairbanks area."This need for additional transmission interconnection lines between major load centers and their generation facilities was substantiated by a number of different studies and assessments recently undertaken concerning the Alaska Railbelt interconnected electric utility systems.In response to those recommendations,the Alaska Legislature approved certain grants and other funding for five electric interties located throughout the State during its 1992-1993 Legislative Session.The subject of this filing is one of those electric transmission interties;the proposed Northern Intertie Project (Healy-Fairbanks). Page 1 -Application for Authority of GVEA DRAFT 2/10/97 GVEAis requesting the Commission grant approval of its participation in the ownership of the Northern Intertie Project at levels up to 100%.As a condition of receivingtheStategrant,the Legislature required GVEA and the other Participating Utilities to pay forallofthedesignandconstructioncostsfortheNorthernIntertiewhichexceedthegrantamountof$43.2 million plas Hilerest earnmips.Under the terms of the agreementsdescribedbelow,all Participating Oalines except GVEA and the Fairbanks MunicipalUtilitiesSystem(FMUS),bave the limited right to withdraw from participation in the Northern Intertie Project after the line is in operation.Beesuse GVEA intends to purchase the rights to serve FMUS customers (See APUC Docket 96-120),and that;as a result,GVEA may be ultimately responsible for all of the Participating Utilities'obligations!TWerefare,GVEA is requesting that its participation in the ownership of the NorthernInterticProjectBe:wea at levels up to 100%.Commission approvalis required byAIDEApriortofundsbeingdisbursedforconstruction-related activities. Il.NOTICES Notices for this matter should be sent to: Michael P.Kelly - General Manager Golden Valley Electric Association Box 71249 Fairbanks AK 99707 with a copy to: Ron Saxton Kirk Gibson Ater Wynne Hewitt Dodson &Skerritt 222 SW Columbia Suite 1800 Portland OR 97201 I.BACKGROUND A,Historical Overview Studies of the benefits resulting from the construction of northern and southern Railbelt interties bave been done for the Alaska Energy Authority (AEA)by Decision Focus, Inc.(DFT),NERC and Power Technologies,Inc.,(PTI).These studies culminated in a final report being prepared by AEA (the Railbelt Intertie Feasibility Study).With respect to the Northern Intertie,AEA's study concluded that the life-cycle benefits of the intertie project would exceed its projected costs by a subsiantial margin.GVEA's own studies indicate a Page 2 -Application for Authority of GVEA DRAFT 2/10/97 benefit/cost ratio of 2.52.See §1.4 Project Benefits,GVEA's Northern Intertie Environmental Analysis,dated December 4,1996. In 1993,the Alaska Legislature appropriated $43.2 million from the Railbelt intertie reserve for funding of a grant to GVEA for design and construction of a power transmission imtertic of at least 236 F38 kV between Healy and Fairbanks.This grant was to be used by GVEA for the benefit of all utilities participating ia the Northern Intertie Project. The group of utilities making up the Participating Utilities in the Northern Intertie Project are:GVEA,FMUS,Alaska Electric Generation &Transmission (AEG&T),Municipal Light &Power (ML&P),Chugach Electric Association,Inc.(Chugach),and Seward Electric System (SES).Homer Electric Association (HEA)and Matanuska Electric Association (MEA),as members of AEG&T,are parties and are referred to as Additional Parties. B.The Agreements Five associated agreements address a Participating Utility's rights and duties in addition to dealing with the manner in which the Northern Intertie will be constructed, operated,and maintained.These agreements are:the Intertie Grant Agreement,the Grant Transfer and Delegation Agreement,the Intertie Grant Administration Agreement,the Participant's Agreement and the Construction Management Agreement (collectively referred to as the Intertie Agreements).The subject matter of these agreements are summarized below: Intertie Grant Agreement -The purpose of this agreement is to satisfy the Statutory conditions precedent to the Department of Administration's (DOA) transfer of the grant funds and to provide for the expeditious transfer of such funds to the grant recipients for the purpose of partial funding of the design and construction of the Northern Intertic and the new electric teansmission line between Anchorage and the Kenai Peninsula (Southern Intertie).This agreement sets forth:1)the ownership percentages of each Participating Utility based on the relationship of the Participants'1990/1991/1992 three-year average non-coincident peak demand to the sum of the Participating Utilities' 1990/1991/1992 three-year average non-coincident system peak demands (note: the Participating Utilities can agree to a different allocation method);2)the Tates to be charged users of the Interties;3)the assurance of access to _resources,economy energy transactions,etc.,for all users of the Interties;and 4)the manner 4 which funds are to be released by AIDEA.This agreementwasexecutedbyDOA,AIDEA,and all Participating Utilities effective October 1993.See Attachment 1. Grant Transfer and Delegation Agreement -This agreement.expresses DOA's and AIDEA's intention to enter into the Intertie Grant Agreement,designates AIDEA as the custodian and administrator of the State's grant appropriation,delegates all of DOA's powers and duties associated with the administration of the grant Page 3 -Application for Authority of GVEA -wys 'DRAFT 2/10/97 appropriations to AIDEA and sets forth the requirements that must be satisfied before the grant funds can be disbursed (terms to be included in a Grant Administration Agreement).This agreement was executed by DOA,AIDEA and the Participating Utilities effective November 1993.See Attachment 2. Intertie Grant Administration Agreement -This agreement was entered into to satisfy certain statutory conditions precedent to DOA's transfer of the intertie prants pursuant to Sections 1 and 2 of Chapter 19,SLA 1993;the Intertie Appropriation.This agreement provides that:1)the Intertie Grants ate to be transferred to AIDEA for the benefit of the Participating Unilitics, and that certain conditions are to be met prior to AIDEA releasing any of the grant funds to the Participating Utilities;2)the Participating Utilities shall commit to forming an Intertie Participants Group to oversee the construction of the interties and address grant expenditure matters;3)DOA and AIDEA agree to enter into a Grant Transfer and Delegation Agreement under which the Intertie Grants are transferred to AIDEA as custodian and administrator of the Intertie Grants;and 4)the Participating Utilities and AIDEA enter into a Grant Administration Agreement setting forth the terms and conditions to be satisfied by the Participating Utilities in order for there to be a disbursement of the Intertie Grants and the carrying out of AIDEA's obligations with respect to the Intertie Grants.The agreement also includes milestone schedules setting forth the activities to be accomplished during the design and construction phases for the interties.Receipt of Commission approval is part of Phase I.This agreement was executed by AIDEA and the Participating Utilities effective August 1994.See Attachment 3. Participant's Agreement -This agreement sets forth the terms and conditionsunderwhichtheParticipatingUtilitieswillown(as tenants In common)the intertie facilities and how they will exercise the rights and bear the responsibilities of such ownership.This agreement provides generally that: 1)each Participant's rights to Project capacity and responsibility for Project costs shall be determined as set forth in this agreement based on that Participant's respective share of each intertie;2)a Participant's share of the project can be changed and the requirements which must be met for such a change to occur;3)each Participant,other than GVEA and FMUS,shall have 'a limited automatic right of withdrawal from participation in the Northern Intertic Project after the initial year of operation (including the process to be used for reallocation of that percentage share);4)there shall be a managing group called the Intertie Participants Group (PG)which is charged withmakingdecisionsandcarryingoutintertieprojectactivities;5)a Participant will serve as Construction Manager for each intertie project (GVEA is the Construction Manager for the Northern Intertie)and shall be responsible for the design and construction of the intertie;and,6)a Participant will serve as the O&M Manager for each intertie project (GVEA is the O&M Manager for Page 4 -Application for Authority of GVEA DRAFT 2/10/97 the Northern Intertie).This agreement also sets out the manner in which the Project capacity can be used during periods when constraints exist.This agreement was executed by AIDEA and the Participating Utilities effective January 1994.See Attachment 4., Construction Management_Agreement -The purpose of the ConstructionManagementAgreementfortheNorthernIntertieistodetailGVEA's responsibilitics as Construction Manager and the procedures necessary to assure that the IPG provides oversight of the design and construction of the Northern Intertie Project.This agreement covers the IPG's responsibilities with respect to oversight of GVEA,the scope of the project,construction budget issues,funding activities,invoicing and payment,etc.This agreement is in the process of being executed and currently has the signatures of five parties.The incomplete execution process of this document has no effect on the proposed GVEA obligations for which GVEA seeks approval.See Attachment 5 for a copy of the agreement. C.Ownership Percentages Under the terms of the Participant's Agreement,a Participating Utility's right to Project capacity and corresponding responsibility for Project costs are initially to be shared as follows: Initial Share of Project for Participating Utilities Participating Utility Percentage GVEA 15.41 FMUS . 4.70 AEG&T 25.79 of which: HEA?MEA- 11.60 14.19 ML&P 22.43 CEA 30.23 Page 5 -Application for Authority of GVEA DRAFT 2/10/97 SES 1.44 As noted earlier,under the terms of the Intertie Agreements,all Participating Utilities except GVEA and FMUS have the limited right to withdraw from participation in the Project.If there is a withdrawal,the withdrawing Participant's share of the Project must first be offered to the other Northern Intertie Participating Utilities in proportion to their respective Participant's Shares.Any portion which remains must be accepted by FMUS and GVEA in proportion to their respective Participant's Shares.See Section 4 of the Participants Agreement at Attachment 4 for the contract language which governs the manner in which the Participant's shares in the Project will be managed.For the purposes of this filing,the analyses assumes GVEA is responsible for 100%of the obligations of the Project given FMUS's intention to sell its service territory to GVEA. D,The Process Project design,engineering and environmental impact ama work have been.AIDEA has released grant funds ffor these "preconstruction activities.”Release ofanaah: z :pete OSS A eengconstructioninateriil to provide AIDEA the assurance of performance necessary for AIDEA's release of grantfunds.Again,GVEA's $60%@ guarantor role of 100%participation serves as AIDEA'ssecurityforcontractperformance.The milestone schedule for the Northern Intertie Project of the Intertie Grant Administration Agreement requires that Commission approval be obtained during the Design Phase of the Project.See Schedule A-1 to the Intertie Grant Admimistration Agreement at Attachment 3, GVEA seeks the approval necessary to allow for construction as soon as practicable.Commission recognition and approval of GVEA's full participation in the Northern Intertie is an important step im the process of getting AIDEA to release funds for construction.GVEA desires to move the process forward mm a manner which allows financing of construction to proceed,maintains the intent of the Legislature,and preserves the rights of all of the Participating Ultilities. Because no other Participating Utility's obligations are final until after project construction is completed and operation of the intertie commences,other utilities regulated by this Commission are effectively on a different timeline than GVEA for seeking their respective Commission approvals. IV.PROJECT DESCRIPTION A.The Facilities Page 6 -Application for Authority of GVEA DRAFT 2/10/97 The Northern Intertie Project is comprised of two major components:1)a 230 kV transmission line;and,2)a 40 MW Battery Energy Storage System (BESS)facility.The transmission line will be operatedin parallel with the existing anemission (FVIEX linebetweenHealyandFairbanks.The stable limit of thetwo transmission lines when operatedinparallelhasbeendeterminedtobe140MW#ehveereal.eb and support;and iilimprove reliability of the Railbelt system.The BESS is slesprovideimmediateemergencyenergyduringunscheduledoutagesintheRailbelteiThepurposeofsupplyingemergencyenergythroughtheuseofBESSistoSavTies:enable the utility experiencing the difficulty some time in which to bring another resTesource unit on line without having its customers experience a loss of power. B.The Route determine the preferred route for the imtertie. The BESS is to be located in Southern Fairbanks,east of the airport.Under this arrangement,the BESS is to be adjacent to the proposed Wilson substation,one Northern Intertie termims alternative. The Northern Intertie will be routed-on Hired Hi its own right-of-wayseparatefromtheexistingline.The route of the existing line was not chosen as a potential route for several reasons:1)the reliability of electric service is increased by usmg a separate corridor;2)the new intertie would not fit well into the existing corridor because of the amount of developmentin the existing intertie corridor-inchiding-hundreds of homes.ately.Tf piu);and 3)the availability of several feasible alternate routes. path was ae recommended by NERC in 1991.'The Northen Intertie 1s proposed to bebroughtintoanewsubstationinSouthernFairbanks.This arrangement will resultin two separate paths for power being transferred into the Fairbanks area,Acopy ofai map of theoerPotentialaetnunderconsideration|is att Attachment 6 POT Rear :Wihiic VY.THE NEED FOR THE PROJECT The benefits generated by the development of additional electric transmission capability between Healy and Fairbanks are well-established.The existing interconnection Page 7 -Application for Authority of GVEA ORNSOv DRAFT 2/10/97 Extensive studies have been eetormed |for the State of Alaska and by GVEA mreaine the need for the Project and the benefits which it will provide to the Railbelt Utilities System. AEA's 1991 Railbelt Intertie Feasibility Smdy (relying on reports developed by DFJ,NERC and PTT)found the expected value of total benefit to be roughly $105 million in -1999 [99F dollars based upon a range of cases resulting in benefits between $83 millionto$127 million.The AEA report noted that if a new SO MW power plant is added at Healy, then the overall improvement in reliability could be very significant if a second Healy- Fairbanks line were added as well.AEA referenced the conclusion reached in PTI's screening study. New generation at Healy combined with a new line between Heaty and Fairbanks may raise reliability of electrical service in the Fairbanks area nearly to that in the Anchorage area.Witha second line between Healy and Fairbanks,and a system design that will withstand loss of a 50 megawatt unit at Heaty or [loss of]a line from Healy to Fairbanks,biackouts in the Fairbanks area should be far less frequent than at present. AEA Report at pp.6-13.The addition of HCCP will increase the amount of base load generation located at Healy toa total of 81 MW.HCCP iis8 expected to begin commercialPHILINIfonlytheexistingsingleccircuitlineiis"available,nonenone of this capacity willservetoreducetheamountofspinningreservesorloadsheddingSeeeethatGVEAmustmaintainintheFairbanksareatoassuresystemreliability.[ySlengilice theist sentence! The Northern Intertie Project incorporates the use of BESS which will enabletheGVEARanhehtsystemtowithstandthelossofthegenerationatHealywithconsiderablyJessdisruptiontoitssystemthanwouldoccurpresently.BESS will be a major contributor tothereliabilityofGVEA's Rabel system and other interconnected systems.For example,ayer nebortl pot ansinsteadofkeepingenoughspinningreservesonline to cover potential loss of generation or transmission,the use of BESS allows time for reserve generation to begin*star ep. NERC's report (also cited in AFA's report),noted that the existing single line transmission interconnection between the Anchorage and the Fairbanks areas constrains the sharing of generation between and among toad centers and poses a significantly higher than traditional reliability risk for system-wide blackouts due to single contingency outages. Generally,a single 138 kV line of considerable length is not regarded as a reliable Page 8 -Application for Authority of GVEA a DRAFT 2/10/97 intercommection to firm resources as remote as Healy is from Fairbanks.NERC concluded that: The proposed Heaty-[Fairbanks}230 kV transmission line is needed for the reliability of electric supply to the Fairbanks area,...[B]ased on traditional planning criteria,the tie ts required to assure an adequate source-to-load path from Healy to the Fairbanks area.In fact,under traditional reliabilitycriteria,a second transmission line between the Anchorage Bowl K and the Fairbanks TéaHi area would likely be required..." NERC Report at p.4.See Attachment 7 for a copy of NERC's 1990 report entitled Reliability Assessment of the Railbelt Interconnected Electric Utility Systems of the Alaska Systems Coordinating Council 1990-1999. During periods when GVEA is importing non-firm energy from the Anchorage area,the support of Healy-based generation will be even more important.For example,if a single line becomes unavailable (out-of-service)at the time when GVEA is importing 23 MW of non-ficm energy and running both Healy generation plants,the GVEA system will requireanequivalentamountofbackupgenerationonlinetoavoidextensiveloaddroppinginorderona110MWsystemisnotasimplematter.It is a significant"challenge to instantancouslypickupceeloadofthatmagnitude,even with spinning generation on lne.FNOTES GVEA completed its analysis of the estimated benefits that it will receive from the Northern Intertie in December 1996.GVEA's report concluded that a total of $189.06 million in benefits would be experienced.This amount is comprised of an estimated $139.46 million in benefits as a result of the intertie and an estimated $49.6 million (1995 dollars)m BESS related benefits.The table below summarizes the benefits which GVEA estimates will be generated by the Northern Intertie Project. Benefits Value* Healy-Faishanks ESI /EMASSHIG Intervie Economical Energy from Increased Transmission Capability 42.70 Reduction of Transmission Losses 38.34 Reconstruction Savings 29.60 Capacity Sharing 17,32 Page 9 -Application for Authority of GVEA DRAFT 2/10/97 Reliability Increase 11.50 Total Intertie Benefits , 139.46 Battery Energy Storage System Transmission Defetrals 15.00 Increased Transmission Capability 4.50 Capacity Deferral 8.80 Production Expense Savings 5.10 Increased Reliability 13.60 Environmental Savings 2.60 Total BESS Benefits -49.60 Total Intertie and BESS Benefits 189.06 *Iniertie benefits are in 1991 dollars,BESS benefits are in 1995 dollars. NAY EBA ee KOFa Fae ER awecDte:ee H The total benefit/cost ratio of 2.52 assumes:1)a total construction cost for the Northern Intertie Project of $75 million;and 2)that the total estimated benefits of $189.06 milion are achieved.Each of the benefits included in the above-table are addressed in GVEA's Environmental Assessment of the Northern Intertie and are summarized below. Economic Energy from Increased Transmission Capability ($42.70 million)-The greatest benefit of the Northern Jntertie Project would be the value of the increased transfer of economy energy from Anchorage to Fairbanks.GVEA's most economical power sources are its coal-fired generation plants in Healy and natural gas-fired generation from the Cook Inlet area.GVEA also has a 17%share of the Bradley Lake Hydroelectric plant,near Homer,on a "take or pay basis."By increasing the transfer capacity between Healy and Fairbanks,the proposed transmission line allaws economic benefits to be realizedfrom the continued substitution of the lower priced'entral Alaska for locally produced energy.GVEA Page 10 -Application for Authority of GVEA DRAFT 2/10/97 has a take-or-pay contract to purchase 53 MW of power from the HCCP when it is in operation.This take-or-pay contract requires GVEA to pay for the power even if it cannot transfer it to Fairbanks.Currently there is not enough transmission capacity from Healy to Fairbanks for GVEA to transfer all of the power that will be generatediaESie;and the amount of economy energy it purchases from Reduction of Transmission Losses ($38.34 million)-Currently,approximately 13 MW of electricity is lost during the transfer of power from Healy to Fairbanks over the existing intertie,operating at 105 MW.By constructing another intertie and splitting the electric load between the two interties,the loss between Healy and Fairbanks would be reduced to 4 MW.The net present value of these savings over the 50-year life of the Project would be approximately $38 million. Reconstruction Savings ($29.60 million)-The existing 138 kV transmission line between Healy and Fairbanks was constructed in 1967.GVEA expects to upgrade this line to 230 kV as part of the #Tire Project.Reconstruction of the existing intertie is expected to include realignment of the route in limited areas,such as near the Nenana Airport,where the existing line is close to the landing strip and fleatplane"ane takeoff/landing area.With a second intertie in place,the existing intertiecouldbetakenoutofserviceforperiodsoftimewiththenewintertiesupplying power from the Healy generation units and seutheeneral SoutiicenfFAl Alaska sources. The existing line would be reconstructed over a period of five years,with the old intertie out of service as necessary. Reconstruction of the existing line without the proposed Northern Intertie would prevent Fairbanks area utilities from importing lower priced power from Healy and Anchorage during the reconstruction period.Reconstruction would still need to take place over a five-year period with the existing line being taken out of service only during low demand periods. Capacity Sharing ($17.32 million)-The increased capacity sharing between Anchorage and Fairbanks will allow for a sharing of reserve margins between Northern utilities (GVEA and FMUS)and Southern utilities (ML&P,Chugach,SES, HEA and MEA).Regional energy planning allows utilities throughout the Railbelt to buy and sell electricity as needed to make the maximum use of existing generation sources,thereby reducing and/or delaying the need for individual utilities to build their own generation facilities to meet peak demands.A reduction in the capacity reserve margin therefore translates into a lower requirement for future plant additions, resulting in monetary and environmental savings.The capacity sharing benefit is similarly calculated in AEA's Railbelt Intertie Feasibility Study at about $17 million. Reliability Issues ($11.5 million)-Construction of the Norther Intertie would significantly improve the reliability of electric service throughout GVEA's and FMUS's service areas.GVEA currently receives up to 65%of its total power from Page 11 -Application for Authority of GVEA DRAFT 2/10/97 the Anchorage area over the existing 138 kV transmission line.FMUS currentlypurchasespowerfromtheinterconnectedsystemandhasexpressedaninterestinincreasingpurchasesfromtheotherRailbeltutilities.Currently,FMUS must pay afeetoGVEAfortransferringpowerfrom,the existing intertie to the FMUS system.The proposed Northern Intertie woulda avoneesFMUS with a direct connection toait The AEA Study estimated that 50%of power outages in Fairbanks are transmission related and could be avoided with the proposed new intertie.Sixty-nine outages within the last 11 years (1986-1996)are related to the Railbelt intertie transmission system between Anchorage and Fairbanks.Fifteen of these outages would be directlymitigatedthroughconstructionofasecondline.The impacts of the remaining outages would be reduced by the BESS. Outages result in costly losses to consumers,no only through inconvenience and lost production,but also through equipment damage.The economic costs of outages to residences vary widely with studies showing values from $0.21/kWh to $10.17/KWh. The same suidy showed that commercial and industrial user costs vary both among users and are more dependent on the length of the outage,with the economic costs to these users ranging from $0.07/kWh to $143.12/kWh. Based on the types of users im the service area and the average length of outages,the value of increased reliability from the reduction of transmission related outages in the AEA Study was determined to be about $11.5 million. Transmission Defecrals ($15 million)-Transmission deferral benefits consist of the costs saved by not having to install transmission line enhancements,such as reactive compensation,along the Anchorage to Fairbanks intertie and the Healy to Fairbanks intertie.If no BESS was included in the Project,reactive compensation would need to be added to several substations between Anchorage and Fairbanks to allow for the transfer of 140 MW of power,the same transmission capacity that is possible with theBESS.The Bess provides real power in Fairbanks,eliminating the need to use powet produced elsewhere and transferred by transmission line to Fairbanks.EPRI estimated the benefit of transmission deferrals for the proposed BESS in Fairbanks to -be $15 million. Increased Transmission ($4.5 million)-The rating on the existing transmission line from Healy to Fairbanksis approximately 100 MW.The combined "secure"rating ofthetwolinestogetherislimitedtothetransfercapabilityoftheweakestline,in this case 100 MW.The Bess can supply 40 MW for twenty minutes.This increases the "secure”transmission capability to 140 MW.If 140 MW is being transferred across the two lines and one line trips off,the battery will supply 40 MW and the other100MWwiltransfertotheremainingline.The BESS gives GVEA Bad< Page 12 -Application for Authority of GVEA 'DRAFT 2/10/97 Rarteipantytime to start up local generation in Fairbanks to replace the power lostftomHealyorfarthersouth.This results in a 40 MWincrease of transmission capability,valued by EPRI at $4.5 million. Capacity Deferral ($8.8 million)-The EPRI Study evaluates the needs for additional generation capacity in the future and calculates the savings associated with deferral of new generation facilities,through increased sharing of generator planning reserves. Generator planning reserves typically are determined by the utility's largest generator. The utility must have enough generation to meet demand even with the loss of its largest generator.The Railbele Utility System allows the seven participating utilities to share generator planning reserves.Instead of GVEA looking at meeting its peakdemandlocallywiththelossofitslargestgenerator,GVEA can look at the entire Railbelt Utility System demand and loss of the largest generator on the Railbelt Utility System.The ability to share generator planning reserves throughout the Railbeit defers the need for new generation capacity.This benefit of capacity deferral resulting from the proposed 40 MW BESS in Fairbanks was estimated at $8.8 million by EPRI, Production Expense Savings ($5.1 million)-Another significant benefit of the BESSisitsprovisionof40MWofspinningreservesandtheproductionexpensessavedassociatedwiththesereserves.Spinning reserves are a buffer or extra generation that is already up and running and able to respond immediately if a generator or transmission line were to trip off line.The supply of spinning reserves typically has high costs associated with the fuel needed to run a generator year-round to provide spinning reserves.The BESS provides spinning reserves through the energy stored in the battery and does not require the constant fuel use of a generator.The savings associated with this reduced production of spinning reserves by generator was estimated at $5.1 million. Increased Reliability ($13.6 million)-The EPRI Study notes that avoidance of load interruption is one of the primary benefits of a BESS for GVEA.The BESS provides a back-up for local generators,so that when a generator is lost the BESS takes its place and keeps power flowing throughout the system.The BESS also provides a back-up for power being transferred over transmission lines.This value of this increased reliability was estimated at $13.6 million by EPRI. Environmental Savings/Reduced Air Emissions ($2.6 million)-EPRI modeled the emissions that would be produced if thermal generation units were used to provide the spinning reserves provided by the BESS.Emissions were modeled for sulfur oxides (SOx),nitrogen oxides (NOx)and carbon dioxide (CO2).These emissions were selected due to the costs associated with their monitoring and control,and the recent development of markets placing a monctary value on emission reductions.The cost Page 13 -Application for Authority of GVEA DRAFT 2/10/97 4 re re ty possavings:associated with reductions off these emissions was eestimated at $2.6 million.j 4ee,GVEA entered the services of aneaten auegsereEngineeringCompany(FEC),to determine the impact that undertaldns iderwritins the entire costs associated with development of the Project would have on the members of GVEA.Michael Hubbard,the principal of FEC,prepared the estimated costs incurred byGVEAwithouttheNorthernIntertie}to those costs estimated to be incurred with the Northern Intertie.Mr.Hubbard found that under a base case scenario,”...the NorthernIntertieshowssignificantbenefitstoGVEAevenifGVEAisthesoleparticipantandmustabsorballofthecosts." FEC's analyses was performed on eleven different case scenarios covering a period of twelve years.The estimated annual savings are $277,000 $3N3.00U for Year #1(1999)under a base case scenario.The amount of annual savings generated by the elevencasescenariosranforYear#12 (2010)range from a low of $893,000 $1534:SO0S"O0G with a base case savings estimated at $4,444,000|;1:895:00).Table 9?,Summary of Results,at p.20 of FEC's report at Attachment 8. FEC's report noted that its analyses did not incorporate other benefits that GVEA will enjoy as a result of the Northern Intertie such as: v The ability to perform maintenance on a de-energized line; v Reduced load shedding at times the North Pole units trip off-line during times when energy is being imported from Anchorage; v Increased reliability of power supply;and, v Decreased fuel and operating expenses incurred for spinning reserves that can be provided as a result of incorporating the battery system into the Project. Although not quantified in FEC's report,these benefits are valuable to GVEA and the Railbelt system. In his summary of findings,Mr.Hubbard also concludes that the relatively low natural gas prices and availability of non-firm energy in the past have helped GVEAnegotiateloweroilpricesforfuclingitsoil-fired generating units located in iarWithouttheintertic,Mr.Hubbard surmises that GVEA's negotiating leverage will worldbereduced.A copy of Mr.Hubbard's report is at Attachment 8. VI.CONCLUSION AND RECOMMENDATION Page 14 -Application for Authority of GVEA ALASKA INDUSTRIAL DEVELOPMENT =xANDEXPORTAUTHORITY=A @@E™ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM TO:D.Randy Simmons Executive Director Keith Laufer,Esq. Assistant Attorney General FROM:Dennis V.McCrohan,P.EiyDeputyDirector-Energy DATE:February 4,1997 SUBJECT:Northern Intertie Actions |have quickly reviewed the Agreements to determine the impacts of the alternatives suggested by Jon Rubini in lieu of GVEA's proposal.These are: 1.Decision Date Action.The decision date action is referenced in the 1993 Alaska Intertie Project Participants Agreement Section 4(b)3(B).The decision date for either segment is established by the IPG and is a date certain after certain activities are concluded on the Southern Intertie.Since the Southern Intertie precondition activities will not be complete for many months,these conditions would seem to preclude this course in the near term. 2.Unreasonable Delay Action.The unreasonable delay action is referenced in the Grant Administration Agreement Section 3.03(c).AIDEA may in its reasonable discretion determine that development of the Northern Intertie is unreasonably delayed by the Participating Utilities.Unused or obligated funds would be returned to the DOA and deposited in the State General Fund.AIDEA must give the Participating Utilities 15 days notice of such decision.This action in itself does not allow GVEA to proceed.The Participating Utilities could proceed to meet the conditions of the Agreements,or could challenge the reasonableness of our discretion.For AIDEA to retake the money and return it to DOA seems a very high risk option for GVEA. Neither of these courses appears to allow GVEA to proceed this year nor are free of legal challenge. To summarize our meeting with Saxton/Kelly GVEA generally requested that GVEA be allowed to individually meet all of the conditions for advancement of Intertie funds: e GVEA will present a financial plan demonstrating GVEA ability to finance all of the remaining intertie cost e GVEA will file next week an application with APUC for GVEA to finance all of the remaining cost e Based on GVEA 100%backstop (after MUS purchase) e Requesting AEA not object to the filing e GVEA will provide the request legal opinion letters from saxton on PUC requirements and ability to enter into the contract GVEA believes that by doing all these things conditions for phase 2 financing will have been met: e Conditions of Grant Administration Agreement can be interpreted to be that as long as anyone in the group meets all the conditions the condition is met e GVEA will not have met final PUC approval requirement however GVEA will work with other utilities to see that legislation is modified File ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY =ALASKAq@@x™ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM. TO:D.Randy Simmons Executive Director LonMFROM:Dennis McCroha 7MDeputyDirector-Energy DATE:January 15,1997 SUBJECT:Northern Intertie and MEA Litigation On January 14,1997,|met with Mike Kelly of GVEA and Ron Saxton of Ater Wynne.As you are aware,there are numerous agreements related to the Northern Inertie project.The critical issues are that the 1993 legislation,conditions set by AIDEA in the project Agreements,and subsequent letters by AIDEA specify criteria which must be met prior to proceeding into Phase 2 procurement and construction,and specify conditions which must met be if AIDEA financing is to be provided for costs above the State grant.The following items were discussed: Northern Intertie GVEA anticipates receiving approval of the Environmental Assessment (EA)this week.There will be a thirty day holding period for appeal.Subsequently,GVEA wants to start procurement followed by construction in the Fall of 1997. The Construction Agreement is not signed.Kelly anticipates some utilities will refuse to sign and will drop out.He believes these to be Seward and AEG&T.GVEA is willing to assume the ownership shares of these utilities who elect not to participate. GVEA intends to seek AIDEA financing for the construction costs above the grant.This is anticipated by me to be about $10 to $30M total depending upon the funding agreements for the battery storage facility.The GVEA plan is to retain the condominium ownership,less those utilities which drop out,as envisioned by the agreements.Based upon AIDEA's July 14,1995 letter,additional legislation in 1997 may be required for this ownership structure. The utilities have not provided the legal counsel opinion regarding APUC or local government approval of the Intertie Agreement obligations as requested in AIDEA's July 14,1995 letter. Memorandum January 15,1997 Page 2 To obtain these opinions at this time from all the participating utilities,GVEA believes will require considerable pressure from AIDEA. GVEA has prepared and will make their APUC filing as soon as the EA finding is received. The other utilities have not even considered or planned their APUC filings.Since GVEA is fully backing the project if the other utilities withdraw,GVEA proposes modifying the precondition of APUC and local government approval by each participant such that it applies only to GVEA since GVEA will assume their shares if these utilities drop out. GVEA feels the project needs AIDEA proactive support and GVEA and AIDEA need to move forward together and in concert in order to assure a start on Phase 2.GVEA wishes to meet as soon as possible to discuss the criteria for release of Phase 2 funds,other utility participation,and the overall time line to complete the prerequisite actions required to release funds for procurement and construction. MEA Litigation GVEA is preparing a letter to AEA proposing to assume the obligations of MEA for the Transmission Agreement.GVEA would like to discuss this option with us.GVEA believes through proper maintenance,currently not being provided by MEA,that most if not all the outages resulting from snow loading could be avoided.|asked that GVEA not send the proposal until after we had met with MEA separately and GVEA subsequently. |explained our situation regarding the MEA lawsuit on rates. We agreed to meet with GVEA on January 31,1997 in AIDEA offices.Ron Saxton and MikeKellywillattend.|will try to set up a meeting with Wayne Carmony of MEA on the 23"or 24" of January 1997 to discuss the litigation. Please let me know if any additional information is needed.|will have a packet of background information prepared on each item. CC:Valorie Walker,Deputy Director -Finance Jon Rubini,Esq. Tom Amodio,Esq. Keith Laufer,Esq. ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY =>A@@E-™ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 CONFIDENTIAL MEMORANDUM Zoe TO:D.Randy Simmons Executive Director Keith Laufer,Esq. Assistant Attorney General Valorie Walker Deputy Director -Finance aFROM:Dennis V.McCrohan,P.E.oy,Ur.4DeputyDirector-Energy DATE:January 31,1997 SUBJECT:-Northern Intertie Background As requested,|have tried to summarize the background for our meeting at 1:00 p.m.today with GVEA.It is my understanding,after talking to Mike Kelly,that GVEA is preparing to commence procurement and construction this year.GVEA hopes with AIDEA's cooperation to resolve all precedent conditions for release of Phase 2 funds.Also,GVEA wishes to have AIDEA participate in the financing.This was confirmed by Dave Calvert's January 22,1997 letter. As background for the meeting,|have summarized below the conditions and agreement references. Memorandum January 31,1997 Page 2 Northern Intertie Phase 2 Fund Release Conditions AIDEA's letter of July 14,1995,to the IPG discusses outstanding requirements and precedent conditions which must be accomplished to AIDEA's satisfaction to demonstrate satisfactory progress on the interties.Since the letter was issued,engineering and permitting have progressed satisfactorily.However,the contractual,financial,and ownership issues have not progressed,except for the completion of the Northern Intertie System Agreement which demcnstrated concurrence by the Utilities on the benefits of the Intertie.The balance of requirements and conditions which are unresolved are: 1.The Construction Agreement has not been signed.The importance of this Agreement was to address the scope and confirm the benefits and functionality of the Intertie.It was also to demonstrate "peace in the valley”among the Utilities to enhance the feasibility of implementing the condominium ownership plan. 2.The Utilities were advised that to obtain AIDEA financing for the balance of the construction costs would require revisions to Section 29 and 30 of the legislation and that an immediate response was needed from the Utilities to proceed with this option. 3.Each Utility was asked to confirm their requisite intent and legal capacity to enter into a binding obligation to bear their share of project costs and to indicate if voter approval was required. 4.Each Utility was requested to provide opinion letters from counsel regarding any obligations of the various Agreements which require APUC approval. The basis for these conditions are listed below: Construction Management Agreement.To our knowledge the Utilities have not signed the Agreement.It is a required condition of the Intertie Grant Agreement Section 5. determine which of the contractual obligations relating to the grants will be submitted to the APUC for approval.Requirement of the Grant Transfer and Delegation Agreement Section 2.4.Utilities must provide written notice to AIDEA of such determination and agreement. Requirement of the Grant Administration Agreement Section 4.01. Demonstration of Financial Capability.Utilities must demonstrate the ability to raise all additional amounts needed to complete construction of the interties prior to disbursement of any grant funds.Requirement of the Grant Transfer and Delegation Agreement Section 2.4 and the Grant Administration Agreement Section 4.01. ce APUC Determiration.Prior to the disbursement of any grant funds,the Utilities must nan ep K Memorandum January 31,1997 Page 3 Limitation on Phase 2 Expenditures.Except as may be approved by the Authority,grant funds cannot be applied to Phase 2 until the Utilities have demonstrated to the satisfaction of AIDEA the ability to raise the additional amounts of money needed to complete the construction.In addition,final approval must be obtained,not subject to further judicial appeal, of matters submitted to the APUC.Requirement of Grant Administration Agreement Section 4.02b. Establishment of Phase 2 Ceiling.The Utilities are required to establish a Phase 2 ceiling for submission to AIDEA for approval.Required by Grant Administration Agreement Section 4.02(a)and Schedule A-1. AIDEA has continued to release Phase 1 funds for preliminary engineering and permitting regardless of satisfaction of these conditions.Please let me know if you have any questions. cc:Jon Rubini,Esq. November 20,1995 William R.Snell |i 6 fe |\Ic 1ExecutiveDirectorHOY904905AlaskaIndustrialDevelopmentandExportAuthorityooESNS 480 West Tudor Road Alaska Industriz!CovelosmenAnchorage,Alaska 99503 opmeniandExrortAuthority Re:Northern Intertie Project Dear Mr.Snell: The Intertie Participants Group (PG)met on November 6,1995.The IPG selected me as chairman of the group for the coming year and asked that I inform you of the actions taken by the group at its most recent meeting. The Intertie Participants are pleased to inform you that they have voted unanimously to resolve certain issues involving the allocation of benefits of the Northern Intertie Project.In addition,the IPG unanimously adopted a Northern Intertie Project budget,scope,and schedule which will be documented as exhibits to the Northern Intertie Construction Management Agreement.Finally,the representatives of the Intertie Participants have finalized and agreed upon a Northern Intertie Construction Management Agreement and a Northern Intertie System Agreement and have recommended that those two agreements be executed as soon as possible by the respective governing boards,councils,and assemblies of the Intertie Participants.Duplicate original copies of those documents are currently being circulated for execution.I have arranged to provide AIDEA with copies of these final agreements as soon as they have been executed by the parties. If you have any questions,please feel free to contact me at 224-4071. Sincerely yours, ce:IPG Members CC:Be S95DB De Beem arevct Maniuibacdion Rapsonogy as required by and in accordance with 2 AAC 45.010,on an annual basis,for both the Healy-Fairbanks Intertie project and the Anchorage-Kenai Intertie project.Each audit and the resulting audit report shall cover the preceding calendar year,and the audit report shall be submitted no later than April 15 of each year, beginning on April 15,1995.A copy of each audit report shall be transmitted to AIDEA at the same time each audit report is transmitted to the state coordinating agency.The Participating Utilities shall also submit copies to the state coordinating agency to the extent required by 2 AAC 45.010(h). 5.02.Audit Standards and Report Contents.The audits required by Section 5.01 shall be conducted by an independent auditor in-accordance with the audit standards set forth in 2 AAC 45.010(c).The audit reports shall address at a minimum the items set forth in 2 AAC 45.010(@a)through (g). 5.03.Additional Requirements.The audits and audit reports required by this Section 5 shall comply fully with all requirements imposed by 2 AAC 45.010,and any amendments or modifications thereto,regardless of whether such requirements are specifically set forth in this Agreement.In addition,the Participating Utilities shall ensure that the requirements of 2 AAC 45.010(j)are satisfied by any applicable third party recipients. 5.04.Books and Records.In addition to complying with the audit requirements of Sections 5.01-5.03,the Participating Utilities and the IPG shall permit AIDEA to have Grant Administration Agreement Page 12 2 AAC 45.010 ADMINISTRATION 2 AAC 45.010 CHAPTER 45.GRANT ADMINISTRATION Section 10.Audit requirements 2 AAC 45.010.AUDIT REQUIREMENTS.(a)As part of the finan- cial information required under AS 37.05.030,a state agency that enters into a financial assistance agreement to provide financial assis- tance to an entity shall,in coordination with any other state agencies providing financial assistance to that entity,submit to the Department of Administration through the state coordinating agency an audit of the recipient entity if that entity is subject to audit under this section.The audit must be conducted and submitted as described in this section.In order to ensure compliance with this subsection,the audit require- ments of this section must be contained in any financial assistance agreement entered into by a state agency. (b)An entity that receives state financial assistance with a cumula- tive total of $150,000 or more during the entity's fiscal year shall submit to the state coordinating agency,within one year after the end of the audit period,an annual audit report covering the audit period. (c)An audit required by this section must be conducted by an independent auditor,according to the following audit standards effec- tive at the time of review: (1)Government Auditing Standards,1988 revision adopted by the comptroller general of the United States;or (2)generally accepted auditing standards,as accepted by the American Institute of Certified Public Accountants on January 1, 1990 for the type of entity being audited. (d)An audit report required under this section must address the following: (1)the systems of internal control,and whether the recipient entity has effective control over,and proper accounting for,revenues, expenditures,assets,and liabilities; (2)compliance with state statutes and regulations.and applicable financial assistance agreements affecting the expenditure of state money;and (3)the recipient entity's financial transactions,financial state- ments,and accounts;whether those financial statements are pre- sented fairly in accordance with generally accepted accounting prin- ciples;and whether the financial statements contain reliable financial data presented in accordance with applicable financial assistance agreements. (e)As part of an audit report required under this secticn,a recipient must provide written comments (1)on any findings or recommendations contained in the audit report.including the recipient's plan for correc- tive action on the findings or recommendations:and (2)on the status of 109 RAY Vols : .°°ae ALASKA INDUSTRIAL DEVELOPMENT = AND EXPORT AUTHORITY x mx ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /561-8050 FAX 907 /561-8998 July 14,1995 Mr.Thomas R.Stahr General Manager and Chairman IPG Municipal Light &Power 1200 East First Avenue Anchorage,Alaska 99501-1685 Subject:-Intertie Financing Dear Mr.Stahr: |am writing in response to your letter to me dated June 13,1995,relating to the recent Intertie Participants Group (IPG)action to begin work on the southern intertie.|am pleased with IPG's desire to initiate work on the southern intertie.Your letter also provides a timely opportunity to assess the progress made to date on the intertie projects. Initially,|would like to note that through informal discussion with the various participants,it is AIDEA perception that although fair progress has been made on preliminary engineering and related tasks on the Northern Intertie,many fundamental issues remain unresolved on both intertie projects.|believe we have reached a juncture where such issues need be specifically addressed and resolved in order to maintain progress on the intertie projects. With the foregoing objectives in mind,|invite you to respond to the following. First,my letter to you dated November 2,1994,addressed the intended scope of the intertie project and confirms the view that the intertie must have the benefits and functionality envisioned under the AEA feasibility study.Your response of January 12 on behalf of the IPG accepted this view in principle,though it left for resolution in "construction agreements"such critical issues as whether such a line would be developed in phases,or to what extent each participating utility would be responsible for project costs.|understand that the referenced agreements have not as yet,been adopted by the participating utilities.|believe a date should be set by which such issues will be resolved,and |invite your suggestion as to an appropriate deadline. Second.In my letter of November 2,1994,|noted that AIDEA asked its bond counsel,(Foster, Pepper &Shefelman law firm),to address whether the ownership structure provided for under the Intertie Grant Agreement would enable AIDEA to issue bonds to finance all or part of the participant's share of project costs.|recently received a draft legal opinion which concludes that,for purposes of a public financing,AIDEA would require a legislative revision to the underlying debt-issuance authorization (Sec.29 and 30,Ch.18,SLA 1993),since that authorization references intertie ownership by,respectively,Golden Valley Electric Association (GVEA)and Chugach Electric Association (CEA).!add that counsel also notes that the Mr.Thomas R.Stahr Oo July 14,1995 Page 2 ownership structure set out in the Intertie Grant Agreement would,assuming specific legislative authorization,enhance the use of tax-exempt financing. There are,of course,several different ways to proceed in response to the legal opinion.For example,the utilities may maintain the current ownership structure and simply finance the participant's share absent AIDEA involvement.Alternatively,the utilities may want to revert back to the ownership structure specifically envisioned by the underlying legislation,which would enable AIDEA to be the issuer without further legislative action.Finally,the utilities may prefer that AIDEA seek legislative approval of the requisite revision to Sections 29 and 30. While |believe such approval would be viewed as ministerial if supported by all utilities,| recognize that,particularly absent full consensus among the utilities on the various unresolved issues,the prospect of legislative involvement may be troubling. i would appreciate an immediate response whether the IPG requests that AIDEA seek legislative action to facilitate an AIDEA financing under the current ownership structure.If no legislative action is desired,please advise how the IPG intends to proceed and how each participant intends to finance its proportionate share of costs. Third.Item No.4 in our respective letters of November 2,1994 and January 12,1995, addressed the enforceability of the various agreements.While |appreciate that final project costs are not as yet known with certainty and,perhaps more importantly,significant issues with substantial economic ramifications remain for resolution in the "construction agreements," nevertheless,|believe it essential to confirm that each of the participating utilities have the requisite intent and legal capacity to enter into a binding obligation to bear their proportionate share of the project costs in accordance with the ownership interests established in the Intertie Grant Agreement and related documents. As questions continue to arise in informal discussions regarding these matters,|request an unqualified opinion letter from legal counsel for each of the participating utilities confirming the legal capacity of each entity to enter into such agreements and further confirming that the obligations arising under said agreement,including the obligation to bear a proportionate share of project costs,are fully enforceable.I also request that counsel for FMUS and the City of Seward address the applicability of any requirement of voter approval with respect to these financial obligations. Fourth.Both the Grant Administration Agreement and the Grant Transfer and Delegation Agreement envisioned prompt notification of which matters and obligations arising in connection with the development and financing of the interties need be submitted to the Alaska Public Utilities Commission (APUC).As you know,to the extent such approval is required,APUC approval is a precondition to the expenditure of grant monies.|believe it timely to reach a common understanding of prospective APUC matters.Accordingly,counsel for each of the participating utilities should also address in the requested opinion letters of counsel which,if any,of the obligations arising in connection with the various intertie agreement,require APUC consideration. The Authority believes the time has come for the participating utilities to resolve basic questions of ownership,management and participation in the intertie projects.While |appreciate that the "unreasonably delayed”standard under Section 3.03 of the Grant Administration Agreement "Mr.Thomas R.Stahr © July 14,1995 4 Page 3 - does not offer a "bright line”test,|am concerned that,absent substantial progress on these core development issues in the near future,the availability of grant monies is subject to review. In light of the foregoing,the Authority believes it would be inappropriate to authorize the release of full Phase 1 funding on the southern intertie before core development issues are resolved. Accordingly,the Authority will make available $500,000 in grant funds for initial work on the southern intertie.No additional funds will be advanced absent settlement of the outstanding differences among the participating utilities or,in the alternative,execution of a reimbursement agreement in the event that the final development of the intertie is not undertaken.Similarly, the Authority intends to restrict use of grant funds on the northern intertie to the pending engineering and permitting work,until a comparable resolution of core development issues are resolved. |look forward to working with you and the other participating utilities toward development of the intertie projects. Sincerely, William R.Snell Executive Director CC:Jim Ayers,Chief of Staff,Office of the Governor Wilson Hughes,AIDEA Board Member WRS:bjf:ks hiall\bjfboard\stahripg COME Dent v WE FOSTER PEPPER &SHEFELMAN * | A LAW PARTNERSHIP INCLUDING PROFESSIONAL SERVICE CORPORATIONS / f 1411 THIRD AVENUE SUITE 34 BELLEVUE.WASHINGTON OFFICE SEATTLE.WASHINGTON 98101 PORTLAND.OREGON OFFICE (206)451-0500 (206)447-440 {$O3)221-0607 TELECOPIER:(206)455-5487 aN TELECOPIER:($03)221-1510 TELECOPIERS *DIRECT DIAL:(208)447-8067(206)447-9700 -(206)247-9283 February 8,1995 William R.Snell EGEIVE)|Executive Director FER 4.97965AlaskaIndustrialDevelopment&5 fs Export Authority Alaska Industrial Developmert480W.Tudor Road and Export AuthorityAnchorage,AK 99503 : :2/\34>Jonathan Rubini,Esq.ay On602WestFifthAvenue,Suite 500 Anchorage,AK 99501 "Wo otk am dod M ,Re:Electric Power Intertie Financing Sack y Com: Dear Riley and Jon:Won MAI, Enclosed is a draft letter that summarizes the conclusions we have reached based on our work thus far on the referenced matter.We hope this is in useful form for your purposes,and, in any event,we wanted to provide you with some tangible evidence of our efforts in reviewing these questions. Very truly yours, FOSTER PEPPER &SHEFELMAN WGT:djr cc:Hugh Spitzer Dan Dixon 0171717.WP O°yw DRAFT February 4,1995 William R.Snell Executive Director Alaska Industrial Development &Export Authority 480 W.Tudor Road Anchorage,AK 99503 Re:Preliminary Conclusions on Review of Potential Intertie Financing by AIDEA Dear Riley: The purpose of this letter is to briefly summarize the conclusions that our firm has reached following our review of the documents you and Jonathan Rubini furnished to us last fall relating to the electrical transmission interties for which the Alaska Legislature in 1993 SLA CH.18 (the "bond authorization statute")and 1993 SLA CH.19 (the "grant appropriation statute"), among other things,authorized AIDEA to issue bonds'and appropriated certain grant funds,subject to the terms of those statutes. The documents reviewed included the Intertie Grant Agreement dated October 26,1993,by and among the participating utilities (described below),the State of Alaska,Department of Administration,and AIDEA;the Grant Transfer and Delegation Agreement dated November 5,1993,by and among the same parties; the 1993 Alaska Intertie Project Participants Agreement (the "Participants Agreement")dated January 24,1994,by and amongAlaskaElectricGeneration&Transmission Cooperative,Inc.,The Municipality of Anchorage d/b/a Municipal Light and Power ("ML&P"), Chugach Electric Association,Inc.,The Municipality of Fairbanks a@/b/a Fairbanks Municipal Utilities System ("FMUS"),Golden Valley Electric Association,Inc.,The City of Seward d/b/a Seward Electric System ("SES")(collectively,the "participating utilities"),and Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.(the "additional parties");and the.Grant-Administration Agreement dated August30,1994,by and amongAIDEAandtheparticipatingutilities.For convenience,ML&P,FMUS and SES are sometimes referred to as the "municipal utilities,"and the participating utilities other than ML&P,FMUS and SES are sometimes referred to as the "private utilities." 0169379.01 William R.Snell February 8,1995 Page 2 We also made a preliminary review of certain Alaska statutes other than the bond authorization statute and the grant 'appropriation statute and applicable provisions of the InternalRevenueCodeof1986,as amended (the "Code"),and certain regulations that are currently applicable,or that are proposed tobeapplicable,to tax-exempt bonds,including the proposed regulations on the definition of private activity bonds under section 141 of the Code that were published in the Federal Register on December 30,1994. 1.Ownership Structure.The principal question that arisesunderthebondauthorizationstatuteiswhetherAIDEAisauthorized by the terms of that statute to issue bonds to finance the cost ofintertieprojectsthatareownedbytheparticipatingutilitiesastenantsincommon,with each participating utility holding an undivided percentage ownership interest in all of the real andpersonalpropertycomprisingaproject,as required by the Participants Agreement. The question arises because section 29 of the _bondauthorizationstatuteprovidesinpartthatAIDEA may issue bonds to finance the acquisition,design,andconstructionofapowertransmissionintertieofatleast138kilovolts.between Healy and Fairbanks and owned,for the bene of a e ties pa ati ntertie,by Golden Valley Electric Associatio c (Emphasis ours.) Similarly,section 30 of the bond authorization statute provides in part that AIDEA may issue bonds to finance the acquisition,design,andconstructionofapowertransmissionintertieofatleast138kilovoltsbetweenAnchorageandtheKenaiPeninsula to be owned,for the benefit of all of the ut tiesacipateees Association,Inc.(Emphasis ours.) At the same time,section 5(a)of the Participants Agreement provides: Ownership As Tenants In Common.The Participants shallbeownersofeachSegmentoftheProject(including all personal and real property interests thereof)as tenantsincommon,with undivided interests and obligations withrespecttoallProjectSegmentassetsandliabilitiesintheproportionateamountsoftheirrespectiveParticipants'Shares.Except as otherwise provided 0169379.01 William R.Snell February 8,1995 Page Clearly, 3 hereunder,the Participants shall share in the ProjectSegments's benefits,burdens,and risks only.in proportion to their respective Participants's Shares,notwithstanding that the IPG [the Intertie Participants Group]may select one or more individual Participants to manage,design,build,finance,operate,and/or maintain the Project Segment or portions thereof on behalf of the Participants collectively. this provision of the Participants Agreement does notprovideorcontemplatethatGoldenValleyElectricAssociation, ("GVEA"),will "own"the northern segment of the intertieproject"for the benefit of"all of the participating utilities,and also does not provide or contemplate that Chugach Electric Inc. Association,Inc.("Chugach"),will "own"the southern segment oftheintertieproject"for the benefit of"all of the participating utilities.Although the Participants Agreement is not explicit onthepoint,under general real property law,title to property being acquired by persons as tenants in common would be conveyed to thosepersonsinthenamesofalltenantsincommonastotheir respective percentage ownership interests. participating utilities. We considered whether it would be possible to interpret the bond authorization statute in a manner that would result in treating ownership of the intertie project by the participatingutilitiesastenantsincommonasthelegalequivalentofownership by GVEA or Chugach,as applicable,for the benefit of the However,that interpretation,we believe, would give essentially no meaning to the portion of the bond authorization statute that requires the project to be "owned by" either GVEA or Chugach,as applicable.At a minimum,to invest those words with any meaning,we believe legal title to the real and personal property comprising the projects would have to betakenbyeitherGVEAorChugach,as applicable,which then wouldresultineachparticipatingutilityhavingabeneficialownership interest in the project. with projects "on behalf of the Participants collectively,"fails t That kind of ownership structure arguably would be consistentthesecondsentenceofsection5(a)of the ParticipantsAgreement,which makes it clear that each participating utility istosharethebenefits,burdens and risks of the project only inproportiontoitsparticipant's share (or percentage of ownership). However,even that sentence,though it makes express reference to the fact that one or more participating utilities may be selectedtomanage,design,build,finance,operate and/or maintain the fe)make any reference to the possibility that less than all of tne |participating utilities would hold title to the project. 0169379.01 William R.Snell February 8,1995 Page 4 We also considered whether treating the existing ownership structure under the Participants Agreement as the legal equivalent of the kind of ownership structure contemplated by the bond authorization statute would be supported by any language contained in the grant appropriation statute,on the theory that both laws were enacted at the same time and both dealt with power transmission interties.However,reference to the grant appropriation statute actually appears to reinforce aninterpretationofthebondauthorizationstatutethatwouldrequiretheprojecttobeownedbyoneofthedesignatedparticipatingutilities,rather than by all of the participating utilities astenantsincommon.This is because section 1 of the grantappropriationstatuteprovides,,"for payments as a grantunderAS37.ath 316 to Golden Valley Eleectric Associa tioon for the'benefit o the ut ies pa coer(Emphasis ours.) As will be discussed below,the ownership structure currently provided by the Participants Agreement is helpful,if notessential,to the ability to reach favorable conclusions on other important legal questions,principally (i)the question whether the provision in section 10(d)(1)of the Participants Agreement requiring each participating utility to meet its Annual Payment Obligations,Energy Charges and Assessments "whether or not the Project is completed or its operation is terminated,interrupted orsuspendedinwholeorinpart,"is valid under Alaska law,and (ii) the question whether the shares of the project held by the municipal utilities may be financed with .tax-exempt bonds. Therefore,we believe it would be preferable to amend the bond}]authorization statute in a manner that makes it consistent with the existin ure establishedby the participating|utilities 'pursuant.te-the Participants Agreement,rather than tochangethe_ownership structure.For example,the bondauthorizationstatutecouldbeamendedtoprovidethatAIDEAmay issue bonds to finance power transmission interties "owned by the participating utilities as tenants in common."Absent such achangeinthebondauthorizationstatute,we would be unable toprovideanapprovingopiniononbondsissuedbyAIDEAtofinancetheprojecthavingthecurrentownershipstructure(which,as noted above,may be the optimum structure for all other purposes), especially in view of the legal standard that bond counsel mustapply,i.e.,an approving opinion cannot be rendered unless it is determined that it would be unreasonable for a court to hold to the contrary. 2.Validity of Section 10(da)(1)of Participants Agreement. As mentioned above,another important legal question is whethereachoftheparticipatingutilitiesmaylawfullyagree,as provided 0169379.01 William R.Snell February 8,1995 Page 5 in section 10(d)(1)of the Participants Agreement,to make the required annual payments regardless of whether the Project is operational.In Chemical Bank v.WPPSS ("WPPSS"),99 Wn.2d 772, 666 P.2d 329 (1983),the Washington Supreme Court held that Washington public utility districts and cities were not authorized to enter into a joint financing agreement similar to the Participants Agreement containing a so-called "dry hole"provision requiring the participants to make payments regardless of whether the projects were operational. In WPPSS,the court reasoned that,while each of the participating municipalities had statutory authority to purchase electricity,the "unconditional obligation to pay for no electricity is hardly the purchase of electricity,"but rather was an agreement to purchase project capability.Id.at 784.The Washington municipalities also were authorized under state law toconstruct,acquire and operate electric generating facilities. However,the Washington court held that these provisions did notauthorizetheconstructionoracquisitionof"a project in which the participants did not have an ownership interest."Jd.at 785. The court noted that,under the participants'agreement involved inWPPSS,the participating municipalities did not retainan ownershipinterestintheproject.Moreover,based on provisions of the participants'agreement relating to management of the joint undertaking,the court concluded that the participating municipalities "did not retain sufficient control over the project to constitute the equivalent of an ownership interest."Jd,at 785.Thus,the agreements of the municipalities were held to be ultra-vires and void. The participants in the intertie projects here consist of municipal utilities operated by home rule cities and privateutilitiesoperatedbyelectriccooperatives.Unlike the municipalities in WPPSS,Alaska home rule municipalities have considerable autonomy.In particular,under Article xX,Section 11oftheAlaskaConstitution,a home rule city may exercise all legislative powers not prohibited,by law or charter.We havereviewedAlaskastatutesandthechartersofthemunicipalitiesofAnchorage,Fairbanks and Seward,and found no provisions that wouldprohibitthosemunicipalitiesfromenteringintotheParticipants Agreement. Electric cooperatives are authorized by AS 10.25.020 to"generate,manufacture,purchase,acquire,accumulate,and transmitelectricenergy."(Emphasis ours.)By analogy to the WPPSS analysis,the electric cooperatives also may be required to have anownershipinterestintheproject. 0169379.01 William R.Snell February 8,1995 Page 6 If the tenants-in-common ownership structure currently provided by the Participants Agreement is retained,each participating utility would have an actual ownership interest in the project,and the principal basis for the WPPSS holding would not exist here.If the ownership structure were changed to comply with the bond authorization statute as currently written,the participating utilities other than GVEA and Chugach would not have an actual ownership interest in the project.In that case,an ownership interest might be implied based on the degree of management control over the project exercised by the participating utilities through the Participants Agreement.However,we cannot conclude with certainty that it would be unreasonable for a court to hold to the contrary on that issue. As one of the conditions to the issuance of any bonds to finance the project,AIDEA should require each participating utility to provide to AIDEA an opinion of counsel stating that the participant has full legal authority to enter into the Participants Agreement,and that the terms of the Participants Agreement (including an explicit reference to section 10(d)(1)thereof)represent legal and valid obligations of the participating utility. and are enforceable against it. 3.otentia Tax-Exempt inancin (e)ons 9 the nterties Owned and Used by Municipal Ut jes.We believe that the portions of the interties that will be owned and used by the municipal utilities (i.e.,by ML&P,FMUS and SES)can be financed with tax-exempt governmental bonds,subject to the favorable'resolution of various subsidiary issues that are briefly summarized below.We base this preliminary conclusion primarily upon existing Treasury Regulations §1.103 7(b)(5)and Example (13)under that regulation,IRS Private Letter Ruling 9247012 (the so-called "Grant County Public Utility District"ruling,and Proposed Treasury Regulations §§1.141-6 and 1.141-7.The latter proposed regulations on the definition of private activity bonds provide,inessence,that proceeds of tax-exempt bonds may be specificallyallocatedtotheexpendituresforadiscreteportionofamixedusefacility,which may consist of an undivided ownership interest inanoutputfacility,distribution facilities or any similar utilitysysten.The Preamble to the proposed regulations specificallyrecognizesthechangingnatureoftheelectricgenerationandtransmissionindustry,and notes that the proposed regulationsattempttoaddressthosechangesby,e.g.,providing guidance onallocationsofuseoftransmissionfacilities. The following subsidiary federal tax issues would have to be favorably resolved before the issuance of any tax-exempt bonds. First,the exact undivided percentage ownership shares of the municipally-owned portions of the interties would have to be -0169379.01 William R.Snell February 8,1995 Page 7 finally determined and be reasonably expected to remain fixed in those portions for the term of the bonds.This means that the procedures contained in the Participants Agreement allowing certain utilities to withdraw from participation in one or both segments of the interties,and allowing or requiring other utilities toincreasetheirsharesaccordingly,must have fully run their course.Only then will it be possible to determine the extent of the discrete portions of the project that are to be owned by the municipal utilities and permitted to be financed with tax-exempt bonds. The use of the project also must be consistent with the_percentage ownership interests held by the municipal utilities andfinancedwithtax-exempt bonds.In this respect,we would need to confirm our understanding of the provisions of section 11 of the Participants Agreement,which appear to provide that use of the project,at least when capacity is or may be constrained,must beavailabletotheparticipatingutilitiesinaccordancewiththeirrespectiveparticipantshares.Thus,it appears that the relativeextentofuseoftheprojectbyprivateandmunicipalutilitiescanbeexpectedtobeconsistentwiththerespectiveownershipshares of the private and municipal utilities,but this would have to be confirmed. The Participants Agreement provides that GVEA will be the O&MManagerofthenorthernsegmentoftheprojectandChugachwillbetheO&M Manager of the southern segment of the project.GVEA and Chugach are treated as private businesses under section 141 of the Code.Unless it can be determined that neither of the O&M Agreements contemplated by the Participants Agreement constitutesa"management or service contract"for the purposes of the privatebusinessusetestunderSection141oftheCode,it would be necessary to alter the duration and compensation and terminationprovisionsofthosecontractstoconformwiththerequirementsof Proposed Treasury Regulations §1.141-3(c)for "qualifiedmanagementcontracts"that will not be treated as private businessusebythoseO&M Managers.For example,one of the requirements for a management contract providing that 100%of the manager'scompensationduringthetermofthecontractwillbebasedona periodic fixed fee is that the term of the contract may not exceed the lesser of 50%of the expected useful life of the related property or 15 years. However,it may be possible to determine that neither of theO&M Agreements is a "management contract"for these purposes underProposedTreasuryRegulations§1.141-3(c)(6)(vi),which providesinpartthat: 0169379.01 Cl William R.Snell February 8,1995 .Page 8 A contract to provide for the operation of a mixed use facility described in 1.141-6(b)(2)(i)(B)(relating to certain undivided ownership interests [in an output facility,distribution facilities or a similar utility system])is not a management contract if the only ompensatio is the reimburseme of the actua n direct expenses paid by the service provider.(Emphasis ours.) Section 10(b)of the Participants Agreement provides in part that the project operating budget shall include costs attributable to overhead or administrative and general costs oof the O&MManager...onlyto the extent that said costs are approvedbytheIPGbeforetheyareincurred,are reasonably incurred for labor directly employed by that O&M Manager in performance of its duties under the O&M Agreement,and would not have been incurred but for the activities undertaken as O&M Manager. . It is not entirely clear whether the compensation payable to the O&M Manager pursuant to the O&M Agreement thus contemplated by the Participants Agreement is limited solely to "reimbursement of the actual and direct expenses paid by the service provider [O&M ManagerJ]"as required by the Proposed Treasury Regulations.It does appear,however,that the participating utilities do desire to strictly limit the amounts payable to the O&M Manager,and perhaps the O&M Agreement itself can limit compensation payable to the O&M Manager in a manner that would allow the O&M Agreements to bedisregardedforpurposesofapplyingtheprivatebusinesstest under section 141 of the Code. As you know,there are numerous other requirements that mustbesatisfiedforinterestonbondstobe,and remain,tax-exempt under the Code,and,for the purposes of this preliminary analysis,we assume those other requirements,could be satisfied in ordinarycourse.These would include all applicable arbitrage requirenents,for example.We also would have to confirm,based on opinions ofcounselfortheparticipatingutilities,that the IPG itself wouldnotbetreatedasanassociationtaxableasacorporationundertheCode,as intended by the participating utilities.Otherwise,the'project would be treated as used for a private business use by thatassociation,with adverse consequences for the ability to issue tax-exempt bonds for any portion of the project. 0169379.01 William R.Snell February 8,1995 Page 9 , 4.roval o ojec and eements _b Alaska ub Utilities Commission. Under Section 4.01(b)of the Grant Administration Agreement, _Gisbursement of the grant funds is conditioned on receipt by AIDEA of written notice that the participants have determined and agreed upon which contractual obligations related to the Intertie Grants and Intertie Funds must be submitted to the Alaska Public Utilities Commission for its review and approval. Section 4.02(b)of the Grant Administration Agreement also provides that grant funds will not be applied to reimburse costs incurred for Phase II activities,...until...(b)final approval, ot subject to further judicial appeal,of matters submitted to the Alaska Public Utilities Commission related to the financing or use of the intertie(s).(Emphasis ours.) As discussed above,the participants consist of municipal utilities and private utilities,both of which may or may not be "public utilities"subject to the jurisdiction of the Alaska PublicUtilitiesCommission(the "PUC")depending on whether the utility meets any of the various requirements for an exemption under the public utilities statute (AS 42.05).Utilities that are generally -exempt from the public utilities statute are not exempted from the requirement of a obtaining from the PuUC a "certificate of convenience and necessity"under AS 42.05.221 through 42.05.281. AS 42.05.311 provides that a public utility may for areasonablecompensationpermitanotherpublicutilitytousedistributionortransmissionfacilitiesundercertain circumstances.If the public utilities fail to agree upon thejointuseorinterconnectionoffacilitiesortheconditionsfor compensation,either public utility may apply to the Puc for an order requiring the interconnection.AS 42.05.321.So long aseachoftheparticipantsagreetothetermsoftheParticipantsAgreement,the PUC would not have jurisdiction over theParticipantsAgreementunderthisprovision. Pursuant to AS 42.05.431(b),any "wholesale power agreementbetweenpublicutilitiesissubjecttoadvanceapproval"by thePuc.Assuming that some (if not all)of the participants are regulated public utilities,the Participants Agreement would besubjecttoadvanceapprovalofthePucifitisa"wholesale poweragreement."Unfortunately,the term "wholesale power agreement"is 0169379.01 _Agreement prohibits the disbursement of funds until all required William R.Snell February 8,1995 Page 10 not defined in the statute;nor has it been interpreted by the Alaska courts. To comply with Sections 4.01(b)and 4.02(b)of the Participants Agreement,the participants,among other things,must determine whether a "certificate of convenience and necessity"must be obtained from the Puc for the intertie projects.The participants also must determine whether the Participants Agreement is a "wholesale power agreement"subject to advance approval of the Puc,and whether any other aspects of the projects are subject toPUCapproval.Section 4.02(b)of the Grant Administration approvals are final,subject to no further judicial appeal,and the same condition should be imposed on the issuance of any bonds to finance the project. 0169379.01 WY MunicipalLight&Power 1200 East First Avenue Anchorage,Alaska 99501-1685(907)279-7671,Telecofters>(907)276-2961,277-9272 In \IDI Edu eryJanuary12,1995 eneeen LyJan2)tos Alaska Incdustint Devcisemesi William R.Snell end Excors tthertry Executive Director Alaska Industrial Development&Ce.Cand. Export Authority Ovum 480 W.Tudor Road Wes Anchorage,AK 99503 Son @. Re:Intertie Letter of November 2,1994 Dear Riley: By unanimous action of the IPG,the Intertie Participants want to respond to the points raised inyourlettertoTomStahr. 1.We are pleased that AIDEA may be available as a financing option for the Project. 2.We understand that your concerns regarding the joint ownership arrangement arise only inthecontextofpossibledebtfinancingbyAIDEAanddonotaffectAIDEA's previous acceptancesofthejointownershiparrangementforpurposesofthegrant.If you determine that thisarrangementcreatesaseriousproblemforAIDEAfinancing,please advise us as soon as possible.We are prepared to explore other methods of financing the costs in excess of the grant.We arecommittedtomovingforwardinamannerthatpreservestherespectiverightsandresponsibilitiesoftheParticipantssetforthintheexistingagreements., 3.We agree that the \ntertie wil))provide benefits consistent with the project envisioned by theAEAreports.We commit to provide all funding in excess of the grant in accordance with prioragreements.The construction agreements will be the vehicles for setting project budgets andestablishingtherespectiverolesandlevelsofparticipationinindividualprojectphasesor components. Putting Energy IntoAnchorage William R.Snell,Executive Director January 12,1995 Page Two 4,The utilities believe the terms of the various existing agreements,including the Participants'Agreement and the Construction Management Agreements,can certainly be enforced as written for all parties.Subject to the termination provisions of those agreements,the utilities are collectively committed to proceed with design andconstructionofboththeNorthernandSouthernIntertieProjects.The Construction Management Agreements will be the vehicle for setting Project budgets and establishing the respective roles and levels of participation in individual Project phases or components. a ES Intértie Participants Group Thomas R.Stahr,Chairman SOLDEN VALLEY ELECTRIC S084 ore?>.Pow £184,Gintbanks,Alasku 99707-1249,Phone 907-452-1151 Sle October 27,1994 William R.Snell Executive Director AIDEA 480 West Tudor Anchorage,Alaska 99503-6690 Re:Healy-to-Fairbanks Interlic Dear Riley: As we discussed at our recent breakfast meeting,some membersoftheIPGseeminclinedtobreaktheNorthernIntertieprojectintophasesbyreducingthescopeoftheinitialconstructionefforttobuildonlyabasictransmissionlinewithoutvoltagecompensationorbatteryenersystorage.A basic line will notdeliverthebenefitswhichwerepredictedbythe1991AEAfeasibilitystudy.our consultant predicts that only a 4 megawatt power transfer increase will result.Additionally,there is no present contractual comnitment to any future "phases". It would be most helpful if you will tell us at our meeting inFairbanksonNovember1whetherAIDEAwillallowapplicationofthe$45 million grant for the Northern Intertie against the roughly $55millioncostofabasiclinewithoutautilitycommitmenttofund the full project.This decision wil]help the IPG in consideringwhethertoproceedwiththepresentpreliminaryscopeandbudget(line plus battery energy storage at approximately $75 million)or a reduced scope and budget. In spite of the difficulties experienced by the IPG,we areprogressingsmoothlywiththedesignoftheNorthernIntertie.Ifthescopeisreduced,some members will proceed with thecompensationorbatterystorageseparatelysoIamnottryingto lobby you one way or the other. See you on Tuesday. Best Regards,Hike (up Michael P.Ke¥ly Golden Valley cc:Jon Rubini ce hwB S aC - :a bilehastyALASKAINDUSTRIALDEVELOPMENT AND EXPORT AUTHORITY «x EE ENERGY AUTHORITY te :x 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /561-8050 FAX 907 /561-8998 November 2,1994 Mr.Thomas R.Stahr General Manager and Chairman,IPG MUNICIPAL LIGHT &POWER 1200 East First Avenue Anchorage,Alaska 99501-1685 Re:Intertie Financing Dear Tom: Your letter to me of August 16,1994 inquired whether,without further legislative authorization,AIDEA or AEA is ina position to finance the Participant's share of the intertie costs. In a related vein,I recently received an inquiry from GoldenValleyElectricAssociation,a copy of which is attached.As you know,I have also participated in discussions among AIDEA staff and consultants,as well as with several of the participatingutilities,on matters generally relating to these two inquiries. While I believe there are several issues which require further analysis and consideration,I thought it advisable to offer my preliminary thoughts for the IPG's consideration. 1.In light of the specific legislative authorization, we believe that,as between AIDEA or AEA,AIDEA is the appropriate issuer. 2.Several parties have raised questions regarding whether the form of ownership provided for under the Intertie Grant Agreement requires legislative action.As you know,the language in Chapters 18 and 19 refer to interties owned,respectively,by Golden Valley and Chugach Electric "for the benefit"of all the participating utilities.In the context of our collective efforts to satisfy the grant preconditions,it was determined that the form of collective ownership provided under the Intertie Grant Agreement (and other related documents)was an acceptable alternative for purposes of the grant.As the question of ownership structure has been renewed in the context of a possible public financing,I have asked that AIDEA bond counsel for the intertie financing consider this issue. ec'AWE SES rs Mr.Thomas R.Stahr General Manager and Chairman,IPG MUNICIPAL LIGHT &POWER November 2,1994 Page 2 3.GVEA's recent letter,as well as our earlier discussions,present questions regarding the scope of the intertieproject.As I understand the issue,the IPG is considering a phased development of the intertie,with the initial phase limited to only a "basic line."I have requested that AIDEA's legal counsel review whether,and under what circumstances,a scaled-down project,or phased development,is consistent with the grant appropriation and debt issuance authorization set out in Chapters 18 and 19. As I anticipate that this issue is likely to be considered by the IPG before the legal review by outside counsel and the Department of Law is complete,I thought it instructive to offer AIDEA's view on this issue.We believe that Chapters 18 and 19,read together,envision a roughly "equal"sharing of cost between the utilities and the State.The broader scope of the intertie project is also consistent with the AEA feasibility studies presented to the Legislature at various times.Finally, our analysis is that the basic line,standing alone,would not result in the scope of intended benefits to warrant use of grant funds.While a phased approach to development may well be prudent and acceptable,AIDEA staff concludes that the availability of grant_funds will likely require binding monetary commitments with respect to subsequent project development phases. 4.In several of my meetings with utility representatives,questions have arisen as to the enforceability or binding nature of obligations arising under the Intertie Grant Agreement and related contracts.This issue is particularly troubling as the Intertie Grant Agreement was itself the basis for the State's determination that the preconditions to the intertie grants had been satisfied.While I do not believe these questions directly relate to your inquiry of whether further legislative action is necessary,I have asked legal counsel to address whether use of grant funds is affected were the Intertie Grant Agreement to include unenforceable provisions. With these comments in mind,it is,in my view,uncertain whether AIDEA is now in a position to proceed with a financing absent further legislative authorization or clarification.If the IPG,or the participating utilities,have comments or opinions which they would like considered as AIDEA and its counsel addresses these matters,I invite any party to submit such comments for our Mr.Thomas R.Stahr General Manager and Chairman,IPG MUNICIPAL LIGHT &POWER November 2,1994 Page 3 consideration.And while this letter addresses only the relatively narrow question of whether further legislative action is required, there are various other issues which need be resolved before a public financing can be concluded. As I trust you appreciate,in anticipation of the change in administration and the new legislative session,AIDEA desires to resolve issues relating to scope and financial participation in the immediate future.We request that the IPG advise AIDEA as promptly as possible,but no later than January 13,if questions remain regarding which utilities desire to participate in each of the respective interties,and if so,a schedule for how each of the utilities intend to resolve any prerequisite actions (e.g.voter approval)if such actions are deemed necessary to enter into binding financial commitments. I look forward to discussing these issues with you and your colleagues in the near future. Sincerely, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY tiliam R.Snell Executive Director /ke Enc. cc:Jim Baldwin,Esq. Keith Laufer,Esq. Jonathan Rubini,Esq. GAM -V2 3/F¢ r \Municipality of Anchorage ,Municipal Light &PowerTomFink,Mayor 1200 East First Avenue Anchorage,Alaska 99501-1685 (907)279-7671,yECEIVfe"2aS iGAugust16,1994| teWilliamR.Snell AUG 13 1994 Executive Director . Alaska Industrial Development Alaska andustrial Development&Export Authority and Export Authority 480 W.Tudor Road Anchorage,AK 99503-6690 Re:tertie Financin Dear Riley: We had earlier talked about the possibility of AIDEA providing the additionalfinancingnecessarytocompletethenorthernandsouthernsegmentsoftheParticipantsIntertieProject.The Intertie Participants Group ("IPG”)at its last meeting directed me,as chairman,toformallyaskyoutodeterminewhetheryouareinaposition,without further legislativeauthorization,to finance the Participants'share of the additional cost of these projects,either asAIDEAorthroughAEA. If you determine that you are in a position to arrange for the joint financing of theParticipants'additional cost of these projects,the IPG would like to request that you take thosepreliminarystepswhicharenecessarytodeterminetheconditionsandcostsofthisjointfinancingoftheproject. The IPG is anxious to determine whether joint financing through AIDEA or AEA isanoptionandtherelativefinancingcostofthisoptiontotheParticipants.Please feel free tocontactmeifyouhaveanyquestionsorrequirefurtherinformationfromtheprojectParticipants. Sincerely yours, °AL LIGHT &POWER ww”? omas R.Stahr General Manager and Chairman,IPG TRS:]ka . a cc:Norm Story,HEA James N.Woodcock,MEA Dave Calvert,City of Seward Vince Mottola,FMUS Robert Hufman,AEG&T Gene Bjomstad,CEA Mike Kelly,GVEA Putting Energy Into Anchorage * LDEN VALLEY ELECTRYS £280 ore '2.Bors F181,Finebanks,Alasku 99707-1249,Phone 907-452-1151 ane October 27,1994 William R.Snell Executive Director AIDEA 480 West Tudor Anchorage,Alaska 99503-6690 Re:Healy-to-Fairbanks Intertiic Dear Riley: As we discussed at our recent breakfast meeting,some membersoftheIPGseeminclinedtobreaktheNorthernIntertieprojectintophasesbyreducingthescopeoftheinitialconstructionefforttobuildonlyabasictransmissionlinewithoutvoltagecompensationorbatteryenergystorage.A basic line will notdeliverthebenefitswhicnwerepredictedbythe1991AEAfeasibilitystudy.our consultant predicts that only a 4 megawattpowertransferincreasewillresult.Additionally,there is no present contractual commitment to any future "phases".,It would be most helpful if you will tell us at our meeting inFairbanksonNovember1whetherAIDEAwillallowapplicationofthe$45 million grant for the Northern Intertie against the roughly $55millioncostofabasiclinewithoutautilitycommitmenttofundthefullproject.This decision wil].help the IPG in consideringwhethertoproceedwiththepresentpreliminaryscopeandbudget(line plus battery energy storage at approximately $75 million)orareducedscopeandbudget.thIn spite of the difficulties expexienced by the IPG,we areprogressingsmoothlywiththedesignoftheNorthernIntertie.Ifthescopeisreduced,soma members will proceed with thecompensationorbatterystorageseparatelysoIamnottryingto lobby you one way or the other. See you on Tuesday. Best Regards,Hiky (us Michael P.KeYly Golden Valley cc:Jon Rubini - a Or C) eeeee+ree oerate Co Oe a TTeS eTGoldman,Sache &CO.|85 Broad Siaet |New York,New York 10004 ae,wsel:212-902-6417 "de ;a ei 1 yee Francis J.ingrassia Vice President Municipal Finance Department September 26,1994 Mr.William R.Snell Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage,Alaska 99503-6690 Dear Riley, In response to your request for our thoughts on major credit issues relating to Intertie financing,we have identified three major categories you should think about:general creditissues;credit issues related specifically to AIDEA authorization;and tax issues.We examine each area briefly below.ene feSenaTTeatemimnaaibintes General Credit Issues: Regardless of whether the Intertie is financed directly by the participants through formationofajointactionagencyorwhethertheparticipantsjointlyobligatethemselvestomake conduit payments to AIDEA as bond issuer,identical credit issues arise.Therefore,the maincreditrequirementsofsuchafinancingincludethefollowing: '1)Each participant needs clear APUC authorization to enter into what ever 'financing arrangements are taken and authorization to make payments over time; 2)Regardless of the existing language in the participants'agreement,a core, creditworthy group of obligors must remain obligated from the closing of financing onward; 3)Appropriate and customary joint action agency step up clauses need to be ineffecttoprovideforparticipantdefaults,if they occur; 4)Annual charges to participants need to provide by formula for proper allocation of benefits of tax-exempt financing among participants,if any. AIDEA Authoritzation Issues: Assuming that the underlying credit can be structured in a manner acceptable to AIDEA, AIDEA may wish to provide conduit financing with a state moral obligation.However to S New York |Longan |Tokyo |Boston |Chicago |Gallas |Franiiurt |Hong Kong |Housion |Loe AngelesMCMemphis|Miami |Montreal|Osaka |Parts|Priadeiphia |San Francisco |Singapore |Syaney |TorontojZurich .fssue bonds,AIDEA will need its bond counsel to opine that the bonds are validly authorizedbythestatelegislature.Therefore,the conflicting provisions regarding intertie ownershipmustberesolved. Tax Issues: AIDEA's bond counsel should immediately confer with tax counsel for the participant grouptodetermineonwhatbasistax-exempt debt could be structured as part of the overall intertie financing.Wohlforth's review should include whether the Grant County ruling can be relied upon. While the above briefly summarizes the major issues,we would like to discuss each with you in more detail.Please feel free tc call when you are free. Sincerely, F nanhe Francis J.Ingrassia PUBLIC FINANCIAL MANAGEMENT,INCFinancialandinvestmentAdvisors 1000 SW Broadway,Suita 1500 Portland,Oregon 97205-3067 503-223-3385 (Fax)503-223-7002 TO:Riley Snell Valoric Walker FROM:Pat Clancy Scott Clements RE:Intertie Financing we September 23,1994 We have completed our review of the documents you provided us on the Intertie Financing.We concur with your observation that there are a number of issues that need resolved prior to proceeding with a financing.Here is a list of the issues we believe nced to be resolved.As these issues get resolved,in all likelihood,new issues will emerge. 1,Authority of the various parties to enter into this long term agreement.In reviewing the problems of the Washington Public Power Supply System financings,the mostimportant _..assumption -which proved wrong -was clear authority on the part of the participants to enterintothesupplyagrcement.We would suggest that each participant provide,up front,an opinion letter from their counsel as to their authority to enter into the Intertie agreement 2.Clear agreement on who will participate in the financing.It is unclear that AIDEA can issuetax-exempt bonds for this project with Chugach and GVEA as participants.Therefore,FMUS and ML&P would become liab?s for a stream of payments for taxable bonds.It seems unlikely that ML&P would agree to this situation.On the other hand,if a tax-exempt participant issues bonds separately,it is not clear what happens tn those.bonds if they stop parucipating in the Agreement because the project would all be taxable and the payments would now be coming from non-exemzt parties.A different type of arrangement may be needed. 3.Increasing concentration of debt burder.On the Healy -Fairbanks Intertie,the only participants that cannot withdraw are GVEA and FMUS.Given the debt burden of the Healy Clean Coal Project,it is not clear that GVEA can maintain its "investment grade"status. This is even more the case for FMUS which is already a struggling utility.In a worst case, all the debt ends up on these two parties and it is not clear they can handle i.We need to develop a financial analysis (or have ore developed by the participants)that shows the effect of all the debt being with the last partics on those parties and assess the financial viability of financing based on that analysis. of the potential last shareholders with a liability of almost 15%.The utility is not healthy4.Analysis of what happens with a bankn:ptcy of one of the remaining parties.FMUS is one Jandhastakenon-going supportof the City to continuc to operate.We should prepare an Atlanta Austin Boston Denver Fort Myers Harrisburg Houston Los Angeles Memphis Minneapolis New York Orlando Philadelphia Portland San Francisco {<€3)}An Atitiate ct Marine Midland Banik,NA .WdeS -AIDEA Intertie Financing ae " sate: . ."Aokee maaroravaangr ae..re *Page2 peaTp apnea ' analysis of what would happen if only GVEA and FMUS were left and then PMU3 wetbankrupt. 5.Legal analysis of APUC authority for rate increases related to the Intertie system.To theextentthepaymentsexceedtherevenuesproducedbythe1.5 mil rate increases authorized "the Intemic Agiccuent,Will ne APUC grant rate increases to accommodate the increased debt payments?' 6.Effect of rate increases on electricity rates in Fairbanks.The rates need to stay compctitive Y"or the demand for electricity may drop.Long term conversion to altemative heating and energy sources would be detrimental to the ability of GVEA and FMUS to meet the long term payment obligations. 7.Unlimited exposure to future assessments.Section 10¢of the Participants Agreement leaves the participants with an unlimited exposure to future assessments.Without a Clear A mechanism for financing those assessments (bonding authority may be used up by then)it is not clear that all of the participants have the capacity to pay cash as needed.A mechanism for financing future assessments should be explored especially for the weaker of the participants. Please feel free to call either of us to discuss any of these points.It is our opinion that the documents may form a base for a financing but we do not believe the project would be viable without the use of the moral obligation of the State.We suggest stronger agreements on the part of the parties involved and 4 clear picture of who is in and who is out before proceeding with more analysis. -|NOV-1-95 WED 15:44 ALASKA,aL ELECTRIC |FAK NO,561554 P,02/04 INTERTIE PARTICIPANTS GROUP NORTHERN INTERTIE SYSTEM AGREEMENT Whereas;the Intertie Participants Group (IPG)intends to settle the issues of the Healy- Fairbanks Project Segment of the Northem Intertie System related to: (a)Capacity allocations (b)Scope of the project segment,and (c)Budget for the project segment in order to permit the timely execution of the Construction Management Agreement; Therefore The Parties Agree: 1.The existing Healy-Fairbanks 138 kV line owned by Golden Valley Electric aeAssociation(GVEA)and used for transfers north by GVEA and Fairbanks Municipal OY,ltUtilitySystem(FMUS),shall have fer capacity of 10 into Fairbanks.All \Y ah paretransfercapacityinexcessof100MWofthecombinedMealy-Fairbanks lines after : construction of the new line shall belong to the IPG.All southbound transmission A,WZcapacityoftheexistingAlaskaIntertieshallbelongtoA'aska Electric Generation &to ¢,!Transmission Cooperative (AEG&T),Chugach Electric Association (CEA)and veeAnchorageMunicipalLight&Power (ML&P)as provided in the Alaska Intertie 4 ehAgreement.GVEA and FMUS agree that all southbound transfer rights on the existing GVEA transmission line in excess of the transfer requirements they have to serve theirownretailloadsshallbelongteAEG&T,CEA and ML@P,- RAS 2.The Healy-Fairbanks Project Segment shall consist of a 230 kV line energized at 138 kV and a40 MW battery.The line shall be a "freeway"as specified in the Participants Agreement and capacity shares shall be bi-directional.However,the battery spinning reserve benefits shall be divided by IPG shares. 3.The budget for the Healy-Fairbanks Project Segment will be $75 million. 4.The parties will fully cooperate to achieve expeditiously all necessary approvals by the Alaska Public Utilities Commission (APUC). 5.The parties will pursue financing at the lowest reasonable cost and will seek technical amendments to existing legislation if necessary. 6.The parties will continue to cooperate to achieve fast-tracking of the construction schedule.The goal is to begin construction during the first quarter of 1996. 4a NOV-1-95 WED 15:44 ALASKA {LL ELEVIKIU !PHA NU.DOLD041 teu us !' 7.The parties will support the following after completicn of the Healy-Fairbanks Project Segment: (a)Future upgrades resulting in increased transfer capacity of the AlaskaIntertieandincreasedtransfercapacitypenmistedontheHealy-FaitbanksProjectSegmentshallbepaidforandallocatedbasedonAlaskaIntertieshares. "This provision for increasing shares of transfer capacity shall remain in effect until the potential transfer capacity of this project segment is realized.GVEA and the IPG commit that when both their line;between Healy and Fairbanks are operational,FMUS will be assured delivery to Fairbanks of their "minimum intertie transfer capacity right"(MITCR)over the Alaska Intertie. When improvements to the Alaska Intertie resultin an increased MITCR for FMUS,this provision will apply so long as there is an increase in Healy-Fairbanks delivery capability at least equal to the increase on the Alaska Intertie. (b)When the existing GVEA 138 kV Healy-Fairbanks line is upgraded, participants in the Healy-Fairbanks Priject Segmentshallbeofferedan_Opportunity to participate in proportion to their IPG shares.Any increased transfer capacity and increased stable/sécure capacity shall be shared on the basis of each utility's participation.If any paricipant declines the opportunity to participate in the upgrade ofthe GVEA line,that participant's share shall be offered,on a pro rata basis,to the other participants in the Healy-Fairbanks Project Segment.If any participant declines its portion of this declined share, that portion shall revert to GVEA. (c)The Northern Intertie System shall be operated in the stability/secure mode.However,participant utilities may access the additional transfer capacity increment and the increased additional transfer capacity increment resulting from future upgrades of the Alaska Intertie or the Healy-Fairbanks Project Segment,provided they employ sufficient IPG approved rapid load shed or )equivalent to return immediately to the stable/secure transfer limit following a afirstcontingency.The parties intend that the Norther Intertie System may beoperatedabovethesecurelimitTtisfurthertheintentofGVEAandFMUS weythat,ealy-Fairbanks Project Segment,they will install equipment necessary to permit the abovementionedrapidloadshed. . 8.The parties will expediteIPG actionundertheParticipznts Agreement necessary tasupportthisagreementandtoapproverelatedexhibits.ths Northem InterieConstructionManazementAgreement. 0,GVEA hereby re-states its strong intent to participate in the Anchorage-Kepal e acounaProject Segment and looks forward10 design and construction procecding an a PROPOSED ON 10-31-95 BY: MUNICIPALITY OF ANCHORAGE GOLDEN VALLEY ELECTRI adb.a.MUNICIPAL LIGHT &POWER ASSOCIATION,INC. . 4 pro *a LIAT PUNE TANT ies LITIADY LIIOC OA reuse NUV-1-¥5 WED 19:45 HLHDAR |IL ELEVINIU THA WU.OOLI04iNOVIFYYHLLSe,4374504GVER,rouitsiRerao FAK NO,5615547,P33 3 or Tr amt Ad/II/95 «=«15:53 4503 221 rg TER WYNNE 003/031 WNotion +o a HPpeee tabled DRAFT \Antilb "weet 4/11/95 ms..(Tone +)|ty 1 3-98 1993 ALASKA INTERTIE PROJECT -CONSTRUCTION MANAGEMENT AGREEMENT BETWEEN ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC., THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER, CHUGACH ELECTRIC ASSOCIATION.INC., THE MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM, THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM AND GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. ("PARTIES") AND HOMER ELECTRIC ASSOCIATION,INC MATANUSKA ELECTRIC ASSOCIATION,INC. ("ADDITIONAL PARTIES") D4/11/95 15:54 503 22 79 \TER WYNNE 004/031 DRAFT 4/11/95 CONSTRUCTION MANAGEMENT AGREEMENT THIS AGREEMENT ("Agreernent")is made and entered into this _ day of ,1995,by and between:ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC,("AEG&T),THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER (""ML&P"),CHUGACH ELECTRIC ASSOCIATION,INC.("Chugach"),THE MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM ("FMUS”"),THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM ("Seward"),HOMER ELECTRIC ASSOCIATION,INC.("HEA"), MATANUSKA ELECTRIC ASSOCIATION,INC.("MEA")and GOLDEN VALLEY ELECTRIC ASSOCIATION,INC,("GVEA").AEG&T,ML&P, Chugach,FMUS,Seward and GVEA are sometimes referred to individually as "Party"and collectively as "Parties."HEA and MEA are referred to as"Additional Parties". WITNESSETH: WHEREAS,the State of Alaska ("State")has by statute authorized, and has partially funded,the design and construction of a 138 kV (minimum) transmission line between Healy and Fairbanks,Alaska (hereinafter called the "Healy-Fairbanks Segment"or "Segment");and WHEREAS,the Parties and the Additional Parties and the State,acting through the Department of Administration and the Alaska Industrial Development and Export Authority,have entered into the Intertie Grant Agreement ("Intertie Grant Agreement"),dated October 26,1993 under which the Participating Utilities have agreed to contract with GVEA to design and construct the Healy-Fairbanks Segment and requires that the Intertie Participants Group ("IPG")be formed by the Participating Utilities for the purpose of exercising the rights and responsibilities of the owners and to provide oversight of GVEA's construction efforts;and 1 -CONSTRUCTION MANAGEMENT AGREEMENT 34/11/95 15:54 @s503 229 TER WYNNE oos/oa1 DRAFT 4/11/95 WHEREAS,the Participating Utilities have entered into the Participants Agreement,dated January 24,1994 ("Participants Agreement")which designates GVEA as the Construction Manager of the Healy-Fairbanks Segment,forms the IPG and provides for the basic requirements for budgeting and oversight by the IPG regarding GVEA's design andconstructionoftheHealy-Fairbanks Segment and provides for a means of financing the remaining cost of the Segment by AIDEA or the Participants; and WHEREAS,the Participants have entered into the Grant Administration Agreement dated August 30,1994 ("Grant Administration Agreement"), which provides the terms and conditions to be satisfied prior to disbursement of Grant Account funds and provides for AIDEA's obligations with respect to the administration of the Grant Account;and WHEREAS,in order to assure that the Participating Utilities and GVEA meet their obligations under the Intertie Grant Agreement and the Participants Agreement,the Parties and Additional Parties desire to detail GVEA's responsibilities as Construction Manager for the Healy-Fairbanks Segment and the procedures necessary to assure that the IPG provides oversight of the design and construction of the Healy-Fairbanks Segment. NOW,THEREFORE,IN CONSIDERATION of the mutual covenants set forth herein,the Parties and Additional Parties agree as follows: SECTION 1.TERM. Unless otherwise provided in this Agreement,this Agreement shall become effective on May 10,1995 and shall continue until the Final Acceptance Date or terminated as provided for herein;provided,that all obligations incurred hereunder shall be preserved until satisfied. 2 -CONSTRUCTION MANAGEMENT AGREEMENT oer se 04/11/95 15:55 503 22 79 hTER WYNNE 006/031 DRAFT AI11/95 SECTION 2.-DEFINITIONS. Whenever used in this Agreement the following terms shall have the meaning stated below: (a)"Additional Costs”means approved Project construction costs in excess of available Grant Funds as defined in the Participants Agreement. (6)"Agreement"shall mean this Construction Management Agreement. (c)"Commercial Operation Date"means the date that the IPG receives an opinion from the Project Engineer(s)that the Healy- Fairbanks Segment is fully available to operate at rated capacity on a commercial basis. {d)"Canstruction Budget"means the budget for Design and Construction Costs spproved by the IPG in accordance with this Agreement. (e)"Construction Manager”means GVEA. (f)"Construction Manager's Design and Construction Costs"means all capital costs of the Healy-Fairbanks Segment incurred under and consistent with the Participants Agreement,Section 11 of this Agreement and the Construction Budget approved by the IPG, including but not limited to planning,permitting,design,acquisition of real property interest,construction,equipment,testing,and insurance costs and payment of claims,regulatory activities,judgments, settlements,or claims,legal and consulting costs,GVEA's labor costs directly assigned to the Project (including associated payroll benefits) and equipment costs related to design and construction and GVEA administrative and general overhead,including construction overhead, of 0.5%of the sum of the above direct Construction Manager's Design and Construction Costs contained in an approved Construction Budget. The Parties and Additional Parties recognize the IPG will incur 3 -CONSTRUCTION MANAGEMENT AGREEMENT 04/11/95 15:55 503 2°*7 -079 hTER WYNNE :gooTso3l DRAFT 4/11/95 additional Design and Construction Costs as defined in the ParticipantsAgreement., (g)"Construction Schedule”means the schedule prepared by GVEA under.Section 6(a). (h)"Contract Year”means calendar year,except that the initial Contract Year shall begin on the effective date of this Agreement and the final Contract Year shall end on the termination of this Agreement. (i)"Final Acceptance Date"means the date GVEA notifies the IPG . that all design and construction of the Project has been completed,all invoices submitted to the IPG have been paid and GVEA has made final payment to its contractors for the design and construction and the IPG determines that the Project has been completed. {j)"Grant Funds”means the $43,200,000 appropriated by Section 1 of Ch.19,SLA 1993,for payment as a grant under AS 37,05.316 for construction of the Healy-Fairbanks Segment and accrued interest. (k)"Major Equipment and Construction Contracts”means contracts for the acquisition of equipment,design or construction in the categories listed in Exhibit D that commit expenditures for the Project in excess of $100,000,as such Exhibit D may be revised from time to time by GVEA and approved by the IPG in accordance with Section 6(e)(3)of the Participants Agreement. (1) "Participant's Share”means Participant's Share as determined in Section 4 of the Participant's Agreement. (m)"Project”means the design and construction of the Healy- Fairbanks Segment as described in Project Scope. (n}"Project Engineer(s)"means the engineering firm of national reputation engaged by GVEA to provide preliminary and final engineering design and specifications for the Project and provide construction liaison and oversight for the Project. 4 -CONSTRUCTION MANAGEMENT AGREEMENT 04/11/95 15:55 503 22°"79 ATER WYNNE :008/031 DRAFT 4/11/95 (o)"Project Scope”means the description of the Northern Intertie Scope attached hereto as Exhibit A,as revised from time to time pursuant to this Agreement. (p)"Prudent Utility Practice”means at a particular time any of thepractices,methods and acts engaged in or approved by a significant portion of the electric utility industry at such time,or which,in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability,safety and reasonable expedition.Prudent Utility Practice is not required to be the optimum practice,method or act to the exclusion of all others,but rather to be a spectrum of possible practices,method or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety and expedition.Prudent Utility Practice includes due regard for manufacturers'warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of the Healy-Fairbanks Segment,but also to appropriate structures,landscaping,painting,signs,lighting and other facilities. (r)"Trustees”means AIDEA or the successor to AIDEA named by the State. (s)"Uncontrollable Force"means any cause beyond the control of a Party hereto and which by the exercise of due diligence that Party is unable to prevent or overcome,including the following causes,if they cannot be overcome by due diligence,but not limited to,an act of God,fire,flood,volcano,earthquake,explosion,sabotage,and act of the public enemy,civil or military authority,including court orders, injunction and orders of governmental agencies of competent jurisdiction,insurrection riot,an act of the elements,failure of equipment,or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers.Strikes, lockouts,and other labor disturbances shall be considered Uncontrollable Forces,and nothing in this Agreement shall require either Party to settle a labor dispute against its best judgment: S -CONSTRUCTION MANAGEMENT AGREEMENT 2m eee '04/11/95 15356 S503 27°9979 ATER WYNNE Mo0s/o31 DRAFT 4/11/95 provided,that during any labor dispute each Party shall make allreasonableeffortsunderthecircumstances,including,to the extent permitted by law and collective bargaining agreements,the use of replacement personnel and or management personnel and/or other personnel under the provisions of a mutual aid agreement,to ensure,if possible the continued ability of the Parties and Additional Parties to carry out their obligations under this Agreement. SECTION 3.CONSTRUCTION MANAGER. (a)GVEA as Construction Manager.GVEA shall serve as the Construction Manager on behalf of the Parties and the Additional Parties of the Healy-Fairbanks Segment for the term hereof,unless either GVEA gives written notice to the [PG of termination,or the IPG removes GVEA as Construction Manager pursuant to the terms of section 9(b)of this Agreement.GVEA,as Construction Manager,shall be responsible for (i)selection and supervising of qualified contractors employed to design or construct the Healy-Fairbanks Segment,subject to the oversight and approval of the IPG as provided in this Agreement and (ii)the administration of all contracts to insure compliance with all contract plans,specifications and the Construction Budget.All contracts between GVEA and a contractor shall contain an assignment clause in favor of the Parties and Additional Parties in the event that this Agreement is terminated. (6)Management of Design and Construction.GVEA shall manage the design and construction of the Healy-Fairbanks Segment in accordance with Prudent Utility Practice and the requirements of the IPG as described in this Agreement. (c)Reports to the IPG.GVEA shall submit monthly reports to the IPG members setting out in sufficient detail the status of the design and construction of the Healy-Fairbanks Segment.Monthly reports Shall be in such detail as is requested from time to time by the IPG but shall,at a minimum,allow the IPG members to compare the percentage of completion of the Project with total expenditures as a percentage of budgeted items.GVEA shall promptly inform,so as to allow the Parties and the Additional Parties to protect their interests,the 6 -CONSTRUCTION MANAGEMENT AGREEMENT -04/11/95 15:37 503 2 179 ATER WYNNE (0107031 DRAFT 4/11/95 members of the IPG or,in the case of litigation or significant potential litigation,the legal representatives designated by each Party by fax regarding any design or construction problems encountered which,in the opinion of GVEA,might result in significant litigation,require aaNsignificantChangeOrderorasignificantdeviationintheschedule for(34 completion of the Segment.For the purposes of this section, Na significant shall mean potential litigation or a Change Order which__GVEA determines has-a raasonable tikelihood_of resulting liability.or -festof-$50,000 or an increase in the cost of a Major Equipment or Construction Contract of 10%,whichever is lower,or a delay in the proposed Commercial Operating Date of 30 days or more.The IPG,its members and the Parties and the Additional Parties shall treat as exempt from public disclosure any commercial or financial information furnished pursuant to this Agreement that Is privileged or confidential and is so designated by GVEA.In the event a third party seeks disclosure under any applicable Alaska law,the IPG,its members and the Parties and the Additional Parties shall notify GVEA of such effort and to protest such disclosure.The IPG,the Parties and the Additional Parties shall use their best efforts to avoid disclosure of any privileged or confidential information. (d)GVEA shall include in all of its construction contracts and any engineering contracts or amendments entered into after the date of this Agreement,provisions for insurance and bonding naming the Parties and the Additional Parties as additional insureds or third party beneficiaries to protect the Parties and Additional Parties from contractor negligence and willful misconduct and other risks normally included in construction contracts. 7 -CONSTRUCTION MANAGEMENT AGREEMENT 04/11/93 13:58 43503 22 79 TER WYNNE 011/031 DRAFT 4/11/95 SECTION 4.-OVERSIGHT.» The IPG acting on behalf of the Parties and the Additional Parties shall be responsible for oversight of GVEA construction efforts.Such oversight shall include approval of: (a)Any material revisions to Project Scope including: (1)selection of final segment routing; (2)changes in Project design voltage; (3)changes in final location and specifications for points of interconnectian; (4)changes in design criteria for reliability and transfer capability; (5)substation one line drawings and major equipment ratings; and (6)ratings and operational limits of station compensation and Capacity. (b)Construction Budget,including any revision thereof. (c)Selection of Project Engineer(s),Major Equipment and Construction Contracts. (d)Construction Schedule. SECTION 5.SCOPE OF PROJECT,PRELIMINARY DESIGN OF SEGMENT,CONSTRUCTION CONTRACT. (a)Project Scope.The Project Scope is attached hereto asExhibitA.Project Scope may be amended from time to time by the IPG to reflect the results of design and engineering studies undertaken 8 -CONSTRUCTION MANAGEMENT AGREEMENT am meme 04/11/95 15:58 503 22¢9 TER WYNNE (012/031 DRAFT 4/11/95 as part of Phase 1 of the Construction Budget,including,but not limited to: (1)final segment routing; (2)interconnection location and design specifications; (3)Project design voltage;and (4)System voltage compensation and stability facilities. {b)Preliminary Design of Seqment.Subject to the terms of this Agreement,GVEA shall proceed with the selection of the Project Engineer(s),preliminary engineering,design survey of the Segment and related environmental and geotechnical studies detailed in Exhibit B. Prior to the execution of this Agreement,the IPG approved GVEA proceeding with preliminary contracts for services to allow GVEA to prepare the Construction Budget attached as Exhibit C. (c)Final Design and Construction of Project.Upon approval of Phase 2 of the Constructian Budget,GVEA shall proceed as appropriate with contracting for detailed construction design,purchase of equipment and material and construction of the Segment.GVEA shall submit the Major Equipment and Construction Contracts to the IPG for approval prior to their execution. SECTION 6.CONSTRUCTION BUDGET. (a)Initial Construction Budget.The initial Construction Budget for the Project,including a Construction Schedule,is attached hereto as Exhibit C.The Construction Schedule may be revised from time to time with the concurrence of the IPG without further change to the Construction Schedule attached hereto as part of Exhibit C.GVEApwshallnot,without the express approval of the IPG,incur costs orOobligatefundsbeyondthoseamountscontainedinandapproved fer__each lineitem of the Construction Budget,adjusted for Change Ordersasprovidedinsubsection(d)below and intra-budget transfers as providedin subsection (e)below.Prior to the completion of Phase 1 of 9 -CONSTRUCTION MANAGEMENT AGREEMENT 04/11/98 15:59 503 226 9 ATER WYNNE 013/032 DRAFT 4/11/95 the Construction Budget,GVEA shall provide the IPG a revised Phase 2 estimate and Construction Schedule for approval.The Project Schedule shall be detailed showing the commencement and completion dates of major Project components and a projected cash flow by months for each phase of the Project. (b)GVEA Direct Labor and Related Direct Expenses.The Construction Budget may separately itemize a reasonable amount for GVEA's direct labor,including normal associated payroll benefits and related direct expenses during the design and construction of the Project to the extent such labor was directly assigned to the Project by the Construction Manager.GVEA's other administrative and general expenses shall not be included as part of such direct labor and related direct expenses.Direct labor includes all hours actually worked on the Project by GVEA employees,excepting the General Manager,even though the employee performing the work may be employed less than 100%on the Project;provided,that the claim is supported by itemized descriptions of the work performed and the time taken to perform the work. (c)Working Capital and IPG Expenses.The estimated amount of Working Capital needed to cover GVEA's estimated contractual payment obligations for each month of the Contract Year and the IPG expenses allocated to the Project by the IPG shall be separately designated in the Construction Budget. (d)Annual Revisions to the Construction Budget.GVEA shall provide the IPG a revised Construction Budget,including a revised Project Schedule and Project Scope,if appropriate,120 days prior to the beginning of each Contract Year.The IPG shall approve or disapprove within 60 days any revision to the Construction Budget. Proposed revisions or modifications must be submitted in sufficient detail or with sufficient explanation so as to clearly show the scope and justification for the requested expenditure or revision.If the IPG disapproves the revised Construction Budget,it shall provide GVEA an explanation of the items disapproved and an alternative that would be acceptable to the IPG. 10 -CONSTRUCTION MANAGEMENT AGREEMENT "O4/11/95 15:59 S03 226 TER WYNNE (014/031 DRAFT 4/11/96 (e)Limits on Intra-Budget Transfers.GVEA may make intra-budget transfers,not to exceed $50,000 to any single budget item;provided, that GVEA shall report such intra-budget transfers at the next IPG meeting.Any proposed intra-budget transfer over that amount shall be submitted by GVEA as a proposed Change Order as provided in subsection (f)below. (f)Change Orders.GVEA may approve Change Orders to its agreements with design or construction contractors if: (i)the Change Order does not exceed $50,000 or the aggregate of all Change Orders in the Contract Year do not increase the applicable line item in the Construction Budget,and (ii)the Change Orders do not affect the Project Scope,including Project capacity,general routing,points of interconnection,or basic design of the structures;and (iii)the total of all Change Orders in the Contract Year does not Cause the budgeted costs for that phase of the Project to increase. GVEA may proceed with the above Change Orders it determines are required to maintain the Project Schedule;provided,that GVEA shall report all such Change Orders to the IPG on its next regular monthly report. SECTION 7.FUNDING OF THE HEALY-FAIRBANKS SEGMENT. (a)Funding of Preliminary Costs.GVEA costs and expenses incurred or obligated by GVEA and approved by the IPG pursuant to Section 4(a)and approved IPG expenses shall be funded from Grant Funds held by Trustee for the account of GVEA under the Intertie Grant Agreement,subject to the availability of such Grant Funds, (b)Financing Plan and Funding of Costs in Excess of Grant Funds. Each Party shall notify the IPG prior to July 1,1995,of its decision regarding the source of funding for its Participant's Share of Additional 11 -CONSTRUCTION MANAGEMENT AGREEMENT moO eP 8 04/11795 16:00 503 226 hTER WYNKE 015/031 DRAFT 4/11/95 Casts.If such Party elects to finance its share separately,such notice shall include an financing plan demonstrating that such plan Is a feasible method to assure the funding of that Party's Participant's Share of Additional Costs,provided,that the costs of financing arrangements which do not finance all Participant'Shares shall not be considered Project costs or be born by the Participants.If the Parties and Additional!Parties elect to jointly finance such Additional Costs, each Party shall act in good faith to enter into agreements with the issuer within 30 days after GVEA submits its revised Phase 2 estimate pursuant to Section 6(a)to allaw timely funding of Additional Tosts- (c)Assurance of Adequate Funding.The Parties and Additional ° Parties shall use theirbestefforts to secure adequate financing of theHealy-Fairbanks Segment and cooperate with AIDEA,if AIDEA is requested by any IPG member to issue bonds to finance all or a part of the remaining cost of the Segment. SECTION 8.INVOICING AND PAYMENT, (a)Invoicing.GVEA shall prepare and submit an invoice to the IPG, or its designee,by the twentieth of each month stating the amounts paid to its contractors for progress payments for work accomplished in the prior month,the amount of additional Working Capital,if any, needed to cover the ensuing month's estimated costs,the amounts to be paid to GVEA for direct labor and other related direct costs and the amount of authorized overhead (0.5 percent of direct Design and Construction costs)and any other Design and Construction Cost relating to the Healy-Fairbanks Segment.GVEA shall maintain copies of all invoices subject to audit and include copies of invoices in excess of $10,000 submitted by such contractors and a summary statement of invoices that are less than $10,000 and certify their accuracy and that the invoice is consistent with the Construction Budget and the terms of this Agreement.The GVEA invoice shall also detail the hours of direct labor and other related direct costs provided by GVEA personnel involved in support of the design and construction of the Healy-Fairbanks Segment and any other Design and Construction Cost expended by GVEA.GVEA shall certify that all progress payments and invoices submitted for IPG approval are accurate and in conformance 12 -CONSTRUCTION MANAGEMENT AGREEMENT BO vEAT ts od 94/11/93 16:00 503 226 }KTER WYNNE 016/031 DRAFT 4/11/95 with contract and budget requirements.All invoices submitted shallconformtotherequirementsoftheGrantAdministrationAgreement. (b)Review of Invoice.The IPG or its designee shall review GVEA's invoice and approve the invoice in whole or in part or disapprove any part not consistent with the Construction Budget or not conforming to the requirements of the Grant Administrative Agreement at the next IPG meeting.The approved invoice or the approved parts of the invoice shall then be forwarded to AIDEA authorizing payment to GVEA.Once grant funds available from AIDEA are fully committed, GVEA's invoice shall be forwarded ta AIDEA or the individual IPG member for payment of its proportionate share of such invoice,AIDEA or individual IPG members will reimburse GVEA upon approval of the invoice by the IPG. (c)Working Capital.(f authorized in the Grant Administration Agreement,in addition to costs actually incurred,GVEA may include in each invoice an amount to maintain working capital at the level provided in the Construction Budget for the ensuing month approved by the IPG solely for Project purposes.Working Capital shall be adjusted for each month in such Contract Year to an amount requested by GVEA,but not to exceed the highest estimated monthly payment to GVEA estimated in the approved Construction Budget.Interest earned by GVEA on Working Capital shall be credited to Working Capital and used solely for Project purposes.To the extent Grant Funds are not available to pay Working Capital,each Party shall pay,as its share of Additional Costs,within 15 days of approval by the IPG its Participants Share of the amount to maintain Working Capital at the level provided in the Construction Budget for the ensuing month as approved by the IPG. SECTION 9.TERMINATION AND DEFAULT. (a)Termination by GVEA.GVEA may,for any reason,terminate this Agreement if written notice of such termination is tendered no less than 60 days prior to the anticipated date of commencement of construction specified in the notice to proceed.If such notice is not given,GVEA may terminate this Agreement upon reasonable notice 13 -CONSTRUCTION MANAGEMENT AGREEMENT "'p4/11/83 16:01 503 221 9 \TER WYNNE 017/031 DRAFT 4/11/95 (not less than 90 days)if GVEA can demonstrate that termination is for good cause shown.In either event,GVEA shall use its reasonable best efforts to transfer Project files,contracts and responsibilities andcooperatewith,the new construction manager selected by the IPG,and mitigate any costs arising from the termination of this Agreement and the transfer of responsibility to the new construction manager. (b}Removal of Construction Manager.The IPG may remove GVEA as Construction Manager and terminate this Agreement for reasonable cause provided that the IPG gives GVEA at least 30 days'prior notice in writing and reasonable opportunity to cure.Reasonable cause shall include,but not be limited to,the unavailability of adequate financing to complete the Segment,substantial cost overruns in any phase of the Project,significant threatened or pending litigation or claims,material discrepancies in the books and records of GVEA,or negligence of GVEA,irrespective of whether GVEA would be liable for any of the above causes under this Agreement. (c)Notification of Material Breach or Default.If a Party is in material breach of or default under this Agreement (Defaulting Party),the other Party or Parties (Terminating Party)may notify in writing the Defaulting Party that it is in material breach or default.Such notice shall be effective upon its receipt by the Defaulting Party.For the purpose of this section,material breach or default under this Agreement includes, but is not limited to: (1)removal,withdrawal or termination as set out above; (2)insolvency,/,e.,a Party is unable to meet its obligations as they become due; (3)general assignment of substantially all of a Party's assets for the benefit of it creditors,filing of a petition for bankruptcy or reorganization or seeking other relief under any applicable insolvency laws;and (4)material failure of a Party to meet its obligations under thisAgreement.| 14 -CONSTRUCTION MANAGEMENT AGREEMENT oO ee 04/11/35 16:01 503 22¢9 ATER WYNNE 018/031 DRAFT 4/11/95 Notwithstanding the foregoing,this Agreement shall not be terminated as a result of an Uncontrollable Force. (d)Right to Cure. (1)The Defaulting Party shall have the right to cure the materia!breach or default within 60 calendar days of the mailing date of notification of the material breach or default. (2)Inthe case of a material breach or default which may not reasonably be cured within 60 calendar days,the Defaulting Party shall have the right to provide the Terminating Party with a plan for the appropriate actions to cure the breach or default.Within this 60 calendar days, the Defaulting Party must commence diligently pursuing appropriate action under the plan to cure the default and continue until the default is cured. (e)PaymentsUponTermination.Upon receipt of notice oftermination,GVEA shall not incur additional cost obligations without the approval of the IPG and shall limit additional cost to those absolutely necessary to maintain essential project management pending determination of allowable close-out costs.Such allowable close-out costs shall include costs irrevocably incurred by GVEA in accordance with this Agreement,costs of terminating related contracts not assigned to the new construction manager and,subject to negotiation and agreement of GVEA and the IPG,GVEA's direct costs associated with the close-out of its obligations as Construction Manager.GVEA shall be reimbursed from Grant Funds or from Additional Funds for such allowable close-out costs,in accordance with subsection (f),less GVEA's share of such costs.GVEA shall submit to the IPG within 30 days of termination a summary of its obligations and an estimate of such costs.Any obligation of AIDEA or the Participants for reimbursement of GVEA shall survive termination and shall remain in full force and effect until satisfied, 15 -CONSTRUCTION MANAGEMENT AGREEMENT eo ee et a 04/11/95 16:02 503 221 9 ATER WYNNE igJ019/7031 DRAFT 4/11/95 (f)In any event,GVEA shall use its best efforts to cooperate with a new construction manager selected by the IPG and to mitigate any costs arising from the removal,withdrawal,or replacement of GVEA and the transfer of responsibilities to a mew construction manager, including the immediate transfer of all Project records and books and the immediate assignment of any subcontracts entered into by GVEA in connection with the Project. SECTION 10.IPG DECISIONS DURING CRITICAL CONSTRUCTION PERIODS. The Construction Manager shall use its best efforts to anticipate construction problems,and bring matters related to such problems that require action or could require action by the IPG under this Agreement to the IPG for decision at regularly scheduled meetings of the IPG. During critical construction periods,designated by GVEA and agreed to in advance by the IPG,the members of the IPG shali each designate one or more representatives,fully empowered to vote on behalf of that member,wha shall be available by telephone.These votingrepresentativesshallbeavailabletodecidemattersthatcannot wait for consideration until the next scheduled meeting of the IPG without exposure to delay claims or substantial additional cost.Diligent efforts aS are reasonable under the circurnstances shall be made to convene an emergency telephonic meeting of the IPG. SECTION 11,LIABILITY. GVEA shall defend,indemnify and hold harmless the IPG,AIDEA and Project Participants,their agents,employees,and consultants from and against all liability,damages,claims,lawsuits,demands,causes of action and expenses (including,but not limited to,reasonable attorneys'fees)resulting from GVEA's,its directors',agents', officers',staff's,or employees'grossly negligent acts or intentional orwillfulmisconductinperformanceofGVEA's obligations under,this'Agreement.Except that GVEA shall not be liable (except with otherParticipantsundertheParticipantsAgreement,and to the extent of its Participant's Share of Project liabilities )for: 16 -CONSTRUCTION MANAGEMENT AGREEMENT bo soot eeee ee ae >B 04/11/95 16:03 Gaol "6 i}TER WYNNE >020/031 DRAFT 4/11/95 (a)Damages resulting from design or construction decisions presented to and approved by the IPG;and/or = (b)The intentional or negligent acts of engineering design firms or contractors retained by GVEA;and/or (c)Damages or other costs and expenses resulting from GVEA's ordinary negligence in the perfarmance of its duties as Construction Manager. All such damages,costs,and expenses other than those indemnified by GVEA under this Section shall be Construction Costs and Expenses. To the maximum extent allowed by law,each signatory recognizes the principles of law contained in Alaska Statutes Section 45.45.900 and agrees that no part of this Agreement shall be construed so as to be invalid or unenforceable because of those or similar principles, SECTION 12.MISCELLANEOUS PROVISIONS. (a)Audit.The Parties and Additional Parties,acting through the IPG,may conduct an annual audit,the cost of which shall be a Design and Construction Cost as defined in the Participants Agreement. GVEA shall cooperate with the IPG in the conduct of the annual audit or final audit of funds disbursed pursuant to this Agreement as required in 2 AAC 45,010 and the Grant Administration Agreement and such audit shall be submitted to the IPG for submission to the Alaska State Coordinating Agency designated by AIDEA. Any Party or Additional Party shall have the right to audit the books and records of GVEA relating to GVEA's performance of this Agreement at any time upon reasonable notice to GVEA.The cost of such audit shall be borne by the requesting Party,unless such audit discloses that GVEA has (1)failed to account for Construction Manager's Design and Construction Costs in some significant manner or (2)acted in bad faith,in performing its obligations under this Agreement,in which case GVEA shall pay the reasonable costs of the 17 -CONSTRUCTION MANAGEMENT AGREEMENT bo sD?°me a me ce me ee ee 04/11/93 16:03 503 "73 0079 KTER WYNNE 021/031 DRAFT 4/11/95 audit.The right to audit shall extend for a period of three years following the Commercial Operatian Date . (b)Separate Books and Records.GVEA shall maintain separate books and records for the design and construction of the Healy- Fairbanks Segment.Such books and records shall be available to the Parties and Additional Parties for their inspection.Copies of such books and records shall be made available to any such entity upon request;provided,that such entity reimburses GVEA for the reasonable cost of reproducing or otherwise making available such books and records. (c)Waiver Not Continuing.Any waiver at any time by a Party of its rights with respect to any default of the other Party,or with respect to any other matter arising in connection with this Agreement,shall not be considered a waiver with respect to any prior or subsequent default, right or matter. {d)Applicable Law.The laws of the State of Alaska (including without limitation the equal opportunity laws set forth in AS 18.80.220,as the same may be amended from time to time)shall govern the interpretation and application of this Agreement and the actions of the Parties and the Additional Parties hereunder. (e}Assignment.Each Party and Additional Party agrees that it shall not sell,assign or transfer its interest,rights,or obligations under this Agreement to any other entity without the written permission of the IPG. (f)Section Headings.The Section headings in this Agreement are for convenience only,and do not purport to and shall not be deemed to define,limit or extend the scope or intent of the section to which they pertain. (g)Third Party Beneficiaries.By entering into this Agreement,the Parties and the Additional Parties expressly do not intend to create any obligation or liability,or promise any performance to any other third 18 -CONSTRUCTION MANAGEMENT AGREEMENT °eo sme .04/11/95 16:04 @503 3 0079 TER WYNNE 022/031 DRAFT 4/11/95 party,nor have the Parties and the Additional Parties created for anyotherthirdpartyanyrighttoenforcethisAgreement. (h)Severability.If after this Agreement has become effective any article,paragraph,clause or provision of this Agreement shall be finally adjudicated by a court of competent jurisdiction or a regulatory agency with jurisdiction over the Parties or the Additional Parties to be invalid or unenforceable,or if any administrative agency with authority over the Parties or the Additional Parties shall require changes to this Agreement,then the Parties and the Additional Parties shall in good faith meet promptly to negotiate lawful amendments or modification to this Agreement that will effectuate the original intent of this Agreement and return the Parties and the Additional Parties as nearly as possible ta the position that each would have enjoyed in the absence of such judicial,regulatory,or administrative action. (i)Notices and Computation of Time.Any notice required by this Agreement to be given to a Party or Additional Party shall be effective when mailed,and in computing any period of time from such notice, such period shall commence at 12:01 p.m.prevailing time at the place of receipt on the date of mailing of such notice.Whenever this Agreement calls for notice to or notification by a Party the same (unless otherwise specifically provided)shall be in writing and directed to the General Manager of GVEA or the members of the IPG as appropriate.If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment Is to be made or a legal holiday,payment may be made or the act performed on the next succeeding day which is neither a legal holiday nor a day when banking institutions are closed in such place. (j)Inspection of Facilities.For purposes of this Agreement,the Parties and the Additional Parties or designees may,but shall not be obligated to,inspect GVEA's plans and specifications related to the Healy-Fairbanks Segment and to visit the construction sites related thereto at any time upon reasonable notice,but such inspection or failure to inspect shall not render the Parties,the Additional Parties or their designees,liable or responsible for any injury,loss,damage,or 19 -CONSTRUCTION MANAGEMENT AGREEMENT ae ome et __<04/11/95 16:04 5a 26 0079 \TER WYNNE @o23/031 » DRAFT 4/11/95 accident resulting from defects in such plans and specifications or construction of the Healy-Fairbanks Segment. (k)Covenant of Good Faith and Fair Dealing.In order to permit this Agreement,throughout its term,to be ful]effective in accordance with the original intent of the Parties and the Additional Parties,each Party and Additional Party agrees that it shall at all times act in good faith and with fair dealing in performing its obligations and in exercising its rights under this Agreement. (1)Exhibits.The exhibits attached to this Agreement shall be incorporated by reference into this Agreement. (m)Performance Pending Resolution of Dispute.Pending resolution of any dispute,each Party shall continue to perform its obligations under this Agreement,including but not limited to the obligation to make the payments required by this Agreement.A Party shall be entitled to seek immediate judicial enforcement of this continued performance obligation notwithstanding the existence of a dispute. Application for such enforcement shall be made to the Superior Court for the State of Alaska,at Fairbanks or Anchorage. (n)Other Agreements.The Parties have entered into an Intertie Grant Agreement,a Grant Transfer and Delegation Agreement,and a Participants Agreement in connection with the design and construction _of the Project.In addition,the Parties contemplate entering into a Grant Administration Agreement and a Project Financing Agreement in the near future.This Construction Agreement has been entered into pursuant to Section 7(k)of the Participants Agreement between the Parties,and it should be interpreted and construed in harmony with the Participants Agreement,the Intertie Grant Agreement,and the Grant Administration Agreement and is intended to implement the provisions of Section 7 of the Participants Agreement.Except as otherwise © expressly provided herein,this Agreement does not modify,alter,or 20 -CONSTRUCTION MANAGEMENT AGREEMENT .bos ID*4 IAT RRS Limam time eA ar aw wena «,O4/11/85 =18:05 B30 18 0079 KTER WYNNE (024/031 ® DRAFT 4/11/95 amend any other contract or agreement that may exist between or among any of the Parties or Additional Parties. IN WITNESS WHEREOF,the Parties and the Additional Parties have caused this Agreement to be executed the day and year first above written. ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. By: As: THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER By: As: CHUGACH ELECTRIC ASSOCIATION,INC. By: As: 21 -CONSTRUCTION MANAGEMENT AGREEMENT ebho/Q9°44 CAT UN ee ew eee LIRA time ee me a 04/11/95 16:05 =50-26 0079 TER WYNNE 025/031 DRAFT 4/11/95 THE MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM By: As: THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM By: As: GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. By: As: ADDITIONAL PARTIES: HOMER ELECTRIC ASSOCIATION,INC. By: As: 22 -CONSTRUCTION MANAGEMENT AGREEMENT Pl /e>* _ *04/11/95 16:06 =526 079 \TER WYNNE 026/031® DRAFT 4/11/95 MATANUSKA ELECTRIC ASSOCIATION,INC. By: As: 23 -CONSTRUCTION MANAGEMENT AGREEMENT LGM\aSaigh.agr ho srac »'04/11/95 18:06 50 26 0079 WER WN.'s Py NAE 9 :OPR 26°93 @4:42PM GVI NGINEZERING ve 1027/0391 s |Exhibit A (page1 of 3) April 6,1995 NORTHERN INTERTIE SCOPE Healy to Fairbanks TRANSMISSION LINZ Several]sub-routes have been added to the existing alternativereuteswhichwereselectedfortheHF-136 transmission line.Alltheproposedroutesareshownontheattachedmap.The proposedlineigplannedtebeconstructedcf230kVtowerswhichwillmainlyconsistofweatheringsteelXeframestructures.Although thelinei8plannedtobeconstructedfor230kv,the line willinitiallybeoperatedat1368kV.All river crossings will beaccomplishedwithoverheadspansandarenotproposedtoincludeanysubtarinecrossingsoranyundergroundsections.Short sectionsoftransmissionlineswillberequiredtointerconnecttheWilsonSubstationtotheexistingGoldenValleyandFMUStransmission system. SUBSTATIONS Substation modifications to accommodate the new breaker bay areproposedtobeaddedatHealySubstation. A new substation (Wilson Sub.)is proposed near Van Horn andCushmanattheNorthStarTerminals,located by the existing GVEA69kVand138kVlines,and the FMUS 69 kV.back door tie.The newsubstationwillbethenorthernterminaloftheintertie,and site of the}Battery Energy Storage System (BESS).The proposedsubstationwillhavefive138kVbreakersbayswithtwotiestotheexistingGVEAGHS=FWS 138 kv line,one to the new intertie,one forthenew|40MW BESS installation,and one for a 60/80/100 MVA,138 kvto69kytransformer,The 69 kV portion of the substation will havefour69|kv breaker bays with one for the transformer,one to GoldHill,one to Ft.Wainwright,and one to the FMUS back deor tie.Seeattachedsketch. ENERGY STORAGE and REACTIVE COMPENSATION A new Battery Energy Storage System will be installed at thenorthernterminaloftheintertieintheNorthStarBuilding adjacen|to Wilson substation.Tha Wilson BESS is proposed to besizedat40MW/MVAR for 20 minutes,(14.1 MWh).The BESS will bedesignedtoprovideprimarilyreactivecompensationduringnormaloperationinlieuofstaticvarcompensation,and in addition stored jenergy during transmission disturbances to reduce flows,black start and spinning reserves for generation loss. bevtTorn VINTONTi erties tia fire im oer aeaT NE MU rdSUB-RCI.XLS heTta o 3 ra A }HS :9 KV to South Side Interconnection Drawing for the Northern Terminal of fhe Norihem Intesie an°138 kV fo Gold Hill 138 kV to FL.Wolrreaight OF wr risomees---.eee UT Lo) Qofhoo 69 KY to is Peger Road 40 MVA fcr 20 minules 3 Boltery Enevpy Ps 0 Slorege System so (¢FO¢o5ed)W3TATUxSONTASENION6L009:aiO 6?KV 'y 40/80/100 ViVA xtror ANNANWaLYLotooOPanenaeeyhemeTEERFubure 230 KV area L 230 k¥No them Imiertie from Heoly to fakbanks (operated at 338 kV) 69 KV fo South Folibanks eeTeo/ézowPage 1} .04711795 16:08 5aotwoe16:st 26 007anAPR,BS 295 "B4:12RM E\ENGINEERING 4aMand{t}_210247031°IO ty ep,a,eat || t Fairbanks!- | ' , :> Pa 2? Mans >x>2PAzFene hemeee Hz:}'seeereiyy°.7,>*7aNe"EL8AEEeG_5Fa;TetagerfietSeAd1ia,fjoesyat.4ZEs.nyAy|.,:SoeTKy1'JYatae°v4:=-atei}:L3erAS:a/+8.+frt\2;Ph:nyA-|!",>eo”>EYoefeDfeml°,5)Yy2KeBy ar%NatSS:saljaece7YaltellSooONTUA,"7 ALASKA INDUSTRIAL DEVELOPMENT =”AND EXPORT AUTHORITY =A @@E™=ENERGY AUTHORITYEE 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 December 18,1996 Dave Calvert IPG Chairman City of Seward P.O.Box 167 Seward,Alaska 99664 Mary Ann Pease Municipal Light &Power 1200 East First Avenue Anchorage,Alaska 99501-1685 Subject:New Grant Administrator Northern Intertie Invoicing Process Budgeting -Invoice Issue Dear Dave and Mary Ann: This letter has three purposes:(a)notify you that |will replace Daniel W.Beardsley as grant administrator for the Northern and Southern Interties,(b)verify the invoice approval process for the Northern Intertie,and (c)clarify billings in excess of contract commitments. Approval Process for the Northern Intertie Invoices: To ease my transition as grant administrator,it will be helpful to define the invoicing process. As |understand it,the process we have agreed to is as follows: 1.GVEA will send all reimbursement requests with invoices and backup to Mary Ann Pease (Charlene Cigard)at ML&P for review. 2.After review by ML&P staff,the reimbursement requests and invoices will be submitted to the IPG Chairman,Dave Calvert,for approval. Dave Calvert Mary Ann Pease December 18,1996 Page 2 3.The IPG Chairman will send AIDEA an approved copy of the invoice plus the spreadsheet listing for those individual invoices less than $10,000 and back up for those invoices $10,000 or greater. 4.Upon receipt of the approved invoice,AIDEA will review the documentation and issue a reimbursement check to GVEA unless there are discrepancies in the invoicing or approvals. 5.In the event there are discrepancies AIDEA will notify the IPG Chairman by letter with copies to Mary Ann Pease and GVEA. 6.Once the discrepancies are resolved,AIDEA will issue a reimbursement check. 7.After the close of the year,the IPG will obtain an independent audit in compliance with 2 AAC 45.010 and submit that audit to AIDEA by April 15. If the process as outlined above is not accurate or there are concerns,please schedule a telephonic meeting with all concerned parties to resolve the process. Billings in Excess of Contract Commitments: Several of the billings have exceeded the line item "Total Contract Commitment”amount. Although the expenditures have been approved by the IPG,our concern is the expenditure is in excess of that authorized by the individual contract.AIDEA does not have a current total budget that assures that the total contract expenditures are within the Phase 1 total approved budget.It is therefore important that a revised budget be submitted as soon as possible.As you are aware,there are certain conditions which must be satisfied prior to exceeding into material procurement and construction.The revised budget will allow us to satisfy our administrative obligations. Thank you for your assistance with the above concerns. Sincerely,Lo. Dennis V.McCrohan,P.E. Design/Construction Manager CC:Mike Kelly,GVEA toheeIFExhiblia Northern Inierlie -Healy to Faltbanks tina 10-Apr-95 Total Caniiac!Altacaled Jotal Contract |Tolat Contract CONTRACTOR Ongtnal Conlingency Changes Commitment Preliminary Design Dryden &LaRue $584,622.00 $50,482.20 $0.06 $643,304.20 Power Enginasis,Inc.$280,17,00 $28,011.70 $0,00 $308,128.70 Richmond Meteorological $20,480.00 $2,048.00 $5,709.00 $28,237.00 Power Technolagies Inc $17,610,00 $0.00 $10,390.00 528,000.00 Enveonmental Services Alaska Blofogical Research $17.988.00 $1,739.00 $37,195.80 $30,322.80 Dames and Moose,Inc EA $62,216.00 $2.524.00 $35,948.70 $90,688.70 Dames and Moore,Inc.Raplor Survey $33,200.00 $1.300.00 $0.00 $14,500.00 Land Fleld Serves (Lond Rights)$143,846.00 $14,364.00 $4,428.00 $162,658.00 Land Fleld Services (Ownership)$12,970.00 $1,297.00 $0.00 $14,24700 Northen Land Use $80,596.00 $8,058.40 $7,752.00 $96.405.40 Geolectnical Golder Associalas $204,895.00 $38,981.50 $201,939.00 $445,815.50 Design Surveys , Nortach Surveys $196,700.00 $0.00 $39,840.00 $234,540.00 CONTRACT TOTALS $1.624,839.00 |$154,825.80 $317,202.60 $2,098,867.30 The above Iisted contracts and amounls were oppioved pilot to Ine execulion of {h's Agreement, es 8Pett Seg0:9TC6/TI/tO.«6L0092SNNLWUSLYTcosocomy Benefit /Cost Analysis of the Northern Intertie Healy to Fairbanks 230 kV Transmission Line sa Loss Reduction $38.34 million Reliability $11.50 million Increased Economy Energy Transfers $42.70 million Increased Capacity Sharing $17.32 million Reconstruction Benefits $29.60 million Tota!Benefits $139.46 million Battery Energy Storage System Transmission Deferrals $15.00 million Increased Transmission Capacity $2.00 million Transmission losses $0.00 million Capacity Deferral $8.80 million Production Expense Savings $5.10 million Increased Reliability $17.50 million Environmental $3.00 million Total Benefits $51.40 million Total Northern Intertie Benefits $190.86 million Total Northern Intertie Estimated Cost:$75.00 million Benefit /Cost Ratio 2.54 Values were taken from two benefit Studies: Economic Feasibility of the 138 kV Transmission Lines In the Railbelt.Dec.1989 at March 1996 Draft -Energy Storage Systems for the Interconnected Railbelt of Alaska.March 1996 NPV based on 50 year life @ 4.5 %discount rate. NPV based on 20 year life @ 9.0 %discount rate. Value recomputed due to addition of Healy Clean Coal Project and Battery Energy Storage System after initial benefits study was completed. ealy -AZsaAN AS = GOLDEN VALLEY ELECTRIC ASSOCIATION H NC. NORTHERN INTERTIE HEALY TO FAIRBANKS ALTERNATE ROUTES MARCH 1996DATE: 2010 SCALE IN MILES 1"=10 Miles Northern Intertie Pro'>sct (See project map on opposite sid GVEA,your member-owned cooperative,other Railbelt electric utilities and the State are pro- posing to construct a new intertie from Healy to Fairbanks to provide additional economical power,increase reliability of service,and reduce nuisance outages.GVEA evaluated several al- ternatives to the proposed intertie,including new generators in Fairbanks,energy conservation, and improvements to the current intertie.For over 2 years,GVEA has been conducting an environ- mental review process,under Rural Utilities Ser- vice (RUS),formerly Rural Electrification Admin- istration,to determine the preferred route for the new intertie.The eight routes evaluated are shown on the reverse side. Paralleling the existing intertie route was not se- lected for several reasons.The new intertie will be different from the existing intertie,with higher capacity,higher towers,and a wider right-of-way. Because of the level of development in the exist- ing intertie corridor,including hundreds of homes, the new intertie wouldn't fit into the existing cor- ridor without a great deal of disruption.The new intertie could be placed parallel to the existing intertie in some areas,but in others it would have to be miles away,resulting in impacts to a wide area and the homes and businesses established there.In addition,the reliability of electric ser- vice is increased by having a separate intertie corridor completely removed from the existing in- tertie.Asecond,or loop,path was recommended by the North American Electric Reliability Coun- cil in 1991. Issues that were evaluated include potential im- pacts on:endangered or threatened species, such as the American Peregrine Falcon;wet- lands;private properties;health and safety;avia- tion;other wildlife,such as Trumpeter Swans and Sandhill Cranes;and many others. The environmental review process began in February 1994 when GVEA invited local,state, and federal agencies to attend a project kickoff meeting.The meeting allowed these agencies to identify issues which they felt needed to be addressed in the environmental review process. In August 1994,a preliminary environmental study was completed and GVEA and RUS held another agency meeting to discuss the prelimi- nary findings.Public meetings were also held in Fairbanks and Healy.Interest in the project was very high in the Ferry area and residents re- quested additional meetings.Based on these public meetings,GVEA agreed to evaluate routes crossing further east of the Parks Highway through the Alaska Range foothills and then across the Tanana Flats (Rex,Jumbo,Walker andTatlanikaRoutes).The preliminary environmen-tal study was revised to include these new route alternatives and was reissued in December 1994 to everyone who submitted comments on the original study. The environmental review process continued through late 1995 as GVEA's consultants pre- pared an environmental analysis document. GVEA continues to meet with agencies to dis- cuss the preliminary findings of the environmen- tal analysis and how particular issues had been addressed.Following are the major issues that have been the focus of this study. American Peregrine Falcons:This is the onlyendangeredspecieswithinthestudyarea.A fieldSurveywasconductedin1994toidentifyactive Peregrine Falcon nests along the Tanana River, between Fairbanks and Nenana.The Preferred Route avoids the areas identified as active Per- egrine Falcon nesting habitat. Trumpeter Swans:Minto Flats and the Tanana Flats are major nesting areas for Trumpeter Swans.U.S.Fish and Wildlife Service's Trum- peter Swan survey data was plotted on USGS maps and studies on swan and crane migration were reviewed.Although all routes have some potential to impact Trumpeter Swans during nest-ing and/or migration,the Preferred Route has been designed to avoid concentrations of nest- ing swans in the Tanana Flats. Residential Areas:Private land and residences are concentrated along the Parks Highway be- tween Healy and Fairbanks.Studies were con- ducted to evaluate the number of residences and privately owned parcels impacted by each route alternative.The Preferred Route minimizes im- pacts on residential and private areas. Wetlands:The Tanana Flats area is almost en- tirely wetlands.Each route was studied to iden- tify the types and amounts of wetlands crossed. GVEA proposed to construct the Tanana Flats portion of the line using driven piling during the winter when the area is frozen.Except for one possible pad at the Tanana River crossing,con- struction will not include any fill in the wetlands. Visual Impacts:GVEA will take several steps to minimize visual impact.Visual resources were evaluated in detail from Chena Ridge,the Parks Highway,and other high sensitivity viewpoints. GVEA has proposed mitigation using distance from viewpoints and self-weathering towers which blend into surrounding vegetation.In addition, clearing of the right-of-way will be limited to ar- eas of tall trees or dense brush and edges of cleared areas will be undulated.The environ- mental analysis contains several photographs which illustrate the Preferred Route's appearance in the landscape. Construction Methods:Construction in the Tanana Flats would be restricted to winter,when the area is frozen.Construction will consist of driven piles and will likely include helicopter place- ment of towers and wire stringing.No construc- tion access roads will be constructed in the Tanana Flats.Construction in upland areas will occur during other seasons.Most access for these areas is expected to be by existing recre- ation or old mining trails in the Alaska Range foot- hills.Although existing trails will be used for ac- cess in most areas,the right-of-way may be used for access during construction in upland areas. Clearing of the right-of-way corridor will be mini- mized,with only areas of dense vegetation s. cleared.Low brush and shrubs will de left withi: the corridor to decrease visual impacts. Fragmentation of Habitat:The Tanana Flats i: an important habitat for several species of wild life.However,the vegetation of the Flats is « mosaic of open areas of low shrub,black spruce and other vegetation.In addition,as the are: has become more popular for recreation,nev trails have been created by snow-machines anc airboats.Although the intertie corridor may re- sult in some clearing,these areas will be mini mized and should not significantly change the mosaic of habitats on the Tanana Flats. Tanana River Crossings:The Tanana Rive: must be crossed to complete the intertie.Some route alternatives crossed the Tanana River threetimestoavoidwetlands.The Preferred Rout: crosses the Tanana River once,near Goose Is land.This crossing minimizes impacts on thr Fairbanks International Airport and high recre ation use areas and is compatible with existing uses near Goose Island. Aviation Impacts:GVEA coordinated witt Alaska Department of Transportation and Publi. Facilities (ADOT/PF),Federal Aviation Adminis tration,and other aviation groups on the envi ronmental analysis.Concerns were raised b: ADOT/PF regarding highway and river crossing and towers over 200 ft.high.The Preferred Rout: will minimize aviation impacts by minimizing high way and river crossings and keeping towers ur- der 200 feet. Health &Safety Concerns:Some people have expressed concerns regarding electromagneti- field (EMF)exposure.The Preferred Route avoid: populated areas and will not increase EMF ex- posure to residences or businesses Other issues addressed in the environment: analysis include general biological issues (vez etation,moose,caribou,fish,etc.),recreation use subsistence,hunting and trapping,fire manage ment,land use,socio-economics,and the mil: tary mission at Fort Wainwright.Archaeologica geotechnical and other studies have been cor ducted to gather information. SUMMARY:GVEA has worked diligently to re sponsibly address all issues raised and has de- signed the proposed Preferred Route (proje= map on reverse)to meet the project's goals wit the least environmental impact.The Preferre: Route is one of the shortest routes possible ard impacts fewer resources than the other alternz tives.BLM/RUS are currently reviewing th GVEA document.They will be analyzing all e ternatives including GVEA's Preferred Route.Yor. comments are encouraged.The study will te available at all GVEA offices,the Noel Wien Pubk Library and the Denali Borough office.Pleas submit written comments by July 31,1996 « Gary Foreman ¢«Bureau of Land Management 1150 University Ave.*Fairbanks AK 99709-389 Please call Steve Haagenson at GVEA,45: 5647,or 1-800-770-GVEA (4832)for further& formation. INC.GOLDEN VALLEY ELECTRIC ASSOCIATION, MARCH 1996 ”[FY}=>re)Ly= - ww<|..Ee623/°Zy«2IeixOozrais<= lo] -N aG2==ozo3a Norther n Inter tie Proj ect (See project map on opposite side} GVEA,your member-owned cooperative,other Railbelt electric utilities and the State are pro- posing to construct a new intertie from Healy to Fairbanks to provide additional economical power,increase reliability of service,and reduce nuisance outages.GVEA evaluated several al- ternatives to the proposed intertie,including new generators in Fairbanks,energy conservation, and improvements to the current intertie.For over 2 years,GVEA has been conducting an environ- mental review process,under Rural Utilities Ser- vice (RUS),formerly Rural Electrification Admin- istration,to determine the preferred route for the new intertie.The eight routes evaluated are shown on the reverse side. Paraileling the existing intertie route was not se- fected for several reasons.The new intertie will be different from the existing intertie,with higher capacity,higher towers,and a wider right-of-way. Because of the level of development in the exist- ing intertie corridor,including hundreds of homes, the new intertie wouldn't fit into the existing cor- ridor without a great deal of disruption.The new intertie could be placed parallel to the existing intertie in some areas,but in others it would have to be miles away,resulting in impacts to a wide area and the homes and businesses established there.In addition,the reliability of electric ser- vice is increased by having a separate intertie corridor completely removed from the existing in- tertie.Asecond,or loop,path was recommended by the North American Electric Reliability Coun- cil in 1991, Issues that were evaluated include potential im- pacts on:endangered or threatened species, such as the American Peregrine Faicon;wet- lands;private properties;health and safety;avia- tion;other wildlife,such as Trumpeter Swans and Sandhill Cranes;and many others. The environmental review process began in February 1994 when GVEA invited local,state, and federal agencies to attend a project kickoff meeting.The meeting allowed these agencies to identify issues which they felt needed to be addressed in the environmental review process. In August 1994,a preliminary environmental study was completed and GVEA and RUS held another agency meeting to discuss the prelimi- nary findings.Public meetings were also held in Fairbanks and Healy.Interest in the project was very high in the Ferry area and residents re- quested additional meetings.Based on these public meetings,GVEA agreed to evaluate routes crossing further east of the Parks Highway through the Alaska Range foothills and then across the Tanana Flats (Rex,Jumbo,Walker and Tatlanika Routes).The preliminary environmen- tal study was revised to include these new route alternatives and was reissued in December 1994 to everyone who submitted comments on the original study. The environmental review process continued through late 1995 as GVEA's consultants pre- pared an environmental analysis document. GVEA continues to meet with agencies to dis- wuss the preliminary findings of the environmen- tal analysis and how particular issues had been addressed.Following are the major issues that have been the focus of this study. American Peregrine Falcons:This is the only endangered species within the study area.A field survey was conducted in 1994 to identify active Peregrine Falcon nests along the Tanana River, between Fairbanks and Nenana.The Preferred Route avoids the areas identified as active Per- egrine Falcon nesting habitat. Trumpeter Swans:Minto Flats and the Tanana Flats are major nesting areas for Trumpeter Swans.U.S.Fish and Wildlife Service's Trum- peter Swan survey data was plotted on USGS maps and studies on swan and crane migration were reviewed.Although all routes have some potential to inpactTrumpeter Swans during nest- ing and/or migration,the Preferred Route has been designed to avoid concentrations of nest- ing swans in the Tanana Flats. Residential Areas:Private land and residences are concentrated along the Parks Highway be- tween Healy and Fairbanks.Studies were con- ducted to evaluate the number of residences and privately owned parcels impacted by each route alternative.The Preferred Route minimizes im- pacts on residential and private areas. Wetlands:The Tanana Flats area is almost en- tirely wetlands.Each route was studied to iden- tify the types and amounts of wetlands crossed. GVEA proposed to construct the Tanana Flats portion of the line using driven piling during the winter when the area is frozen.Except for one possible pad at the Tanana River crossing,con- struction will not include any fill in the wetlands. Visual Impacts:GVEA will take several steps to minimize visual impact.Visual resources were evaluated in detail from Chena Ridge,the Parks Highway,and other high sensitivity viewpoints. GVEA has proposed mitigation using distance from viewpoints and self-weathering towers which blend into surrounding vegetation.In addition, clearing of the right-of-way will be limited to ar- eas of tall trees or dense brush and edges of cleared areas will be undulated.The environ- mental analysis contains several photographs which illustrate the Preferred Route's appearance in the landscape. Construction Methods:Construction in the Tanana Flats would be restricted to winter,when the area is frozen.Construction will consist of driven piles and will likely include helicopter place- ment of towers and wire stringing.No construc- tion access roads will be constructed in the Tanana Flats.Construction in upland areas will occur during other seasons.Most access for these areas is expected to be by existing recre- ation or old mining trails in the Alaska Range foot- hills.Although existing trails will be used for ac- cess in most areas,the right-of-way may be used for access during construction in upland areas. Clearing of the right-of-way corridor will be mini- mized,with only areas of dense vegetation "cleared.Low brush and shrubs will be left within the corridor to decrease visual impacts. Fragmentation of Habitat:The Tanana Flats is an important habitat for several species of wild- life.However,the vegetation of the Flats is a mosaic of open areas of low shrub,black spruce and other vegetation.In addition,as the area has become more popular for recreation,new trails have been created by snow-machines and airboats.Although the intertie corridor may re- sult in some clearing,these areas will be mini- mized and should not significantly change the mosaic of habitats on the Tanana Flats. Tanana River Crossings:The Tanana River must be crossed to complete the intertie.Some route alternatives crossed the Tanana River threetimestoavoidwetlands.The Preferred Route crosses the Tanana River once,near Goose Is- land.This crossing minimizes impacts on the Fairbanks International Airport and high recre- ation use areas and is compatible with existing uses near Goose Island. Aviation Impacts:GVEA coordinated with Alaska Department of Transportation and Public Facilities (ADOT/PF),Federal Aviation Adminis- tration,and other aviation groups on the envi- ronmental analysis.Concerns were raised by ADOT/PF regarding highway and river crossings - and towers over 200 ft.high.The Preferred Route will minimize aviation impacts by minimizing high- way and river crossings and keeping towers un- der 200 feet. Health &Safety Concerns:Some people have expressed concerns regarding electromagnetic field (EMF)exposure.The Preferred Route avoids populated areas and will not increase EMF ex- posure to residences or businesses Other issues addressed in the environmental analysis include general biological issues (veg- etation,moose,caribou,fish,etc.),recreation use, subsistence,hunting and trapping,fire manage- ment,land use,socio-economics,and the mili- tary mission at Fort Wainwright.Archaeological, geotechnical!and other studies have been con- ducted to gather information. SuMMARY:GVEA has worked diligently to re- sponsibly address all issues raised and has de- signed the proposed Preferred Route (project map on reverse)to meet the project's goals with the least environmental impact.The Preferred Route is one of the shortest routes possible and impacts fewer resources than the other alterna- tives.BLM/RUS are currently reviewing the GVEA document.They will be analyzing all al- ternatives including GVEA's Preferred Route.Your comments are encouraged.The study will be available at all GVEA offices,the Noel Wien Public Library and the Denali Borough office.Please submit written comments by July 31,1996 «Mr. Gary Foreman »Bureau of Land Management « 1150 University Ave.*Fairbanks AK 99709-3899. Please call Steve Haagenson at GVEA,451- 5647,or 1-800-770-GVEA (4832)for further in- formation. Kale ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY {=ALASKA@ae™=ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /561-8050 FAX 907 /561-8998 December 27,1995 Dave Calvert IPG Chairman City of Seward P.O.Box 167 Seward,Alaska 99664 Subject:Northern Intertie Reimbursement Requests Dear Dave: Previously AIDEA has not requested invoices in the reimbursement request for contractor billings less than $10,000.After review of several recent billings,our abiltiy to expeditiously review the reimbursement request would be simplified if a copy of the billing summary sheet for all contractor invoices under $10,000 were included in the reimbursement request package submitted to us by the IPG. Please continue to provide copies of all invoices $10,000 and over. If you have questions,please don't hesitate to call me. Sincerely, Daniel W.Beardsley Grant Administrator cc:William R.Snell Dennis V.McCrohan Mike Kelly e Ke yh (Or _CL NOL ::.eu *fc Future Intertie Construction f !Ly OY In its 1993 session,the State Legislature appropriated a total of $90 million for grants to GVEA and None me CEA for the benefit of certain participating utilities,including ML&P,for the design and construction of powerNa'transmission interties between Healy,-Alaskéand Fairbanks (the "Northern Intertie")and between Anchorage andoa«the Kenai Peninsula (the "Southern Intertie").Construction of the Northern and Southern Interties is expected toS"improve substantially the reliability of power deliveries from the Bradley Lake Project and to facilitate the transmission of economic energy from the Anchorage area to the Fairbanks area.The participating utilities are «J «required,as a condition of the grants,to provide the remaining funds needed to design,construct,operate and wm)Ne maintain the interties. -)=Se ML&P,CEA,GVEA,FMUS,Alaska Electric Generation &Transmission Cooperative (on behalf of its y "members MEA and HEA),and the City of Seward (collectively,the "Participating Utilities"),the AlaskaDepartmentofAdministration("DOA")and the Alaska Industrial Development and Export Authority ("AIDEA") have entered into an Intertie Grant Agreement and a Grant Transfer and Delegation Agreement to satisfy the statutory conditions precedent to DOA's transfer of the grant funds to the grant recipients.At present,the Participating Utilities have completed most of the necessary negotiations for an Intertie Participants Agreement.7 The Participating Utilities have agreed to design,construct,operate,maintain and own 138 kV power /.co.transmission lines for the Northern and Southern Interties.The Participating Utilities will collectively own the (/ -,(7 two interties as tenants in common,with ML&P having the right to acquire a 22.43%undivided ownershipinterestinbothinterties.Commercial operation of the new interties is expected to commence in 1996 and 2001fortheNorthernandSouthernInterties,respectively. responsibility for this $90 million of capital costs,as well as annual operation and maintenance costs,is fo be allocated among the Participating Utilities based-peHnarty on each utility's respective ownership interesty#ThedesignandconstructioncostsmaybecollectivelyfinancedthroughtheissuanceofbondsbyAIDEA,a political subdivision of the State,and recovered by the inclusion of debt service costs in the annual payment obligation of the Participating Utilities.AIDEA has received authorization from the Legislature to issue $60,000,000 of such bonds for each of the interties.Alternatively,each Participating Utility may decide to finance its share of the project costs separate from AIDEA;ML&P's annual cost associated with its share of debt service costs,plus operation and maintenance costs,is currently estimated to be approximately §.If financed by another entity such costs may be reflected as transmission related Operating Expenses and paid prior to ___emesenvies Soto:\at WaleSignificantintertieprojectdecisions,such as design,routing,annual budget approvals and management selection,will be made collectively by the Participating Utilities through an Intertie Project Group ("IPG"). ML&P will have one of the seven membership votes regarding IPG decisions as well as a percentage vote equal to its 22.43%ownership interest.ML&P has a limited automatic right to withdraw from participation in either or both of the interties upon final completion of requisite route studies and cost estimates. In a separate matter,AIDEA has received a certificate of public convenience and necessity from the APUC to provide electric generation service from its proposed Healy Clean Coal Project,a 50 MW coal-fired power plant to be built near Healy,Alaska.The APUC also approved a power sales agreement between AIDEA and GVEA for the plant output.This plant will be financed in part by federal and State funds and is expected to be financed in Spring 1996 and operational inl9977 Depending on load growth in the Fairbanks area,it is expected that economy energy sales from Anghorage to Fairbanks wail decrease significantly when the Healy Clean Coal Project goes on line.Since CEA supplies most economy energy sales to the Fairbanks area,the impact of the Healy Clean Coal Project is expected to be minimal fo ML&P. wry . ack:Du Wd -30- ALASKA INDUSTRIAL DEVELOPMENT =AND EXPORT AUTHORITY =A aE =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /561-8050 FAX 907 /561-8998 MEMORANDUM TO:William R.Snell Executive Director FROM:Dennis V.McCrohan,P.EZ.AVDeputyDirector-Energy DATE:November 6,1995 SUBJECT:-Technical Review Northern Intertie System Agreement The Agreement seems to be a reasonable compromise for the concerned parties.It appears to memorialize the separation of the Northern and Southern Intertie regarding benefits. However,it still provides some of the southern utilities with no benefits from the Northern Intertie.In summary,GVEA and FMUS existing capacity rights are preserved with the addition of the new Intertie.The members of the IPG share costs and incremental benefits of the new combined configuration in proportion to the ownership shares indicated in the 1993 legislation. This is probably perceived as favorable for GVEA and FMUS.But GVEA and FMUS have agreed to other conditions which may limit their ability to sell energy south to Anchorage.This limit could be removed by future upgrades or configuration improvements.However the agreement seems to impose for improvements different ownership and benefits structures than the original interties which seem very difficult to implement. Item 1.This clause contains three provisions.First,it guarantees and holds harmless GVEA's and FMUS'capacity rights on the existing GVEA owned Healy Fairbanks Intertie.Second,it provides that the combined new and existing capacity rights,in excess of the existing capacity rights of GVEA and FMUS of the existing Intertie,are shared in accordance with IPG ownership.These were GVEA objectives of the ongoing discussions.Third,GVEA and FMUS capacity rights flowing south are restricted to GVEA existing customers and inhibited from flowing south to Anchorage as the lines are currently configured.Since energy has always flowed north,this has never been an issue for GVEA. However,it could be in the future if GVEA were to have excess generation and if coal became competitive with gas in Anchorage. Memorandum November 6,1995 Page 2 Item 2. Item 3. Item 5. Item 7a. Item 7b. Item 7c. Item 9. Please let me This clause simply locks the battery into the scope for the project.As you are aware,we had insisted that the project not be downgraded to a bare line project and this clause assures that concept.The new segment including the battery will be owned as per the legislation. The new combined budget for the line and the battery is $75M.We should note that the less expensive battery has been substituted for the more beneficial static var compensation but the capital budget is still the same.This may mean less benefits for more money. This clause recognizes that ownership issues may need to be modified to enhance financing. This clause states that future improvements for the new Healy Fairbanks line or the existing Anchorage Intertie will be owned and benefits shared based on the existing Intertie agreements.This seems unworkable for the new Healy Fairbanks line. This clause states that upgrades to the existing GVEA intertie between Healy and Fairbanks will be owned and benefits shared based upon the IPG ownership concept.This also seems a very unworkable concept. This clause requires the utilities to install the necessary equipment to implement the rapid load shedding required due to the spin not carried by the utilities.This is long overdue and is a positive for all. This clause assures GVEA's intent to participate in the Southern Intertie. know if any additional information is needed.