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Renewable energy investments recommended Draft report from Senate Resources, Energy committees also recommended ‘staying the course’ on AGIA state-supported gas project Kristen Nelson Petroleum News
The draft of a report on the state’s energy situation, released Oct. 19 by members of the Alaska Senate energy policy group, provides a wide-ranging look at proposals from energy-efficient buildings to incentives for more oil and gas exploration. (See part 1 of this story in the Nov. 1 issue of Petroleum News.)
The report is a product of work by members of the Senate Resources and Energy committees and is available online at www.energy.aksenate.org, a Web site which also provides a place for comments on the draft report.
Sens. Bill Wielechowski, D-Anchorage, and Lesil McGuire, R-Anchorage, said the recommendations in the report are designed to promote more reliable and affordable energy for Alaska. Wielechowski and McGuire are co-chairs of the Senate Resources Committee; McGuire also chairs the Senate Special Committee on Energy.
In addition to McGuire and Wielechowski, members of the Senate’s energy policy group, all members of the Resources and Energy committees, include: Hollis French, D-Anchorage; Lyman Hoffman, D-Bethel; Charlie Huggins, R-Wasilla; Albert Kookesh, D-Angoon; Bert Stedman, R-Sitka; Gary Stevens, R-Kodiak; and Tom Wagoner, R-Kenai.
Renewable energy Investments are recommended in renewable energy: hydroelectric, biomass, wind, geothermal and solar, including creating an incentive for renewable energy development with a state production tax credit for renewable energy generation. Senate Bill 31 would provide a tax credit for geothermal energy production.
Low-cost financing is recommended for customer-owned renewable energy systems, as well as incentives for utilities to invest in renewable energy systems. Lower interest rates for utilities could be provided by lowering Power Project Fund interest rates for loans for renewable energy projects.
An appropriation of $50 million per year through 2012 for the Renewable Energy Fund is recommended, based on a 2008 legislative pledge of $300 million over a five-year period to the fund for in-state renewable energy projects.
The report also recommended working with utilities to draft legislation establishing renewable portfolio standards or goals for the state to ensure utilities generate or purchase renewable energy and legislating a net-metering program, already required by law in most states.
Legislation requiring utilities to report sources of electricity annually is also recommended.
Affordable energy Alaskans pay among the highest prices in the nation for energy and the report recommended considering price gouging legislation to ensure Alaskans pay a fair price for energy.
The Legislature should also evaluate whether the state should help lower heating fuel prices or smooth out price volatility and how that might be accomplished.
The Regulatory Commission of Alaska should be encouraged to come up with a predictable pricing methodology for Cook Inlet natural gas in collaboration with utilities, gas producers and consumers, and the report recommended considering legislation that would establish a pricing methodology or require RCA to develop one.
Legislation is also recommended to require the Alaska Energy Authority to assess interest in developing a statewide fuel-buying cooperative to cut the costs of heating fuel.
Developing Alaska’s energy The report recommended fully supporting efforts to bring Alaska’s North Slope natural gas to market while maximizing benefits to Alaskans, specifically: “Stay the present course and await the results of the competing ‘open seasons’ scheduled for 2010” while preparing for negotiations with gas producers by ensuring the state has “the technical and commercial expertise to carry out effective negotiations.”
The report said Alaska’s current production tax may not adequately compensate the state for gas resources when oil prices are high and gas prices are low, and recommended a review of Alaska’s gas tax regime following conclusion of the two open seasons “and once there is greater alignment between gas producers and pipeline companies and more data available about the economics of the various proposals.”
Support of both offshore drilling and heavy oil development are recommended, with the state taking the lead “in viscous oil research by creating an Arctic Resource Research Center that could serve as a central research facility for heavy and viscous oil development worldwide.” Continued support for the state’s net profits tax is recommended, since it “enables producers to deduct expenditures and receive tax credits for costly capital investments, making it more economic to develop more challenging oil fields.”
Congress should be urged to open the coastal plain of the Arctic National Wildlife Refuge for exploration and development, and regular lease sales should be supported in the National Petroleum Reserve-Alaska.
The administration’s efforts to expedite Point Thomson development should be supported and adequate staffing at the Department of Natural Resources should be ensured so that all state oil and gas leases are monitored to ensure they are adequately explored and produced where economically practical.
The costs and benefits of constructing an in-state gas pipeline should be evaluated, including associated transportation tariffs, and efforts to develop additional natural gas storage in Southcentral should be supported, including analyzing whether incentives are needed to encourage private developers.
Cook Inlet incentives A range of incentives should be evaluated to stimulate additional investment in Cook Inlet, including a state subsidy or matching grant for exploration; paying to mobilize a jack-up rig; creating state-private sector partnerships to explore outside existing units; conditioning state support for a renewed liquefied natural gas export license on development of new reserves; and creating a more functional market for Cook Inlet gas through posting of gas prices and flexible pricing.
An updated gas reserve estimate for Cook Inlet is called for, along with ensuring access to nonwilderness areas of the Kenai National Wildlife Refuge for exploration and production.
Improvement of the Cook Inlet pipeline system is recommended “to ensure gas can flow wherever needed,” along with encouragement of development of storage facilities open to all producers.
“Require the Regulatory Commission of Alaska to consider supply as well as price. Require companies doing business in Cook Inlet to share subsurface information, including engineering data, reservoir characteristics and seismic mapping in exchange for the unusually low tax rates in the inlet,” the report said.
In addition to Cook Inlet, all potential sources of natural gas for Railbelt use should be identified and evaluated, and findings and recommendations of the Regional Integrated Resource Plan for Southcentral should be evaluated once the plan is completed in December.
Refinery viability The viability of Alaska’s largest refinery, Flint Hills North Pole Refinery, should be ensured, the report said, and the Department of Natural Resources should be asked to prepare “an action plan for maintaining the viability of this refinery, including possible transfer to a state corporation.”
Responsible exploration and development of Alaska’s coalbed gas resources should be supported, including a joint Alaska Division of Geological and Geophysical Surveys-U.S. Geological Survey drilling program to assess coalbed gas potential.
Development of Cook Inlet Region Inc.’s proposed underground coal gasification should be supported and the report recommended that the Legislature work with DNR “to draft legislation to craft a regulatory structure and permitting process appropriate for underground coal gasification.”
Efforts to separate propane from North Slope natural gas and transport it to communities in the state should be supported, and storage and distribution needs within communities should be evaluated if the project is economically viable. Appropriate investments are also recommended.
Efforts to explore for natural gas in the Nenana basin, Gubik field and other promising areas should be supported, including a thorough evaluation of oil and gas resource potential on state lands. “Maintain a robust and easily accessible database of this information for new explorers,” the report said, and provide predictable land access.
The report also recommended asking the administration to develop cost estimates and timelines for needed marine infrastructure in the Arctic, including communications systems, port facilities, ice information centers, places of refuge, icebreakers and equipment to assist in emergency response and oil spill cleanup.
The report also recommended advocating for U.S. Senate ratification of the Law of the Sea Treaty, estimating that the treaty would allow the U.S. to lay claim “beyond the present 200-mile exclusive economic zone to an area of the northern seabed off Alaska that is equal in size to California,” and “likely rich in oil and gas resources.”
State should lead The report recommended that state government, as one of the largest energy consumers in Alaska, should take the lead in energy savings.
There are nearly 1,800 state-owned buildings and facilities, the report said, and in just 12 of those buildings the state spent nearly $1.9 million on electricity and $1.2 million on heat last year.
With 6,291 vehicles, the state also spent $4.3 million on transportation fuels.
By reducing the energy used in state buildings the state could save money and set an example, the report said.
“Committing state funding toward energy efficiency in state operations could also have the secondary benefit of providing the business to attract performance contractors, energy auditors and retailers that sell efficient appliances, vehicles and other products to Alaska,” and by purchasing electricity from renewable energy sources the state could encourage further development of those technologies.
The report recommended retrofitting public facilities to meet energy efficiency standards and setting energy efficiency targets for state agencies, and proposes that legislation be drafted requiring the Department of Administration to set energy savings targets for state agencies.
The report also recommended drafting legislation directing the Department of Transportation and Public Facilities to adopt energy efficiency standards for new facilities and retrofit existing facilities, and recommended passing SB 121, “An Act relating to energy efficiency for public facilities with the intent to reduce state operating costs.”
Legislation would also be drafted directing the Department of Administration to adopt regulations favoring procurement of “Energy Star” appliances and DOT&PF to use efficient broad spectrum lights on roadways.
Legislation would also require a policy favoring purchase of high-efficiency vehicles and the purchase of renewable energy where available and affordable.
The report recommended passage of SB 71, “An act relating to alternative energy systems for public works,” and incorporating viable renewable energy systems into new public works projects.
Efficient transportation Transportation accounts for 33 percent of the energy consumed in Alaska, the report said, and recommended using more efficient vehicles and providing a greater variety of transportation options.
In this area the report’s first recommendation is support for development of community transit systems, and it recommended appropriating $3 million annually to help communities match up to $9 million in federal public transit dollars.
The report also recommended modifying state law so that State Transportation Improvement Program funds can be spent on alternative transportation infrastructure; supporting legislation, such as SB 59, which encourages the expanded use of electric cars; and also providing funds for local governments to install electric car recharging stations.
The report also recommended a public education program to encourage drivers to minimize unnecessary idling, and notes that idling an engine for more than 10 seconds wastes more fuel and produces more carbon dioxide than restarting the engine.
“Twenty-two states plus the District of Columbia have enacted some form of anti-idling regulations,” the report said, noting that exemptions would need to be made for idling in temperatures below freezing and for emergency, repair and safety vehicles.
Emerging technologies The report recommended supporting emerging energy technologies and said a grant program to support “pre-commercial” energy technologies, such as SB 150, would encourage innovation and exploration of new sources of renewable energy.
Landfills are a source of methane, and the report recommended asking the Alaska Energy Authority to assess the state’s largest landfills to determine the feasibility of capturing landfill gas and other waste products to generate heat or electricity.
The report also recommended supporting projects employing liquefaction technologies, such as gas-to-liquids and coal-to-liquids, which would convert Alaska’s natural gas and coal resources into synthetic fuels.
GTL and CTL are both proven technologies which could provide transportation fuels, but “full commercialization of these technologies has been hampered by high capital and operations costs and by significant environmental concerns,” the report said. GTL is challenged by the fact that 30-40 percent of the natural gas feedstock is used up in the conversion process, while CTL is challenged by creation of greenhouse gas emissions nearly double that of traditional diesel fuel during the life cycle of a coal-based synfuel.
Companies are working on new technologies to reduce gas consumed in the GTL process and sequester emissions produced in the CTL process.
“Given technological breakthroughs, GTL could prove a valuable option for commercializing North Slope natural gas if the proposed gas pipeline fails to proceed and CTL could play an important role in the development of Alaska’s vast resources,” the report said, and recommended the state look at supporting research and development by passing SB 150, “An Act establishing an emerging energy technology fund.”
Passage of that bill would also support resource assessment, feasibility studies and research and development of hydrokinetic and wave energy technologies, which could be used to develop Alaska’s in-river, tidal, ocean current and wave energy resources.
The report also recommended supporting the assessment of North Slope gas hydrates and research and development of gas hydrate extraction technologies, which could also be done through passage of SB 150.
The report said the U.S. Geological Survey has estimated that there are 85 trillion cubic feet of undiscovered, technically recoverable gas resources within gas hydrates in northern Alaska, but notes that gas hydrates are an “unconventional resource with no confirmed production history.”
Jobs, the environment The report also recommended ensuring ongoing funding for energy-related job training and encouraging the University of Alaska to strengthen energy-related education programs.
Legislative hearings are recommended on Alaska warming issues, along with active monitoring of federal climate change legislation and working with the state’s congressional delegation to ensure Alaska’s interests are considered.
Policies and measures to reduce industrial greenhouse gas emissions should be established.
“Alaska industries with the highest greenhouse gas emission estimates are those engaged in the energy production and delivery business, accounting for approximately 36 percent of greenhouse gas air emissions,” the report said. The governor’s sub-cabinet for climate change has identified steps that could be taken by the oil and gas industry to minimize potential climate change impact, the report said, including “reducing fugitive methane emissions; electrifying oil and gas operations; improving the efficiency of fuel-burning equipment; using renewable energy; and capturing and sequestering carbon,” and recommended working with the sub-cabinet to implement its recommendations.
The report recommended a public education campaign to encourage recycling and reduction of garbage to landfills and encouraging use of sawmill residues, logging debris and beetle-killed timber for heating and electricity generation.
The report concluded that energy is just one of many needs in Alaska. Making hard energy decisions and investing in energy infrastructure promises great payoffs, but also great costs.
The report recommended evaluating the administration of state energy programs and the desirability of increasing efficiency by centralizing energy offices.
State energy programs are distributed “among a number of state and quasi-state entities, including the Alaska Energy Authority, the Alaska Housing Finance Corporation, the Department of Natural Resources, the Alaska Natural Gas Development Authority, and the University of Alaska, among others,” the report said, and recommended considering centralizing energy offices and programs and the creation of a Department of Energy.
House Bill 218, SB 185 and related proposals should be considered, the report said, and recommended ensuring that the Alaska Energy Authority has adequate staff to fulfill its mission and responsibilities.
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