[Senate Hearing 110-637]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-637
 
                  THE IMPACT OF HIGH ENERGY COSTS IN 
 RURAL ALASKA NATIVE COMMUNITIES AND OPPORTUNITIES FOR ALTERNATIVE AND 
                    CONVENTIONAL ENERGY DEVELOPMENT
=======================================================================


                             FIELD HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                            AUGUST 28, 2008

                               __________

         Printed for the use of the Committee on Indian Affairs




                   U.S. GOVERNMENT PRINTING OFFICE
45-586 PDF                  WASHINGTON : 2008
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Washington, DC 20402-0001



                      COMMITTEE ON INDIAN AFFAIRS

                BYRON L. DORGAN, North Dakota, Chairman
                 LISA MURKOWSKI, Alaska, Vice Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            TOM COBURN, M.D., Oklahoma
DANIEL K. AKAKA, Hawaii              JOHN BARRASSO, Wyoming
TIM JOHNSON, South Dakota            PETE V. DOMENICI, New Mexico
MARIA CANTWELL, Washington           GORDON H. SMITH, Oregon
CLAIRE McCASKILL, Missouri           RICHARD BURR, North Carolina
JON TESTER, Montana
      Allison C. Binney, Majority Staff Director and Chief Counsel
     David A. Mullon Jr., Minority Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on August 28, 2008..................................     1
Statement of Senator Murkowski...................................     1

                               Witnesses

Andersen, Ralph, CEO, Bristol Bay Native Association; Chairman, 
  Alaska Federation of Natives' Energy Working Group.............     6
    Prepared statement...........................................     8
Hoffman, Ron, President/CEO, AVCP Regional Housing Authority; 
  President, Association of Alaska Housing Authorities...........    56
    Prepared statement...........................................    58
Leask, Janie, President/CEO, First Alaskans Institute............    13
    Prepared statement...........................................    15
Mello, Chris, Program Manager, Alaska Energy Authority...........    21
    Prepared statement...........................................    22
Middleton, Dr. Robert W., Director, Office of Indian Energy and 
  Economic Development, Department of the Interior...............    84
    Prepared statement...........................................    85
Morello, Steven J., Director, Office of Indian Energy Policy and 
  Programs, Department of Energy.................................    77
    Prepared statement...........................................    80
Naneng, Myron, President, Association of Village Council 
  Presidents.....................................................    30
    Prepared statement...........................................    34
Nicholai, Matthew, President/CEO, Calista Corporation............    40
    Prepared statement...........................................    44
Peltola, Gene, President/CEO, Yukon-Kuskokwim Health Corporation.    49
    Prepared statement...........................................    53
Williams, Mike, Chairman, Alaska Inter-Tribal Council............    18
    Prepared statement...........................................    20

                                Appendix

AVCP, Calista Regional Energy Plan Draft.........................   106
Berger, Carl, Executive Director, Lower Kuskokwim Economic 
  Development Council, prepared statement........................    99
Bullard, Loretta, President, Kawerak, Inc., prepared statement...   102
Rural Energy Action Council--Findings and Action Recommendations 
  for Governor Frank Murkowski...................................   147
Wallace, John, Resident, Bethel, Alaska, prepared statement......    99


THE IMPACT OF HIGH ENERGY COSTS IN RURAL ALASKA NATIVE COMMUNITIES AND 
   OPPORTUNITIES FOR ALTERNATIVE AND CONVENTIONAL ENERGY DEVELOPMENT

                              ----------                              


                       THURSDAY, AUGUST 28, 2008


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                        Bethel, AK.
    The Committee met, pursuant to notice, at 9:30 a.m. on the 
University of Alaska--Fairbanks Kuskokwim Campus, Hon. Lisa 
Murkowski, Chairman of the Committee, presiding.

           OPENING STATEMENT OF HON. LISA MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Good morning. We're calling to order 
this meeting of the United States Senate Committee on Indian 
Affairs, a field hearing to be held here in Bethel, Alaska.
    Welcome to you all. I think it is incredibly significant 
that we are gathered here together in Bethel to listen to some 
individuals that will present various perspectives on what the 
impact of high energy costs are having on, not only our 
communities, but our families, and individuals here in Bethel, 
in the surrounding areas. I do believe that this is the first 
time that a field hearing of a Senate Committee, certainly the 
Senate Indian Affairs Committee, has ever been held out here. 
So for those of you from the Bethel boarding school here, 
you're witnessing history for the first time, so pay attention.
    [Laughter.]
    Senator Murkowski. I would like to convey a special welcome 
to a couple of our out of town guests. We are privileged this 
morning to be joined by Representative Nancy Dahlstrom. 
Representative Dahlstrom has been in the Legislature now, I 
think, six years, and represents my old district and has done a 
good job for us there in Juneau. She's joined by Representative 
Bob Roses. Bob is also from the Anchorage area and you're 
working on your fourth year.
    Representative Roses. Well, hopefully, up until the next 
election.
    Senator Murkowski. All right.
    [Laughter.]
    Senator Murkowski. A little advertisement there for you. 
But I think it is very important, I think quite significant 
that we have other policy-makers from the state here to just 
listen, to hear what is going on in this region. We recognize 
that as State legislators we represent our own constituency but 
it is broader than that, and so your willingness to observe and 
to hear the testimony today is greatly appreciated and we thank 
you.
    I also want to acknowledge Senator Lyman Hoffman. Senator, 
I don't know how long you've been serving this district out 
here but it's been so long and so good that we all forget the 
number of years.
    Senator Hoffman. I'm starting my 23rd year.
    Senator Murkowski. 23rd year, all right.
    [Applause.]
    Senator Murkowski. Well, we truly appreciate that. And we 
also know that it is a challenge for you in a Legislature that 
is predominately urban legislators. It's a challenge to explain 
some of what happens in your very extensive district. We're 
going to be joined by Bob Herron, who we congratulate on your 
successful election Tuesday. We know that you've got a job 
going down there, but you'll be teaming up with Lyman. We were 
hoping that Mary Nelson would be here with us. I ran into her 
in the airport, she has done a fine job representing you in the 
Legislature for years and years and we wish her well as she 
moves on.
    We do have a very distinguished panel this morning. I will 
introduce each of them at the conclusion of my opening remarks 
and give you a little bit of their brief background.
    The hearing here this morning has a very multi-faceted 
purpose. And we recognize that with the high energy prices that 
we face throughout this state and certainly throughout rural 
Alaska, you don't need me to tell you that we are at all time 
record highs. We know that the prices are so high that it's 
making it difficult for people to truly survive. Now, I know 
that we're going to be receiving very instrumental and helpful 
testimony this morning. But yesterday when I flew in, I had the 
opportunity to visit several of the grocery stores, to go by 
the gas station, to talk to people in the grocery stores, to go 
over to the VFW hall to meet with some of our veterans and 
active Guard folks, and then to meet with some of the community 
leaders at a dinner last night; and I have to tell you, when 
you go to bed thinking about the young woman who's moved in 
from one of the small villages because she couldn't live out 
there and she comes into town and she's excited because she has 
a job and that's good but she has no place to live, and when 
you talk to the Veteran who's been here for 44 years and has 
made the decision that he now has to leave, or when you run 
into the guy in the grocery store who says he's had a 
successful business here for 15 years, but he's going to have 
to close; and when you hear the stories about people who deny 
themselves health care because they live in an outlying village 
and they can't afford the price of an airplane ticket to come 
to town and so they wait and they wait and they wait until it 
then becomes an emergency and they're able to be medivac'd in, 
and YKHC will then pay for that ticket, but they put their life 
at risk because they can't afford the price of that airplane 
ticket because of the energy prices. This is a reality that you 
all are living with, that those of us who are not living here 
day to day can't fully appreciate the extent of. So what I'm 
hoping that we get this morning is a clarification, an 
explanation of what it is so that this becomes part of the 
United States Senate Indian Affairs Committee record, so that 
my colleagues, they that might not be able to see it for 
themselves, but they can read it and perhaps better appreciate 
the challenges that you face on a daily basis.
    We've got incredible potential here in Alaska when it comes 
to energy resources. It's kind of the blessing and the curse, 
you almost have so much of it you don't even know where to 
begin.
    Now, we're limited in our time here this morning. We are 
scheduled to receive testimony from three panels of witnesses. 
I've been asked already if others may be allowed time to speak. 
Under the procedures of the Senate and how we operate field 
hearings, it's invited testimony, so those people who have been 
invited to speak today as part of these three panels will be 
the individuals that you will hear publicly. But I invite you 
all, the hearing record will remain open through September 
12th, and any one of you is free to email or to write, to 
provide your statements, your comments, and those will be made 
part of the permanent record. The email address is 
[email protected] and my staff will give you the 
mailing address after the hearing if you prefer to mail, you 
know, a hard copy. In addition, I will be available after the 
hearing for a little bit, I don't have to get on the jet until 
2 o'clock, so I think I've got to be out of here by about 1 
o'clock, I'll be available, my staff will be available and we 
will welcome your thoughts.
    I want to recognize my staff that are with me from 
Washington, D.C. To my left I have Chuck Kleeschulte. Mr. 
Kleeschulte handles my energy issues back in Washington. To my 
right I have Megan Alvanna-Stimple. Some of you may recognize 
her and know her, her family is from Nome. Megan is working on 
the Indian Affairs Committee. We have Eamon Walsh to Megan's 
right. He is on Senator Dorgan's committee staff and we welcome 
him; this is his first visit to Alaska, so this is an eye 
opener for him, and he's going to have an opportunity to tour a 
little bit this afternoon. I also have Nathan Bergerbest, who 
is back in the corner. Many of you know Nathan. He handles my 
Indian Affairs matters and we greatly appreciate his assistance 
as well. We have a couple others that were supposed to be here 
but I guess they missed the plane; welcome to Alaska, right.
    [Laughter.]
    Senator Murkowski. Now, I've mentioned a little bit about 
my experience yesterday going through the stores and just kind 
of appreciating what it is that you're paying here as families. 
I want to put some statistics in the record, again, so that not 
only--not so much for your benefit, but for the benefit of 
those who will be reading the record of this Senate proceeding. 
According to the Alaska Municipal League, Atka holds the record 
for the highest fuel price in Alaska, $8.95 for diesel, $8.65 a 
gallon for gasoline. When I went down to the gas station here, 
it was $5.99 or 98 cents, right about in there. But we 
recognize that all of Alaska is wobbling under record energy 
prices. Statewide average gasoline price is about $4.55 a 
gallon. For those of you here in Bethel you're probably 
thinking that that's a heck of a deal.
    What I'm hoping that we gain from this hearing this morning 
is solid data on how these price increases, the startling price 
increases, how they're affecting average Alaskans and Alaskan 
communities. We hear about these energy refugees, those who 
flee the rural communities for the urban centers where the 
prices are lower because they're, quite honestly, fearful that 
they're not going to be able to make it through the winter, 
they can't pay for the electricity, they can't afford the fuel 
for their vehicles or for their ATVs, they can't get to work, 
they can't do their subsistence hunting. The stories out there 
about what is happening are more than just stories, I mean they 
are real. I had a conversation with a gentlemen with the EPA, a 
sanitation engineer, who's been working on projects all around 
rural Alaska, and his observation that we have several 
communities where the individuals aren't able to pay for their 
water and sewer because they're having to pay more for their 
fuel and so their utility service is cut off and all the 
efforts that we have been attempting to make when it comes to 
putting the honey bucket in the museum, the old saying, we're 
going backwards on it, we're having communities that are 
recognizing that they're not able to pay for the systems that 
we have provided for them. Just last evening I heard that in 
the community of Tuntutuliak, the community well, the water 
service, has been shut down. Essentially you're told, well, you 
can buy your bottled water or you can get water from the river. 
This should concern us all in terms of how we are going 
backwards, instead of advancing insofar as providing, not only 
services, but for the health and sanitation needs of the people 
in the regional areas.
    I want this hearing to produce, perhaps a true picture of 
how difficult things have become in rural Alaska, and better 
yet what the witnesses might suggest that we, at the federal 
level, might be able to do to help ease the energy costs.
    I'd like to hear, not only from those from the individual 
perspective, but what is the impact on the businesses, on the 
health care systems, on the institutions themselves. We all 
know that energy is a key ingredient in the cost of health care 
in rural Alaska, keeping the village clinics and the hospital 
heated, the cost of medivacs from the villages, we are just 
hearing terrible horror stories about those costs. And while 
we're working in Washington to increase the funding for IHS, 
I'm very concerned that what we may be seeing are increases 
that are intended for health services will, of necessity, be 
diverted to energy costs. We know that rising energy costs are 
making it far more expensive for the entities from the local 
school districts, we heard some of that last night, to the YKHC 
to provide services to the clients, making it a huge challenge 
to provide existing services to those who need it.
    I am hopeful that at this hearing we'll be able to provide 
information about what we, in Congress, should be doing to 
encourage the development of reliable, affordable domestic 
energy over the short-term and over the long-term. We know that 
we are extremely rich in renewable energy resources. We've got 
more than any other state out there. You look at the wind, you 
look at the potential through the ocean energy, the hydro-
kinetic energy from our rivers. Look at what we have in the 
Southeast in terms of our hydro power and what is available 
there. We have incredible resources when it comes to geothermal 
and our ability to tap the potential from under the earth here. 
We've got the potential to do so much more when it comes to 
renewable energy resources, but what we need, what we lack is 
that necessary capital infrastructure to advance these 
projects.
    Renewables offer us that, hopefully, lower cost 
alternative. And we recognize that when it comes to the 
sustainable energy out in rural Alaska, this is where the 
future is.
    I do hope that we will hear this morning about the draft 
AVCP, Calista Regional Energy Plan * that emphasizes natural 
gas, wind, hydro, and biomass. All over the state we've been 
seeing efforts at the regional level to develop regional energy 
plans. I know in Northwest Alaska, in the NANA region, they 
recently have developed a plan. The Seward Peninsula has one. 
Southeast. The Aleutians, they're in the process of crafting 
one. And the Interior, Fairbanks, has just finished one. The 
Kenai Peninsula, along with the Mat-Su and Anchorage produced 
one last year that state administration, of course, is in the 
process of producing a new statewide plan that is likely to be 
finished this fall. So there's a lot going on, good and 
interesting concepts.
---------------------------------------------------------------------------
    * The information referred to is printed in the Appendix.
---------------------------------------------------------------------------
    And, then, finally, I hope that we'll hear testimony on 
what Congress should be doing to help rural residents and 
Alaska Natives tap these energy sources that are located on 
their own lands, both to cut the power costs, but also as an 
income source for Native corporations and their subsidiaries.
    We'll have an opportunity to hear from the representatives 
from both the Department of the Interior and the Department of 
Energy in what we can do to get on with funding the policy 
initiatives that were contained in the Energy Act that we 
passed several years ago to help fund the development of Indian 
Native Energy Projects on reservation lands and the Native-
owned lands, little of which, quite honestly, we have funded, 
so I look forward to the updates from the two federal 
witnesses.
    There are some initiatives out there. People have said, 
well, what is it that you can do to help, what is out there? We 
succeeded in winning approval for an Alaska Renewable Energy 
Deployment Grant Program for renewable energy projects for the 
state of Alaska in last year's Energy Independence and Security 
Act. Now, the problem is you get the authorization for it but 
we have not yet got the appropriation. We've got to fund it in 
order for this authorization to do anybody any good.
    So I'm looking forward to the testimony of the individuals 
this morning for the establishment of a record as to what we're 
facing out here in terms of the economic, the social conditions 
that rural Alaska is facing caused by these high energy prices, 
and what the Federal Government can do to help alleviate the 
problems, both in the short-term and in the long-term.
    I think we recognize there are no silver bullets. There are 
no quick and easy fixes. The Legislature wrestled with this in 
their special session not more than a month ago, so it's an 
initiative that we all must be engaged in together.
    With that, and I apologize for taking more than my share of 
time here, but I would like to move to our witnesses and give 
you a brief overview of all of the panels and then we will move 
to the first panel.
    We're joined this morning by Ralph Andersen. Ralph is the 
CEO of the Bristol Bay Native Association. He's the Chair of 
the Alaska Federation of Natives Energy Committee. Ms. Janie 
Leask, the President and CEO of the First Alaskans Institute on 
the Board of Trustees there. Mr. Mike Williams, appreciate you 
joining us here this morning, Mike, and your testimony as well. 
Mr. Chris Mello with the Alaska Energy Authority.
    On our second panel this morning, we will hear from Myron 
Naneng who's President of the Association of Village Council 
Presidents. Matthew Nicolai, the President and CEO of Calista. 
Gene Peltola, President and CEO of Yukon-Kuskokwim Health 
Corporation. Ron Hoffman, CEO of AVCP Housing Authority and 
president of the Association of Alaska Housing Authorities.
    And then on our third panel we have our federal witnesses, 
Mr. Steve Morello, whose Director of the Office of Indian 
Energy Policy and Programs out of the Department of Energy in 
Washington, D.C. And joining him is Mr. Bob Middleton who is 
the Director of the Office of Indian Energy and Economic 
Development in the Department of Interior.
    Unfortunately, as you know, Senate protocol says we ask 
that you try to limit your testimony to five minutes. Your full 
statement will be included as part of the record so if you 
would like to supplement that through your oral testimony here 
this morning that's always most welcome.
    And with that, Ralph, if we can start the first panel off 
with your comments and, again, thank you for joining us this 
morning.

         STATEMENT OF RALPH ANDERSEN, CEO, BRISTOL BAY 
  NATIVE ASSOCIATION; CHAIRMAN, ALASKA FEDERATION OF NATIVES' 
                      ENERGY WORKING GROUP

    Mr. Andersen. Good morning. Thank you Madam Chairman. I was 
sitting here, while listening to your remarks, that being the 
lead off speaker, I'm kind of the warm up for this 
distinguished group of panelists and for the whole other panels 
that will follow me. As you said my name is Ralph Andersen, I'm 
the CEO of the Bristol Bay Native Association. I'm here as the 
Chairman of AFN's Energy Working Group.
    Thank you for holding this hearing today on the extremely 
important issue of high energy costs in rural Alaska. Alaskans, 
especially in our rural communities are experiencing an energy 
crisis unlike anything that we've seen in the past and it's not 
likely to improve in the short-term. While all Americans suffer 
from the rising costs of gas and home heating fuel, the impact 
is unbelievable in our rural communities, threatening the very 
survival of many of our villages. Most of our rural communities 
are not on any power grid, and are dependent on petroleum for 
three major uses; space heat, transportation and electricity. 
Heating fuel prices in some villages have gone as high as $11 
per gallon. In the winter months a home can use between 220 or 
275 gallons each month. This equals to about $2,400 to $3,000 
per month per home. We simply can't afford to meet these prices 
now or over the long-term without help. Our regional village 
economies and everything else are affected by the high cost of 
fuel. Groceries, fresh milk, a dozen eggs, airline tickets, 
toothpaste, medicine, diapers, clothing, lumber and building 
material, car and truck parts, everything have gone up in 
price.
    The State of Alaska Department of Commerce and Community 
and Economic Development expects the price of heating oil to 
rise from 30 to 50 percent this winter. It is entirely possible 
that thousands of our fellow citizens will not be able to pay 
their heating and electric bills this winter and still buy food 
and the other necessities of life without additional emergency 
relief. Making the situation worse is, for most families, is 
the price of gas is limiting their ability to gather food for 
the winter, to gather subsistence food. Now, with the high cost 
of gas fewer families can afford to hunt, fish, and gather 
subsistence food and pay their heating and electric bills at 
the same time. For some families it's become a choice between 
putting food on the table or heat and electricity in the home.
    We encourage the state of Alaska to adopt a long-term 
energy plan, one that covers every region of the state which 
has an overall goal of equalizing energy costs for all 
Alaskans. We are hopeful that such a plan will be adopted 
before the end of the year.
    While working to transition to alternative or renewable 
energy, that future is a long ways away. Until then coal and 
oil and natural gas will remain indispensable to meeting the 
total projected energy demand and Alaska is rich in those 
resources. We're going to need help during the period of 
transition.
    Over the summer AFN's Energy Working Group met four times 
and had very productive meetings. We developed a matrix of 
short-term and long-term actions that could be taken by the 
state and Federal Governments by individuals and by private 
industry. A copy of that matrix is attached to my written 
testimony which I've submitted. I'd like to list, briefly, the 
top five recommendations that we came up with.
    One, strengthening the Power Cost Equalization Program by 
fine-tuning its mission, adding more resources and expanding 
the eligibility requirements.
    Two, buy down debt of rural utilities in order to reduce 
costs passed on to consumers, and include a price cap on fuel 
stock purchased prospectively, with a mechanism for 
reimbursement from the state for costs in excess of the cap.
    Three, expand and support bulk fuel purchasing, 
transportation and cooperative purchase agreements and 
contribute to the Denali Commission's bulk fuel storage program 
in order to eliminate the storage backlog and to complete rural 
upgrades.
    Four, provide a family fuel subsidy to help meet the 
immediate crisis.
    Five, make a sizeable investment in projects that promote 
renewable or alternative energy and conservation efforts.
    The Legislature also, at the special session, suspended the 
state's motor fuels tax for a year and increased the bulk fuel 
revolving loan fund and bridge loan program funding. All of the 
steps will help with the immediate crisis, but fall far short 
of what is needed for the long-term.
    Turning to viable sustainable energy solutions. AFN and its 
member organizations are strong supporters of the development 
of alternative energy resources as an important addition to our 
country's fossil energy resources. Many villages in rural 
Alaska are actively working to develop a wide array of 
alternative and renewable energy projects.
    Alaska is so large and diverse that one village's 
alternative resources may not be available elsewhere. There's 
no one size fits all solution for rural Alaska. There's no 
cookie-cutter approach. Making local solutions more specific 
and more expensive. Because of the vastness of Alaska and its 
virtually unlimited potential Alaska can be a model for the 
rest of the country. Our communities could be part of a 
national demonstration project on alternative energy 
technologies. We could serve as a proving ground to show our 
rural Alaska Native people and our institutions have the 
experience, capital and partnership to effectively implement 
workable solutions to the energy crisis. Investing now in 
renewable energy development will bring down energy costs and 
create jobs.
    In terms of what Congress can do to address the energy 
crisis we have the following suggestions, and there are nine.
    One, provide significant increases in the needs-based Low 
Income Home Energy Assistance program, the LIHEA program and 
urge the state to add its own additional appropriations for 
this program.
    Two, increase funding for the Denali Commission.
    Three, enact a comprehensive energy bill to decrease energy 
demand over the long-term and increase energy efficiency.
    Four, fully fund and implement the Energy Independent and 
Security Act of 2007, which was authorized in 2006.
    Five, provide incentives and funding for the creation of 
regional energy authorities in Alaska.
    Six, increase the supply of energy by encouraging 
exploration and development of private, state and federal lands 
both on shore and off shore.
    Seven, work closely with the state of Alaska to ensure that 
in the development of a natural gas pipeline our communities 
have access to the natural gas that will pass through the 
pipeline.
    Eight, provide consumers with energy rebates and economic 
incentives to conserve energy.
    Nine, enact and fund Senate Bill 2232, the Native American 
Challenge Demonstration Project to help us meet our energy 
needs. We request that the committee mark up this bill when it 
returns as part of the strategies to address the energy crisis 
in rural Alaska.
    Thank you for the opportunity to testify today Madam 
Chairman.
    Again, the high cost of energy is an enormous issue for us. 
We want to be part of the solution. We look forward to working 
with both Congress and the state to address the issue.
    [The prepared statement of Mr. Andersen follows:]

     Prepared Statement of Ralph Andersen, CEO, Bristol Bay Native 
  Association; Chairman, Alaska Federation of Natives' Energy Working 
                                 Group
    Good Morning. My name is Ralph Andersen. I am the Chief Executive 
Officer of the Bristol Bay Native Association (BBNA), and Chairman of 
the Alaska Federation of Natives' Energy Workgroup. I also serve as Co-
Chair of AFN's Human Resources Committee composed of the Chief 
Executives of the 12 regional non-profits. BBNA is a non-profit tribal 
consortium that provides vital services to over 30 rural villages in 
southwestern Alaska. Today, I am testifying on behalf of AFN, as 
Chairman of the Energy Working Group. AFN is a statewide Native 
organization whose membership includes over 200 villages and tribes, 13 
regional Native corporations and 12 non-profit tribal consortia, 
including BBNA, that contract and run federal and state programs.
    I know many of AFN's member organizations would like an opportunity 
to provide testimony on how the high fuel prices is impacting them, so 
I request that the record be kept open for a period of time to allow 
our tribes and corporations and interested individuals to provide 
additional written comments.
    Alaska Natives are committed to working with the State and the 
federal governments, as well as private sector partners, to help meet 
the energy needs of Alaska and the nation. As major landowners, we have 
resources that can be developed. As owners of major corporations, we 
have the management capacity and organizational reach to work with the 
state and federal governments and private sector investors to create 
new sources of energy. Our federally recognized tribes, our regional 
housing authorities, our regional tribal consortia all have a strong 
interest in being part of the solution of obtaining affordable energy--
to maintain our unique way of life and to help meet our national energy 
needs.
    The rising cost of energy has reached unprecedented proportions in 
rural Alaska. While all Americans suffer from the rising cost of 
gasoline, the impact is unbelievable in our rural communities, 
threatening the very survival of many remote villages. Rural Alaska has 
the highest per capita power and fuel costs in the U.S.
    Most of our rural communities are not on any power grid and are 
dependent on petroleum for three major uses--space heat (homes, public 
buildings and businesses); transportation (aircraft, snow machines, 
outboard motors, four-wheelers); and electricity (lighting and 
appliances). Fuel oil prices in some villages have gone as high as $11 
per gallon; and in the winter months, a village home can use four or 
five 55-gallon drums of oil for heating each month. This equals $2,000 
per home/per month in Arctic Village, $1,650 in Hughes, and $1,375 in 
Illiamna. These prices cannot be met--now or over the long term. Just 
as significantly, everything in our villages is affected by the high 
cost of fuel, even more so than in our cities because of the economies 
of scale of serving remote locations. Groceries, toothpaste, medicine, 
diapers, clothes, lumber, automobile and truck parts--everything--has 
gone up in price. This is devastating to individuals and small 
businesses; especially when wages have not gone up in decades. As an 
example, air cargo prices in one area jumped another 32 percent in June 
after previous increases.
    According to a recent study by UAA's Institute of Social and 
Economic Research (ISER), people living in remote, rural communities 
are paying about 41 percent of their annual incomes on home energy use, 
compared to about 4 percent paid by people living in Anchorage. The 
State of Alaska's Department of Commerce, Community and Economic 
Development expects the price of heating oil in remote villages to rise 
from 30-50 percent this winter. It is entirely possible that thousands 
of our fellow citizens will not be able to pay their energy bills this 
winter and still buy food and the other necessities of life without 
additional emergency relief. Making the situation worse is the fact 
that for some families, the price of gasoline is actually limiting 
their ability to gather food for the winter. Rural families depend on 
subsistence, and under normal circumstances they are able to put away 
fish, berries, moose, caribou and other resources to meet their food 
needs throughout the winter.
    We have encouraged the State of Alaska to adopt a long-term energy 
plan--one that covers every region of the State and which has an 
overall goal of equalizing energy costs for all Alaskans. We are 
hopeful that such a plan will be adopted before the end of the year.
    In its recent Special Session, AFN also encouraged the Alaska 
Legislature to take steps to stabilize energy costs and provide 
immediate relief to individuals, families and communities who are the 
hardest hit by high energy costs. We believe a multi-faceted approach 
must be taken--one that provides reliable, sustainable and affordable 
energy to all Alaskans; encourages conservation; and promotes economic 
development opportunities in the process. We also need to continue to 
invest in conventional oil and gas while working to transition to a low 
carbon future. That future is many years away--until then, coal, oil 
and natural gas will remain indispensable to meeting the total 
projected energy demand. And, Alaska is rich in those resources.
    Over the summer, AFN's Energy Workgroup met to identify various 
options for addressing the energy crisis in Alaska. We developed a 
matrix of short-term and long-term actions that could be taken by the 
state and federal governments, by individuals and by private industry. 
A copy of that matrix of ideas is attached.
    Today, I would like to briefly cover the recommendations that 
emerged as our top five recommendations for the State's Special Session 
and then focus on what we believe Congress can do to address the energy 
crisis.
    1. Strengthen the Power Cost Equalization Program by fine-tuning 
its mission, adding more resources and expanding the eligibility 
requirements. Additional funding is critically needed to cover the 
short-fall expected this year. While the Alaska legislature increased 
the ceiling for entitlement for the program from 52.5 cents to $1.00 
per kWh, it did so for only one year. It also failed to make schools, 
health clinics and businesses eligible, as the PCE program was 
originally designed, and it did not address the need for increased 
funding for PCE. Making schools, health clinics and businesses eligible 
is important because it will focus energy help where it is needed, help 
keep down inflation, and ensure that health and education funding goes 
to those purposes. According the Alaska Native Tribal Health 
Consortium, as much as 33 percent of village health clinic funding is 
going to pay for electricity and increased fuel costs. Our hospitals 
and schools are places of refuge for people in the villages. We need to 
ensure that the infrastructure we've invested in (our schools, clinics, 
hospitals) is maintained. Costs for everything from rubber gloves to 
patient travel, to medivacs have increased. These increases threaten 
the ability of our health care providers to deliver much needed 
services. As people move in together to save costs, there will be huge 
public health ramifications.
    2. Buy down debt of rural utilities in order to reduce costs passed 
on to consumers--and include a price cap on fuel stock purchased 
prospectively, with a mechanism for reimbursement from the State for 
costs in excess of the cap. Most rural utilities generate their power 
with diesel fuel. According to the Alaska Energy Authority, the cost of 
diesel fuel for most of these, even at 2007 prices, amounted to close 
to 50 percent or more of the cost of providing power. With the increase 
in fuel prices in 2008, rural utilities will find it difficult to 
operate and maintain power plants, tank farms and distribution lines--
not to mention their insurance, interest on long-term debt, taxes and 
general administrative costs. The Alaska Village Electric Cooperative 
(AVEC), for example, serves 53 villages in rural Alaska, communities 
that have the lowest per capita cash incomes in the State. Because of 
the historically high cost of power, residents and businesses in these 
communities have been conserving power for many years, resulting in 
extremely low electricity consumption. AVEC purchased fuel for its 
power plants at an average cost of $1.29 per gallon in 2002. In 2007, 
it paid $2.93. Its 2008 deliveries will be at least $4.60 per gallon 
(based on the L.A. Platt's Fuel Price Index as of May 13, 2008, 
reporting crude oil prices at $132.57).
    Because of these considerations, we advocated for a program that 
would give relief directly to utility companies. We also proposed 
capping the price of fuel purchased prospectively by electric utilities 
(AVEC has suggested a cap of $10.00 per million BTU, which would 
translate to a price of about $1.30-$1.45 a gallon for various fuels, 
depending on their BTU content.) The fuel supplier would charge the 
utility the mandated price and bill the State for the balance.
    3. Expand and support bulk fuel purchasing, transportation and 
cooperative purchase agreements--and contribute to the Denali 
Commission's bulk fuel storage program, in an effort to eliminate the 
storage backlog and to complete rural upgrades. Communities across 
Alaska are faced with the costs of storing fuel, once it arrives. Fuel 
tanks are expensive to buy and to maintain--and have to meet stringent 
government environmental regulations. Many fuel tanks in Alaska are not 
large enough or are in need of upgrades. Federal funds available for 
the Denali Commission's energy programs totaled about $23 million for 
FY 2008, a significant decline from previous years. We encouraged the 
State to step up as a true partner with the federal government in 
funding for the Denali Commission's bulk fuel storage program. Being 
able to store more fuel should help stabilize consumer fuel prices. In 
addition, we recommended that the State provide grant funding to create 
bulk-fuel co-ops that combine purchases for utilities, schools, the 
state (for state facilities) and private businesses, so that individual 
communities, clusters of communities and/or regions can create 
economies of scale. A total of $211 million are needed to complete the 
backlog of bulk fuel storage tanks, which are old and unsafe; while 
$198 million are needed to complete small electrical generation 
upgrades.
    4. Provide a family fuel subsidy to help meet the immediate crisis. 
The State Legislature voted to provide a ``resource rebate'' of $1,200 
per person to be added to the 2008 permanent fund dividend payment. The 
rebate will provide much-needed relief to families and individuals, but 
as a recent ISER study points out, for about half of the remote rural 
households, increased home-energy costs since 2006 will far outweigh 
the energy rebate ($3,300 for the average-size household).
    5. Make a sizable investment in projects that promote renewable/
alternative energy and conservation efforts. The Legislature created a 
Renewable Energy Fund last year to be housed in the Alaska Energy 
Authority and provided $50 million in funding. During its recent 
Special Session, the Legislature added another $50 million to the fund 
bringing the total available for spending on energy projects this year 
to $100 million.
    The State Legislature also suspended the state's motor fuels tax 
for one year, and increased the bulk fuel revolving loan fund and 
bridge loan program funding. All of these steps will help with the 
immediate crisis, but fall far short of what is needed for the long 
term.
    Turning to viable sustainable energy solutions, AFN and its member 
organizations are strong supporters of the development of alternative 
energy resources as an important addition to our country's fossil 
energy resources. Many villages in rural Alaska are actively working to 
develop a wide array of alternative and renewable energy projects. They 
see not only the potential for reducing the cost of energy, but also 
the tremendous manufacturing, sales and service components (e.g., the 
fact that wind and solar energy will need tailored products, services 
and alternative building materials; and the fact that plans and 
supplies for hybrid homes and facilities that are now being developed 
and manufactured abroad could be developed and manufactured in Alaska. 
Our larger cities are doing the same.
    Alaska is so large and diverse that one Village's alternative 
resources may not be available elsewhere. Some areas have strong wind 
for electrical generation; others can look to geothermal resources. 
There is no ``one-size-fits-all'' solution for rural Alaska, making 
local solutions more specific and expensive. Because of the vastness of 
Alaska and its virtually unlimited potential, Alaska can be a model for 
the rest of the country. Our communities could be part of a national 
demonstration project on alternative energy technologies. We could 
serve as a proving ground to show how Alaska Native people and their 
institutions have the experience, the capital and the community 
relationships that will be necessary to effectively implement workable 
solutions to the energy crisis. Investing now in renewable energy 
development will bring down energy costs and create jobs.
    The undeveloped energy sources most often discussed for rural 
Alaska are small hydro power (using rivers to provide power to small 
communities), solar energy, sea wave action, biomass, coal, methane and 
geothermal:
    Wind: Alaska has world-class wind energy resources, especially 
along the coastal and western regions of our state. There are 31 rural 
Alaska communities that already have good opportunities for wind 
generation--and 17 more that are ``potentially attractive.'' There are 
at least seven projects currently operational and another eight in the 
planning stages. Congress needs to look at ways to provide incentives 
to wind developers and to train our citizens to maintain the windmills.
    Hydro: Existing hydro generation produces nearly 25 percent of the 
state's electricity. But Alaska also has almost 45 billion watts of 
large and small hydro potential, more than any other state.
    Solar: Summer in Alaska produces a huge amount of sunlight, but 
winter darkness is the time of greatest energy demand. Small-scale 
solar projects have great potential, especially if combined with other 
sources of energy to lower the overall cost. Because the homeowner or 
community must make up-front capital investments, the federal or state 
governments should provide incentives.
    Ocean Wave Action: Alaska has over 34,000 miles of coastline, and 
some of the highest tides in the nation making it one of the best ocean 
energy resources in the world.
    Geothermal: A recent study points out four potential geothermal 
areas in Alaska: interior hot springs, southeast hot springs, the 
Wrangell Mountains, and a combination of the Alaska Peninsula and the 
Aleutian Chair. The value of geothermal power is magnified by the fact 
that it can produce both heat and electricity. Large-scale geothermal 
electric power generation projects have been proposed that would 
provide power to Unalaska, and Akutan. Naknek Electric Association is 
actively investigating geothermal potential and the development of a 
regional electrical transmission system.
    Biomass: Alaska has a great amount of wood, wood waste and sawdust 
for potential use in space heating and electrical generation. A few 
villages have begun to talk about making wood pellets from plentiful 
willow brush. Alaska's fish processing plants produce about 8 million 
gallons of fish oil each year. With some chemical changes, this oil can 
be mixed 50-50 percent with diesel for generation. Community waste 
disposal produces 650,000 tons of garbage in Alaska each year that 
could be used to generate electricity. But, again, design and capital 
costs are expensive and need public incentives.
    Coal: Coal is abundant in Alaska, but has higher CO2 
emissions than other energy sources. However, coal can be used to 
produce synthetic ``natural'' gas with and without carbon capture. The 
problem is that these gasification technologies are expensive and still 
under development.
    In terms of what Congress can do to address the energy crisis, we 
have the following suggestions:
    1. Provide significant increases in the needs-based Low Income Home 
Energy Assistance (LIHEAP) program and urge the State to add its own 
additional appropriations for this program. Currently, the only energy 
aid program Congress has established is LIHEAP. It provides aid to 
residents whose income is at or below 150 percent of the federally 
defined poverty level. That program provides approximately 13,880 
qualified Alaskan households with about $730 a year to buy fuel. That, 
at best, only covers about one winter month's supply of fuel for a 
typical home at current prices. In many of our villages, it does not 
even cover one-month's cost.
    2. Increase funding for the Denali Commission. The congressionally 
created Denali Commission and the Alaska Energy Authority recently 
awarded $5 million for alternative/renewable energy projects ($4 
million from the Denali Commission and $1 million from AEA. While this 
was a good start, it only provided funding for 33 projects out of a 
total of some 96 proposals. Congress should increase funding to the 
Denali Commission for its energy projects and make a sizeable 
investment in developing alternative/renewable energy projects.
    3. Enact a comprehensive energy bill to decrease energy demand over 
the long term and increase energy efficiency. As a part of that bill, 
Congress needs to extend the investment tax credit for installing solar 
energy, the production tax credit for producing wind power as well as 
the credits for geothermal, wave energy and other forms of renewable 
energy. These critical renewable energy tax credits are set to expire 
at the end of this fiscal year and, if they do, it will mean thousands 
of jobs lost and billions of dollars of investments not made.
    4. Fully fund and implement the Energy Independence and Security 
Act of 2007, which was authorized in 2006. That bill includes a host of 
provisions to further renewable energy development, including a 
renewable energy deployment grant program that would provide federal 
grants for up to 50 percent of the cost of building a wide variety of 
renewable electricity projects, including wind, geothermal, ocean, 
biomass, solar, landfill gas and hydroelectric projects in Alaska. It 
provides for a federal grant program specifically to help with 
construction of geothermal energy projects in areas of high electricity 
costs like rural Alaska.
    5. Provide incentives and funding for the creation of regional 
energy authorities in rural Alaska.
    6. Increase the supply of energy by encouraging exploration and 
development of private, state and federal lands, both onshore and off-
shore. This can be done by providing incentives, such as OCS revenue 
sharing for Alaska's coastal communities, as has been done for Florida, 
Louisiana and Texas. AFN supports the right of self-determination for 
our Native communities and urges that leases which have generated a 
lack of widespread community support be revisited, and discussions 
opened up with affected communities to address their concerns.
    7. Work closely with the State of Alaska to ensure that in the 
development of a Natural Gas Pipeline in Alaska, our communities have 
access to the natural gas that will pass through that pipeline through 
spur connections; and that ownership, partnership and contracting 
opportunities for Alaska Native tribes and corporations are part of the 
development plans. Serious training funds should be appropriated for 
workforce development to ensure broad Native participation in the 
projects.
    8. Provide consumers with energy rebates and other economic 
incentives to conserve energy. Congress should provide homeowners with 
incentives to shift to supplemental alternative energy, including 
rebates, tax credits, low interest loans, and grants to weatherize 
homes and install energy saving changes.
    9. Enact and fund S. 2232, the Native American Challenge 
Demonstration Project Act. This bill would create a total of five pilot 
projects in remote, predominately Native American areas modeled after 
lessons learned from the U.S. experience in providing foreign aid to 
the developing world. The project would use a compacting model to 
channel significant development funds to implement locally designed 
economic development strategies, including energy strategies. The 
objective would be to enhance the long-term job creation and revenue 
generation potential of Native economies by creating investment-
favorable climates and increasing Native productivity.
    We thank you for the opportunity to testify today. This is an 
enormous issue for us. We want to be part of the solution and look 
forward to working with both the Congress and the State of Alaska to 
address this issue.

    Senator Murkowski. Thank you, Mr. Andersen, I appreciate, 
not only your testimony but your leadership. AFN, in their 
efforts to truly shine the spotlight in all corners of Alaska 
on this issue, I think has been very helpful, and the matrix 
that you've provided shows the level of detail that you're 
going to, which we greatly appreciate.
    Just for the interest of not only the witnesses, but those 
participants, typically what we do in a Senate hearing is each 
of the panelists will give their five minute presentation and 
at the conclusion of the presentations I will then ask 
questions of all of the witnesses at that time.
    So with that, Janie, we will go to you, welcome to the 
Committee.

    STATEMENT OF JANIE LEASK, PRESIDENT/CEO, FIRST ALASKANS 
                           INSTITUTE

    Ms. Leask. Thank you. For the record I'm Janie Leask. I'm 
President and CEO of First Alaskans Institute. It's a statewide 
Native non-profit which houses the Alaska Native Policy Center. 
I testified in Juneau on the $1,200 rebate and the energy 
issues there, and one of the things that I will cover today is 
a little bit of research that the staff has done in the Policy 
Center really taking a look at seven villages and comparing 
them to the cost of Anchorage on a number of different levels. 
We really used Anchorage as a baseline.
    But first, I would like to thank the Anchorage legislators 
who are here today and thank you for inviting them. As we know, 
rural Alaska does not see legislators out in the rural areas 
very often, and I think that it's something, especially since 
the state does have a little bit more money, that it would be 
nice to have rural legislators go to more villages to really 
see first-hand what's happening, so I really appreciate your 
invitation to them and for them coming today.
    Our Alaska Native Policy Center collected information and 
we researched the cost of fuel/gas/energy consumption and cost 
of goods in the villages of Emmonak, Elim, Grayling, Kiana, Old 
Harbor, Stebbins and Togiak and these were just randomly 
selected from around the state. We looked at the consumption 
overall of energy in rural Alaska. Rural Alaska consumes less 
energy, while paying more for that energy. I think those of us 
who have been around and on top of that topic, it's kind of a 
no-brainer. But over the three year period that we tracked 
these communities, we were able to get some data on them from 
2005 to 2007, on an average monthly usage, the seven villages 
surveyed consumed less energy than Anchorage. Anchorage 
households used more than 500 kilowatts of electricity while 
rural households range from 280 to 430 during that same time 
period. Rural residents, as I said, also pay more per kilowatt 
hour than Anchorage residents do, even with the current rate of 
PCE (power cost equalization), rural households in these seven 
communities paid anywhere from 19 to 30 cents per kilowatt 
hour, well above the 9 to 10 cents that Anchorage residents--
Anchorage households pay. In some cases the average monthly 
bill for electricity in rural Alaska is twice that of 
Anchorage. And without power cost equalization, the villages 
that we sampled would pay in the range of 50 cents per kilowatt 
hour, which is absolutely incredible.
    According to the Division of Community and Regional 
Affairs, the Director's report, the average statewide price for 
heating fuel #1, the heating fuel used to heat homes, in June 
of this year was about $5.51 per gallon with prices for heating 
oil ranging from $1.30 to over $9 per gallon.
    The seven communities are paying more than the average 
price, the average price for a gallon of gas was $5.35 at the 
time that we did this study, and, again, the seven communities 
are above that average with prices ranging up to $8.35 per 
gallon for gas. I'm sure that has probably come down some with 
the decrease in gas prices.
    We then took a look at what the USDA and the University put 
together, a marketbasket of goods, and we sent a list out, 
faxed a list out to the villages and asked them, could you 
please go to the grocery store and take a look at these goods 
and we compared them with Anchorage, and we were able to get a 
majority of the villages returning our faxed list. Then we 
compared the cost of food and non-food items to the same ones 
in Anchorage. We found that it cost between $69 and $120 more 
to buy the same basket of goods in the communities that did 
respond over Anchorage. Results published by the Department of 
Labor and the University of Alaska--Fairbanks also paralleled 
these findings.
    Just as an aside, I met with a group of outside funders 
that traveled to Alaska at the invitation of the Rasmuson 
Foundation. They flew from Seattle out to Bethel and then out 
to--traveled to some of the communities and were just shocked 
at the prices that were in the stores. I'm always really glad 
that outside funders and outside public policy makers and 
people who contribute to our state are able to do that and 
really see what the real prices are.
    We also took a look at travel. The average airfare prices, 
beginning in July 2008, we found the average roundtrips between 
Anchorage and the seven communities ranged between $709 from 
Stebbins to $1,220 from Elim.
    Senator Murkowski. From Elim to Anchorage?
    Ms. Leask. From Elim to Anchorage, roundtrip. One of our 
staff members is a recent--came into Anchorage, moved his 
family last fall, about a year ago and he's from Mekoryuk, and 
he was saying that a roundtrip for him to go into Anchorage 
from Mekoryuk was well over a thousand dollars, for one person, 
not the entire family, just one person. He cut back his 
subsistence, he was going to go out, his mother asked him to 
come out to the village to help her with gathering fish for her 
fortunately he had an older brother living in the village. He 
just couldn't pay the price for an airline ticket to go out to 
help his mother gather food for the wintertime. So the 
increasing cost of flying in and out of rural Alaska really 
hinders rural residents ability to come in, as you had 
mentioned for services, and also for shopping, for a lot of 
other trips and for health. It makes the cost of doing business 
in rural Alaska even more expensive.
    I had the, I don't know if it was privilege, but when I was 
on the board of Commonwealth North we did an urban/rural study, 
and one of the things that we came out with was the inter-
dependency of rural Alaska and urban Alaska in our state. One 
of the things that the report stated is that, and it's a quote, 
``a basic element of the envisioned social and economic 
partnership between urban and rural Alaska is the recognition 
of people's right to support their families in the manner they 
choose and in the location of their choice.'' It further said, 
``likewise, an equally important goal is to foster 
understanding of the economic, political and social inter-
dependence of rural and urban Alaska, so that all Alaskans 
truly understand that Alaska's future depends on cooperation 
between urban and rural Alaska.'' I think that this just points 
out that Anchorage is Alaska's largest port, it's the gateway 
to shipping goods to rural Alaska, a healthy economy of rural 
Alaska bodes well for urban Alaska and I think that we know 
that. The cost of subsistence gathering and people are making 
choices of whether or not that they can afford to go out and go 
fishing or whether or not they can afford to fuel up their ATV 
to go out subsistence hunting and collecting berries. As store 
bought food becomes more unaffordable and subsistence becomes 
more expensive and out of reach for the local people, you have 
to ask the question, okay, what's left? It's a really tough 
question. I hear around in conversations and I read in the 
Anchorage paper people saying that rural people have a choice, 
you know, what if they just pack up their bags and move if it's 
too expensive. The response that I say is, yes, we do have a 
choice, but, yes, we choose to live in our homelands and where 
our grandparents grew up and this doesn't mean that we're not 
interested in cost savings, in doing what we can in rural 
villages to make life affordable. Out-migration is very real, 
we're seeing it, I talked to people who serve Alaska Natives in 
Anchorage and the infrastructure there is bulging at the seams 
and, you know, quite frankly I think it's going to get even 
worse once the Permanent Fund and the Energy Rebates come out 
and hit. I think people may use that money to move, we've also 
heard that, although that's not a statistic that we can prove 
at this point in time. But in the long-term, I thought the 
rebate was necessary in order to address what happens at the 
first freeze, but at the same time is not a long-term solution 
and I think that we, as Alaska Native people, state of Alaska 
and certainly the Federal Government, we all need to work 
together in collaborating and come up with some long-term 
solutions. I've got some ideas that I jotted down and I'll wait 
until the rest of the panel has spoken.
    Thank you.
    [The prepared statement of Ms. Leask follows:]

   Prepared Statement of Janie Leask, President/CEO, First Alaskans 
                               Institute
    Thank you for the opportunity to testify at today's field hearing 
regarding the effects of the energy crisis on Alaska people, especially 
in rural Alaska.
    My name is Janie Leask. I'm President/CEO of First Alaskans 
Institute, a statewide Alaska Native 501(c)(3) non-profit organization 
whose mission is to advance Alaska Natives through community 
engagement, information and research, collaboration, and leadership 
development. First Alaskans has three major focus areas-leadership 
development, community investments and public policy research for, and 
on behalf of, Alaska Native Peoples through the Alaska Native Policy 
Center. I'm here today to provide testimony on the effects of high 
energy costs on the Alaska Native village lifestyles and Native 
institutions in light of the current energy crisis.
    In light of the energy crisis in rural Alaska and its detrimental 
effect on the well-being of rural residents, Native and Non-Native 
alike, households, and key infrastructure, FAI is on record advocating 
assistance--be it state or federal--by the ``First Frost'' (winter 
freeze up).
    When I refer to ``rural'' in this testimony, it's important to 
recognize the term ``rural Alaska'' encompasses both Native and non-
Native people with non-Natives making up the majority (60 percent) of 
the population.
    It's imperative that we as a state make the investment in short-
term aid while looking for long-term solutions to our current situation 
because our communities will be facing immediate problems once the 
first frost occurs.
    I'd like to take some time to speak to this crisis, and the 
information First Alaskans has put together. We've collected and 
analyzed data and information from seven villages across the state. 
This data describes the state of economic conditions in rural Alaska 
and provides a comparison to urban Alaska, using Anchorage as a 
baseline.
    Through our snapshot we have verified the obvious for those 
familiar with rural Alaska--economic conditions in rural Alaska are 
under-developed while the cost of living is high.
Economic Conditions in Rural Alaska Are Under-developed
    Rural Alaska is largely remote, disconnected from the road system, 
and faces extreme and changing environmental conditions. Villages in 
rural Alaska have an underdeveloped cash economy and a high 
unemployment rate--May 2008 Department of Labor data shows that 17 out 
of 27 Boroughs and Census Areas have unemployment above the state 
average of 6.7 percent, and with some like the Wade Hampton Census 
Area, it's as high as 22.6 percent.
    The Median Household Income for these seven communities surveyed is 
well below that of Anchorage and the state average. Conditions are 
compounded by the high cost of energy, transportation, and the high 
cost of living.
The Cost of Living in Rural Alaska Is High
    The staff of our Policy Center researched the cost of fuel, gas, 
energy consumption, and cost of goods, in villages of Emmonak, Elim, 
Grayling, Kiana, Old Harbor, Stebbins, and Togiak. These communities 
were randomly selected and are located in various regions of the state. 
Although each community is different in its traditions, culture, and 
environment, they all share the same issue of the current energy 
crisis, which is creating a real sense of uncertainty for the coming 
winter.
    According to the data we collected, rural Alaska consumes less 
energy while paying more for that energy. Over a three-year period from 
2005-2007 on an average monthly usage, the seven villages surveyed 
consumed less energy than Anchorage. Anchorage households used more 
than 500 kWh, while rural household usage ranged from about 280 to 430 
kWh during that same time period.
    Rural residents also pay more per kWh than Anchorage residents. 
Even with the current rate of PCE, rural households in the sample 
communities pay from 0.19 to 0.30 cents per kWh, well above the 0.09 to 
0.10 cents that Anchorage households pay. In some cases the average 
monthly bill for electricity in rural Alaska is twice that of 
Anchorage. Without PCE, the villages sampled would pay in the range of 
0.50 per kWh.
    According to the Division of Community and Regional Affairs, 
Director's report--the average statewide price for heating fuel (#1)--
the heating fuel that's used to heat homes--in June of this year is 
$5.51 per gallon with prices for heating oil ranging from $1.30 to 
$9.10 per gallon ($3.36 without the North Slope subsidy to residents). 
According to our recent survey, all the seven communities are paying 
more than the average price. The average statewide price for a gallon 
of gas is $5.35, and again all seven communities are above the average 
with prices ranging from $3.45 to $8.35 per gallon.
    First Alaskans Institute looked at the USDA and UAF basket of goods 
and compiled an abbreviated list using goods (food and non-food items) 
that are commonly consumed in rural Alaska and asked the seven 
communities to price the abbreviated basket of goods. Four of the seven 
villages responded with prices and quantities for goods. We then 
compared the cost of food and non-food items to the average cost of the 
same items in Anchorage and adjusted the basket of goods for missing 
items. We found that it cost between $69 and $120 dollars more to buy 
the same basket of goods in the four responding communities than it 
does in Anchorage. Results recently published by the Department of 
Labor and the University of Alaska Fairbanks parallels these findings.
    Having noted these price differentials, it's important to 
acknowledge that the purchasing power of $1,200 in rural Alaska is not 
the same as $1,200 in urban communities.
    The Policy Center also looked at the cost of getting to and from 
the seven villages surveyed. Staff looked at a ``snapshot'' of airfare 
prices at the beginning of July 2008. We found that roundtrips from 
Anchorage to the seven communities ranged between $709 (Stebbins) to 
$1,220 (Elim).
    The increasing cost of flying in and out of rural Alaska hinders 
rural residents' ability to come to urban areas for services, makes the 
cost of doing business in rural Alaska more expensive and could 
potentially impact the long-term economy of urban Alaska.
The Human and Cultural Importance of Rural Alaska
    Rural Alaskans add rich diversity to the fabric of the state of 
Alaska. In 2000, the U.S. Census reported that the population of the 
rural areas was comprised of about 60 percent White alone and in 
combination with other races. The Census showed about 38 percent Alaska 
Native alone and in combination with other races, and about two percent 
was made up of other racial combinations.
    We have learned that migration to and from rural areas is not a 
one-time event. Rather, migration is a process in which people move at 
different times and for different reasons, and it is often a 
reoccurring event in the life of Alaskans. Alaska Natives living in 
rural areas live on lands defined as theirs by their ancestors, 
histories and deep cultural roots. In rural Alaska, residents use both 
ancient traditions and the more modern ways of living in their daily 
lives. This is true for Alaska Native and non-Native alike. Each 
community has seasonal subsistence gathering, and for this, residents 
use tools and motorized vehicles as well as traditional means of 
hunting and gathering.
    As the energy crisis continues to escalate, rural residents are 
increasingly unable to sustain themselves by subsistence activities 
alone. For some families, the price of gas is cost-prohibitive and 
precludes the gathering of food. Rural families depend on subsistence. 
Under normal circumstances, a family can store fish, birds, berries, 
caribou, moose, reindeer, and much more for their livelihood. Every 
seasonal activity and food gathering is tied to the fact that people 
need to live and survive. As store-bought food becomes unaffordable and 
subsistence becomes more expensive and out of the reach of local 
people--what is left?
    Items such as freezers, four wheelers, out-board motors, and store-
bought goods, purchased in urban areas for a fairly decent price, can 
be shipped to rural Alaska. But these items are flown and barged in at 
an extraordinarily high price because the cost of fuel it takes to ship 
them.
    We've heard over the years how rural and urban Alaska remain 
dependent on each other. Commonwealth North--a statewide public policy 
``think tank''--published the ``Urban Rural Unity Study'' in 2000. As 
part of that study, they described an ``ideal'' Alaska and cited a 
number of characteristics of that society which would honor and respect 
the diversity of its people and recognize the many areas where urban 
and rural interests coincide.
    The report stated:

        ``A basic element of the envisioned social and economic 
        partnership between urban and rural Alaska is the recognition 
        of people's right to support their families in the manner they 
        choose and in the location of their choice. For this reason, 
        one of the goals is to encourage the economic viability of the 
        smaller `rural' locations in Alaska and to maintain the 
        diversity of cultures and lifestyles in the state. Likewise, an 
        equally important goal is to foster understanding of the 
        economic, political, and social inter-dependence of rural and 
        urban Alaska, so that all Alaskans truly understand that 
        Alaska's future depends on cooperation between urban and rural 
        Alaska.''

    Anchorage is Alaska's largest port and is the gateway to shipping 
goods to rural communities. Anchorage, Fairbanks and other major hub 
communities are also the headquarters of a number of businesses and 
corporations which provide goods and/or services to rural Alaska. The 
healthy economies of urban and rural Alaska are inter-dependent.
    I've heard such statements as ``why don't rural residents just 
leave their villages . . . they have a choice of where they want to 
live.'' Yes, we have a choice--we choose to remain in the lands of our 
ancestors which doesn't mean we're not interested in living smarter 
through alternative forms of fuel, winterizing and/or upgrading housing 
which is better suited for the conditions found in our communities, and 
making better use of the resources we have. But this will take time--
which is why we support a short-term ``fix'' while also supporting an 
accelerated look for sound, practical and affordable energy 
alternatives for all communities of our state.
    In the short term, I don't think any rural hub--whether it's 
Bethel, Anchorage, Fairbanks or the Valley--is prepared for a mass 
influx of rural residents and the subsequent impact on their 
community's infrastructure. And rural residents don't want to leave 
their homelands. So we need to work together--across party lines and 
with all Alaskans at the table.
    First Alaskans Institute is among several Native organizations that 
are in support of the recently passed ``Alaska Resource Rebate 
Program.''
    In addition to the testimony I've offered today, I also want to 
voice our support of the Alaska Federation of Natives' top 5 
priorities:

        1. Strengthen the Power Cost Equalization Program by fine-
        tuning its mission, adding more resources and expanding the 
        eligibility requirements;

        2. Buy down debt of rural utilities in order to reduce costs 
        passed on to consumers and include a price cap on fuel stock 
        purchased prospectively.

        3. Expand and support bulk fuel purchasing, transportation and 
        cooperative purchase agreements.

        4. Provide a family fuel subsidy to help meet the immediate 
        crisis.

        5. Make a sizeable investment in projects that promote 
        renewable/alternative energy and conservation. The high cost of 
        fossil fuel is not going to go away. We need to start investing 
        in alternative/renewable energy now.

    Based on the evidence we found, we believe there is compelling 
evidence that families in rural Alaska need the additional monetary 
income to offset the increasingly high cost of energy and its 
subsequent impact felt at the local level.
    We also believe by working together to make this a better state, we 
will improve our collective future. Again, I thank you for the 
opportunity for this testimony and urge you, Senate Committee on Indian 
Affairs, to provide energy assistance or a similar piece of action 
which will provide a much-needed short-term solution to the energy 
crisis facing our state.

    Senator Murkowski. Okay, thank you, Janie. And next we will 
turn to Mike Williams. Mike is currently the Chairman of the 
Alaska Inter-Tribal Council, along with many other notable 
distinctions, but we're pleased to have you with us this 
morning, Mike.

   STATEMENT OF MIKE WILLIAMS, CHAIRMAN, ALASKA INTER-TRIBAL 
                            COUNCIL

    Mr. Williams. Senator Murkowski, I'd like to welcome you to 
our homelands here and the other staff, welcome home Megan, I 
know I met you over there, and Chuck. And welcome, finally, to 
you Mr. Walsh to our lands. I live 30 miles in a small village 
with my family, my grandkids and my dogs as well----
    Senator Murkowski. Your dogs.
    Mr. Williams.--in the village of Akiak. I'd like to thank 
Asa'carsarmiut Native Council for allowing us to do business 
today in their land here in Bethel.
    Again, my name is Mike Williams, I'm currently the Chairman 
for Alaska Inter-Tribal Council, which is a consortium of 
federally recognized tribes from throughout Alaska, and there's 
229 federally recognized tribes. And I also am the area Vice 
President for the National Congress of American Indians and 
also president for our school district board of education. And 
also vice chair of the Rural Community Action Program, which 
provides a lot of services out in rural Alaska. And this area, 
of course, is the poorest of the poor in the nation per capita. 
And I agree with some of the comments that Janie and Ralph have 
made.
    You know I just have a few comments and I'll make my 
comments short.
    We have sustained ourselves here in rural Alaska for 
thousands of years. I remember as a child growing up in a small 
village, we had only two or four hours a day of electricity 
with no other appliances that we have today. We did not have 
electricity in the summer months. We utilized our ways of 
preserving fish, game and what we gathered throughout the 
summer. I remember we had a small windmill in Akiak to provide 
electricity to our small hospital. Times have changed very 
quickly. When we have all the appliances that we have in our 
communities and our homes, our villages are providing 
electricity and oil and gas for motors and snowmachines to 
engage in subsistence activities. We have over 200 tribal 
communities throughout Alaska that are experiencing problems of 
providing sustainable power fuel to our members, or having that 
access to conduct these activities in each community.
    I wanted to make a few recommendations and these are not 
all the recommendations, the resolutions that Inter-Tribal 
Council had and the National Congress of American Indians in 
our energy resolutions, I will have them forwarded before 
September 12th to your office and they'll be on record and I 
cannot cover those in five minutes.
    One, we need immediate relief for our fuel, which the costs 
have skyrocketed in the last year. We need to do assessments on 
each of our community's needs and you need to consult with each 
tribal government. We are fortunate here in our areas in 
Alaska, in our villages, the tribal governments are the ones 
who are providing all of the services that our tribal citizens 
need for basic services at this time.
    Two, the federal and state governments need to take 
immediately action to subsidize transportation of all fuel to 
rural Alaska. You know, how can we get around that? We need to, 
you know, the transportation of goods coming into Akiak have 
also skyrocketed and, you know, it's just really hard to get 
the goods from Anchorage or Seattle or elsewhere.
    Three, we need immediate capital to harness the wind, 
solar, biomass, hydro, and have each tribal government develop 
their alternative energy. This can be done right now with that 
capacity and with the right kind of training for each 
community. Because I agree each community has its own unique 
needs and we need to do a thorough assessment and we can 
develop these alternative energies right now for each 
community. In my community hydro power is available right now 
but we have no such capital to start right now. So I think 
things that we can do to cut those costs can be done right now.
    Four, we need immediate relief for operations of our 
schools, community buildings, clinics and other public 
facilities to include them in the power cost equalization model 
that we currently receive. That is a good program but I think 
we need to expand it more if we are going to be sustainable. 
For example in Yupiit School District we have to cut $800,000 
from our operations. Because of the cost of fuel this year, we 
had to cut from the 30 percent of the budget to meet our 
budgetary needs to provide education for our children. So 
everybody's being hit by the cost, and especially our schools 
and I wanted to lay that example. So cutting about a million 
bucks from our education budget in a district is a huge hit 
that I think it's going to have ripple effects throughout rural 
Alaska, which we are trying to provide quality education and 
the kids deserve that quality education.
    Five, we need immediate capital to consolidate power 
generation with several villages to connect them to cut costs 
and make them sustainable into the future. Right now each 
community is providing their own with the exception of the 
Bethel to, for example, Bethel to Napaskiak, Bethel to Napakiak 
or to the local immediate areas. But I think we have cluster of 
the villages--that are in clusters that can provide in 
cooperation with each other to provide one system to provide 
power to each community; that will cut operation costs and 
other costs.
    So I think these things that we can do in the immediate 
future.
    And I really appreciate the opportunity to have field 
hearings and consultation in Bethel right now, today. I really 
appreciate that and we've been trying to suggest that these 
ongoing consultations with the federally recognized tribes be 
ongoing every year to find out where each of the communities 
are before any more out-migration happens.
    I really appreciate and thank you for listening to my 
tribal concerns about the energy issues that have profound 
effects on our lives every day in rural Alaska. And I just 
suggest, again, to have ongoing dialogue with each community 
and do things right now to have our villages sustain themselves 
now and into the future. So we need short-term relief and we 
need to do some long-term planning and I think those are on the 
way.
    I really appreciate the five minutes Honorable Senator 
Murkowski.
    Thank you.
    [The prepared statement of Mr. Williams follows:]

  Prepared Statement of Mike Williams, Chairman, Alaska Inter-Tribal 
                                Council
    Greetings! My name is Mike Williams, currently Chairman of the 
Alaska Inter-Tribal Council, Area Vice President for the National 
Congress of American Indians, President of Yupiit School District Board 
of Education, Vice President of Rural Community Action Program, Akiak 
Native Community Tribal Council.
    We have sustained ourselves here in Rural Alaska for thousands of 
years. I remember as a child growing up in a small village that we had 
only 2-4 hours a day of electricity, with no other appliances that we 
have today. We did not have electricity in the summer months. We 
utilized our ways of preserving our fish, game and what we gathered 
throughout the summer. I remember we had a small wind mill in Akiak to 
provide electricity to our hospital. Times have changed very quickly 
when we have all the appliances that we have in our communities and our 
villages are providing electricity and oil and gas for our motors and 
snowmachines to engage in subsistence activities. We have over two 
hundred Tribal Communities throughout Alaska that are experiencing 
problems of providing sustainable power, fuel to our members.
    I want to make a few recommendations.

        1. We need immediate relief for our fuel which the cost have 
        skyrocketed in the last year. We need to do assessments on each 
        of our communities needs and you need to consult with each 
        Tribal Government.

        2. The Federal and State Governments need to take immediate 
        action to subsidize transportation of all fuel to rural Alaska.

        3. We need immediate capital to harness the wind, solar, 
        biomass, hydro, and have each Tribal Government develop their 
        alternative energy. This can be done right now.

        4. We need immediate relief for operations of our schools, 
        community buildings, clinics, and other public facilities to 
        include them in Power Cost Equalizations model that we 
        currently receive.

        5. We need immediate capital to consolidate power generation 
        with several villages to connect them to cut costs and to make 
        them sustainable into the future.

    I recommend that we have ongoing consultation with each of Alaska's 
Federally Recognized tribes every year to review our status.
    I really appreciate and thank you for listening to our Tribal 
concerns about the energy issues that have profound affect on our daily 
lives in Rural Alaska. Thank you.

    Senator Murkowski. Thank you, Mike, appreciate it. 
Appreciate your leadership on so many different levels.
    And now with us this morning we have Chris Mello, who is 
with the Alaska Energy Authority, we welcome you and look 
forward to your comments.

   STATEMENT OF CHRIS MELLO, PROGRAM MANAGER, ALASKA ENERGY 
                           AUTHORITY

    Mr. Mello. Well, thank you, Madam Chair. For the record I'm 
Chris Mello. I'm Program Manager with the Alaska Energy 
Authority. I oversee design and construction of energy projects 
in rural communities throughout the state.
    I wanted to talk about how the state is moving rapidly to 
help reduce the dependence on fossil fuels. House Bill 152 
establishes a renewable energy fund and initially there is $100 
million available for the development of renewable energy 
projects with continued funding over the next five years. The 
request for application was originally scheduled to be issued 
on the 29th but that schedule has slipped a little bit and it 
will be out next week. The advisory board has been named and is 
working on draft regulations right now. The advisory board will 
review the applications and prepare recommendations for 
consideration and award by the Legislative Budget and Audit 
Committee, and we expect that this process will be completed in 
the late fall. The selection criteria for these grants is based 
upon economic and technical feasibility, energy cost per capita 
and statewide balance and matching funds.
    From the State's perspective, continued federal support is 
critical to help us meet the challenge of high energy costs. 
Federal funding of the Denali Commission has been in steady 
decline over the last several years. The Alaska Energy 
Authority has constructed about 60 bulk fuel storage facilities 
and 32 powered generation facilities in Bush communities 
throughout the state in partnership with the Denali Commission 
using federal funds, and, however, these programs have not yet 
been completed. We all know that it's important to reduce our 
dependence upon diesel for heating and power generation in 
rural communities, but it's not possible at this time and in 
the foreseeable future to completely eliminate the need for 
diesel fuel in Bush Alaska. Small communities that are off the 
grid that have hydro and other alternative energy potential 
must have a modern diesel powerplant with modern controls into 
which those alternative energy resources can be integrated.
    You just can't run a village on wind and you just can't run 
it on hydro.
    And the same thing can be said for tank farms. The best way 
for a community to get full value out of every gallon of diesel 
is not to lose any through leaks and spills. So energy 
conservation for fuel starts with a tank farm that does not 
leak. And energy efficiency in a community starts with a diesel 
powerplant with a modern control system that shows about a 26 
percent increase in efficiency over the previous powerplant. It 
also helps to provide stack and jacket heat recovery systems 
that can provide clean heat and continuous heat for schools, 
health clinics and other public facilities.
    Also from the State's perspective the Congress has approved 
Renewable Energy Deployment Grant Program last year and it 
authorized up to a 50/50 matching grant to pay for construction 
of renewable energy projects in Alaska. This program needs to 
be implemented by the Department of Energy and it needs to be 
funded. Likewise with the Authorized Energy Policy Act of 2005. 
There are potential renewable energy projects on Native lands 
throughout the state, including very viable potential projects 
right here in the Bethel region for wind and biomass.
    Lastly, we'd like to see support for the Regional Biomass 
Energy Partnership. The Department of Energy eliminated its 
funding for this program in 2006. The Alaska Energy Authority 
has continued development in this area on a lower level and 
recent works include developing small cleaning burning wood 
boilers to heat schools and community facilities, helping the 
city of Craig do a sawmill waste fired heating system and 
testing biodiesel and assisting fish processors in development 
of portable fish oil rendering module.
    And with that I want to thank you for the opportunity to 
give testimony and my testimony is complete.
    [The prepared statement of Mr. Mello follows:]

   Prepared Statement of Chris Mello, Program Manager, Alaska Energy 
                               Authority





    Senator Murkowski. Thank you, I appreciate that. And let me 
just start with my questions to you first and follow up with 
some of the comments that you have made there.
    We recognize that we have some funds available at the state 
level through the Renewable Energy Grant Program and I think 
that that's considerable opportunity for us and we look forward 
to all that being set in place so that communities can begin to 
get moving. What kind of response do you anticipate that you 
will receive from the Native communities, from places like here 
in the region in terms of requests for assistance for those 
renewable energy grant funds?
    Mr. Mello. Yes, overwhelming. We'll receive overwhelming 
response.
    Senator Murkowski. And I appreciate that you're still 
putting in place kind of the procedures and the mechanisms, but 
is this going to be a situation where you've got to evaluate, 
you've got your pot of money, you've got your $100 million, and 
you've got to evaluate from a cost benefit perspective where 
we're going to get the most bang for the buck, if you will, is 
that going to disadvantage smaller communities from being 
successful applicants to those grant monies?
    Mr. Mello. Well, at the risk of speaking for the advisory 
committee, I think that is going to be one of the criteria, to 
see to it that that does not happen.
    The first part of your question is what sort of response 
we're going to get. Earlier this year we had a $5 million 
request for proposals from the Denali Commission for renewable 
energy projects. We received applications in excess of $2 
billion for that.
    Senator Murkowski. Right.
    Mr. Mello. So I would expect that this won't go unnoticed. 
I would expect that we will receive grant applications.
    Earlier this week I was traveling in Copper Center, 
Gulkana, Gakona and communities in that region talking about 
wood heating biomass projects, and they're very enthusiastic 
and they're looking to put their grant applications together. I 
think smaller communities that have potential are going to 
receive a good review and a fair judgment on that. One of the 
criteria that the advisory committee is looking at is a 
statewide balance.
    Senator Murkowski. Yes.
    Mr. Mello. So it doesn't just go to--weighted to one region 
or another, there are small communities throughout the state 
that have great needs and also have good energy potential and I 
don't think that that will be overlooked.
    Senator Murkowski. What kind of technical assistance, you 
know, can you offer? You look at a community like in Anchorage 
or Fairbanks or some that have--they've got government systems 
in place, they've got grant writers, they've got analysts, 
they've got their projects ready to go yesterday and they've 
got it fully mapped out and they'd be ready to submit an 
application, but if you've got a--you know, let's take Mike's 
community here, at Akiak, you know, you say you've got wind 
potential and you had windmills in the past so you know you've 
got an opportunity, you know you've got the resource there, but 
you don't have the technical expertise to submit your grant 
yet, is the State going to be helping to facilitate anything in 
that vein to help these smaller communities?
    Mr. Mello. The short answer is yes.
    Senator Murkowski. Okay.
    Mr. Mello. And how that assistance is going to be provided 
is yet to be sorted out, we are a small agency. But a lot of 
the information about what resources are available for all 
sorts--all disciplines within the greater subject of renewable 
energy, that information does exist within the Department of 
Natural Resources and the Alaska Energy Authority.
    Senator Murkowski. Right.
    Mr. Mello. So there's a pretty good sense of what the wind 
resources are----
    Senator Murkowski. Right.
    Mr. Mello.--the hydro resources are, geothermal resources 
are, and so I think that that assistance is going to be 
provided. It just doesn't make sense to overlook a community 
because they didn't have the wherewithal----
    Senator Murkowski. Right.
    Mr. Mello.--to get their application filled out right.
    Senator Murkowski. And perhaps we'll hear from our federal 
witnesses whether there is opportunities for this kind of 
technical assistance, if you will, to help facilitate these 
communities, get to that level where they're able to compete 
with some of the bigger dogs that are seeking those same 
sources of funding. But it's important as we move forward that 
these processes are in place----
    Mr. Mello. Yes.
    Senator Murkowski.--and that they work equitably, urban 
versus rural, big community versus smaller community. I wanted 
to ask the question because each of you in one way or another 
spoke to the issue of conservation, whether it's making sure 
that you have fuel storage tanks that don't leak or what you 
can do within respective communities. I was out in Dillingham 
earlier this year and I was there the week after the spring 
barge had arrived and the sticker shock for the people in 
Dillingham was just, you know, phenomenal because the price had 
literally had gone up well over a dollar just literally 
overnight. And I was talking to a couple there living on a 
fixed income and I said, well, you know, conservation, this is 
really going to be the most immediate thing that we can do and 
the response to me was, Lisa, you don't think that every 
morning we don't think about how to conserve energy and you 
don't think we haven't been doing this for years. So the 
question to you is, you have been conserving, you have been 
thinking smart, we're now to a point where, talking to the 
folks here in Bethel, what you saw from just last month's 
utility bill, seeing, you know, an increase that is almost 
double what you paid last month for your utility, how can we 
provide all these people in this room here some further tips on 
what more can you do as a family, as a community, as an agency, 
from AFN's perspective, from the Native Corporation's 
perspective, what can you provide in terms of additional 
suggestions that, you know, maybe don't cost a lot of money, 
but that you can implement today?
    Anybody have any suggestions?
    Ralph.
    Mr. Andersen. Thank you, Madam Chair.
    I think in a lot of cases it's not so much additional 
information but getting basic information out.
    Senator Murkowski. Does AFN do anything like that 
currently?
    Mr. Andersen. AFN hasn't yet started anything like that but 
we're planning to have, as part of our convention, a whole 
section focused on energy, including booths and information----
    Senator Murkowski. Well, isn't Alaska Marketplace looking 
at specifically giving grants to renewable energy ideas 
throughout Alaska?
    Mr. Andersen. Yes.
    Ms. Leask. Yes.
    Senator Murkowski. Can you speak to that?
    Mr. Andersen. Janie can probably speak to it better than I 
because, you know, I'm with the energy working group.
    Senator Murkowski. Right.
    Mr. Andersen. But I did receive information on the recent 
call issued by the Marketplace with the real strong preference 
for those that--for the proposals that do encourage either 
conservation and development of alternatives or some other 
energy or some other energy related project that helps us reach 
our solution.
    And I guess it really depends, Senator, on what level.
    Senator Murkowski. Yes.
    Mr. Andersen. At the family level, I think, it's like the 
couple told you in Dillingham, my home town, that we have been 
practicing energy conservation for a long time. I think that 
tips can be provided in brochures. Those are things that we're, 
in our region, are beginning to look at.
    I think the bottom line, though, is that--and as you 
mentioned in your opening remarks, there are a number of 
regions and areas that have developed energy plans and 
strategies and policies and those activities such as outreach 
and such as providing information are an essential part of 
those. I mean Bristol Bay, we have a plan, I've submitted a 
copy to your staff earlier. But I think the real problem is in 
the implementation.
    Senator Murkowski. Yes.
    Mr. Andersen. Is with funding, especially. Mike and others 
may have mentioned, you know, that we do have these policies 
and plans but really it's how do we take the next step, okay, 
with the BIA/TPA funding, for example, being absolutely flat 
for the past 20 years, that causes problems in being able to 
develop new programs. I met, or just spoke briefly with Bob 
Middleton a minute ago because at BBNA we're trying to--and 
other regions as well, are trying to develop tribal energy 
programs but that we don't have funding to implement them. We 
can develop the plans and strategies and policies and mission 
statements and goals and outcomes but kicking them into gear 
takes money which we don't have.
    Senator Murkowski. Yes.
    Mr. Andersen. And I think the solutions to getting more 
information out can be done at different levels and I think we 
all need to, you know, become more aware of the need for that.
    Senator Murkowski. Well, and I think that is something that 
we can do whether it's AFN or First Alaskans or, I know, AEA, 
the tribal councils, we've got our own communication networks. 
I know that on my website we've got a conservation tip of the 
week, and we just solicit ideas from people around the state 
and we post them. I mean it's nothing earth-shaking. But I 
think part of the frustration is, is that everyone thinks that 
we have to have a big energy plan in place before we can start 
implementing things, and the reality is is that each one of us 
can be doing small things within our own home, within our own 
businesses that cumulatively can make a difference. And I think 
it helps when we share those ideas, and help to facilitate kind 
of that community action from a volunteer perspective first, 
and then we can work on that bigger--can you speak to the 
Alaska Marketplace and what they are doing with urging 
innovation in renewable energy areas?
    Ms. Leask. I got the same email that Ralph got.
    Senator Murkowski. Okay. I saw the advertisement in the ADN 
so----
    Ms. Leask. But I know that energy is one of the four 
categories that they're looking for for innovative projects for 
the rural Alaska Marketplace, which will be announced during 
the AFN Convention. I know it's a relatively short timeframe 
but I know that that's one of them.
    Speaking to what people can do, I think RurAL CAP has done 
a really good job through its weatherization program in trying 
to be proactive and getting tips out to people on ways people 
can save money by weatherstripping or by programmable 
thermostats or maybe even going to what Juneau had to do, which 
brought a smile to my face, when, I mean nobody likes to see 
anybody suffer or go without, but at the same time they 
unplugged everything in their house and then they started 
plugging things in to see what took juice and then what they 
really needed to have plugged in, so I think that that is one 
area, you know, that people can do.
    You know, but I think we need--the Interior Regional 
Housing Authority is doing a terrific job in trying to build a 
house for rural Alaska. Many of the HUD houses that we have in 
the villages, the design came from out of state and didn't take 
any consideration in of our winters, of our climate, or where 
the house was going, it was just a cookie-cutter, here's a 
design so I think that the Interior Regional Housing Authority 
is doing a prototype that I think can be used and I think we 
can put some more money into retro-fitting houses and glass or 
putting what--another thing that people can do is to, during 
the wintertime, is to put either foam or something, curtains, 
at a minimum, over windows, which are the source of big energy 
leaks in housing.
    But I think in any of this, we do need to have 
weatherization, we do need to have collaborization but we also 
need to have jobs in rural Alaska and whether those are 
seasonal jobs or whether those are related to the pipeline or 
the CDQs on fisheries, but we really do need to have rural 
Alaska in order to stem the tide because you do get the young 
people going back to their villages very idealistic and really 
wanting to go to work there but there's really not the jobs 
that's available so we can talk weatherization and we can talk 
about providing and saving money and fuel to make villages more 
affordable but we also have to talk about the jobs, too.
    And, finally, I think that whatever we do, we need to bring 
state dollars to the table, we need to bring federal dollars to 
the table, we need to bring non-profit dollars to the table, 
regional corporations. One of the things that we've decided 
that we're going to do at First Alaskans is try to be a 
clearing house for what everybody is doing with respect to 
affordable energy and renewable energy. I didn't know, for 
instance, that in the Bering Straits region, Bering Straits 
Native Corporation put $6 million into windmills in their area, 
you know, and to try to share information among different 
Native organizations and groups.
    Senator Murkowski. I think that we can gain so much from 
the work that has been done in other parts of the state where 
maybe different challenges----
    Ms. Leask. Yes.
    Senator Murkowski.--but still challenges nonetheless, and 
to hear that First Alaskans will assume that role as a clearing 
house, I think, is good, it's very important because I think we 
need to recognize that through the sharing of the information 
we're probably going to be a step ahead when we start in some 
other areas, perhaps from the mistakes or the successes.
    Mike, I wanted to ask you, you made the comment about the 
need, and I don't want to misinterpret your words, but to 
subsidize fuel to rural Alaska was what I wrote in my notes. 
One of the things that kept coming about repeatedly yesterday 
in my conversations with people, whether it was in the grocery 
store or talking at dinner, was the fact that, here, in the 
region, everything comes to you by either air, very expensive, 
or your goods come up via barge, and the prices that you have 
to pay are now even higher because in order for that barge to 
get there they got to fuel the barge and that's expensive and 
so the cost that is added on to the goods is just that more. 
You think about the rest of the state and the infrastructure 
that is provided to them, through federal or state dollars, 
whether, you know, you've got the railbelt, you got a railroad, 
you got roads that connect from Seward up to the Interior area; 
in Southeast you've got the Alaska Marine Highway System that 
in a lesser extent is kind of their highway, but here, you 
really don't have your transportation infrastructure that is 
your state or your federal infrastructure. You've got your 
barge company that's bringing the goods up, whether it's the 
materials to build your home or the food supplies that you feed 
your family with. Anybody have any suggestions as to how we 
can, you know, you say subsidize fuel costs, I guess I'm 
looking at the situation of how you move things to the region 
as being a major impediment and a cost multiplier.
    Mr. Williams. Yes, first of all before I answer that 
question, as vice chair for Rural Community Action Program and 
I've been on that board for the past 15 years working on 
weatherization projects and also working on the portable homes 
for rural Alaskans. And I commend RurAL CAP for providing tips 
and information how we can conserve fuel in each community, and 
to cut down on or do some assessments on green house gases and 
et cetera, on how much carbon you produce in each household. I 
think more weatherization programs in each community must be 
implemented and if we're going to do an impact on cost 
reduction or saving energy in rural Alaska we need to do that 
and we need to provide funding to each community because we're 
doing several projects here and there.
    And I would also recommend that each housing authority, 
that they build these energy--five star energy efficient homes 
right now. It can be done. For example there is Tim Meyers from 
Bethel that has been doing some stuff to do minimum fuel 
consumption to each house and he's done quite a few things 
right now and I think it can be implemented with all of these 
housing projects that are going on each day in our areas and I 
think Janie alluded to these designs are being built or being 
copied from, for instance, from New Mexico.
    Senator Murkowski. Yes.
    Mr. Williams. So I just wanted to put in that many rural 
community action programs here in Alaska, our Native 
communities are doing the same. So I think in terms of the 
transportation costs, I think it's stemming from--I just hate 
to point fingers at anybody but I think, you know, we have a 
Federal Government that sets policy and, you know, why are we 
in an energy crunch right now in this nation, you know, we're 
not just the only ones who are paying the price right now. I 
think that with all the profits that are going on with the only 
companies and we read it every day in newspapers, that enormous 
profits are being made and who's paying the costs, we are.
    In terms of providing trans goods from Seattle and 
Anchorage through air and through shipping, I just, you know, 
wonder how we can, you know, provide lower costs of the 
transportation of flour, rice, et cetera. But I think the 
leadership of this nation must take action right now to make, 
no matter where you live, that you make everything sustainable 
into the future or else, you know, if we do not, you know, 
where do we find funding for all of these projects and these 
trust programs; it's from the Federal Government. And I think 
it's the trust responsibility of the Federal Government to the 
tribes here in Alaska and in each village, it is the 
responsibility to provide that. But, you know, I think right 
now with the limited amount of funding that we have it's been--
we've been trying to extend the value of the dollar. So I also 
agree with Ralph's comments on those flat funding, you know, 
we've been--the funding has been going down and/or flat and the 
value of the dollar has gone down as well but, you know, I was 
trying to think of how we can get assistance for this and I 
think we can somehow but we know the cost of war, we know the 
disasters that are happening, you know, we're providing money 
for those issues that are going on. But I think this can be 
done but, you know, those were my recommendations that----
    Senator Murkowski. Thank you.
    Mr. Williams.--we need to do something. For example, the 
bypass mail. We've been depending on the fruits of the bypass 
mail but when I hear that it's going to be on the line and if 
we lose it then how can we transport a thousand pounds to Akiak 
at reduced costs, and if we pay the same amount of cost of that 
thousand pounds, then we can't afford it.
    So I really wanted to see--throwing that out on helping us 
sustain ourselves out here for the transportation costs 
because----
    Senator Murkowski. Well, we have so much that we could talk 
about all morning and each issue will take us even further. We 
do need to move on to the next panel.
    Before we do, though, your comments remind me, though, 
you're talking about the federal role and I'm sitting here in 
my federal capacity, most certainly, but I think we also 
recognize as Alaskans, that it is not just the oil companies 
that are standing to benefit from the high prices of oil, the 
state of Alaska and our treasury and our people are benefitting 
a great deal. I view this as an opportunity for us, as a state, 
as our treasury gains $12 billion from last year because of the 
high prices of oil, that this is our opportunity to invest in 
ourselves, to take that resource from a finite resource, if you 
will, and help develop that infrastructure, the clean renewable 
energy resource that will take this state into the future for 
as long as we will be around. I view that as our opportunity to 
invest in ourselves and feel that that challenge is there for 
us, it is not just the Federal Government, it is not just the 
local community, it is all of us and we've all stated that, but 
we've got an opportunity now as a state to be very proactive in 
making this happen.
    So I know Janie, you're itching, but very, very, very 
short.
    Ms. Leask. Very, very quick. And I just wanted to say on 
that line, at an AFN leadership meeting that was held on energy 
a couple of weeks ago, one of the speakers who happens to be on 
our board of trustees challenged the Governor to set aside, I 
think it was $200 million a year, toward finding solutions and 
coming up with innovative sources of renewable energy and start 
implementing that.
    Senator Murkowski. We can do it.
    Ms. Leask. $200 million a year for five years.
    Senator Murkowski. Yes.
    Ms. Leask. And, you know, I totally agree with you, I think 
the state of Alaska with our money, we're giving out lots of 
different things but we're not really addressing the core.
    Senator Murkowski. We're not investing in ourselves and 
providing for the long-term solutions.
    Ms. Leask. Yes.
    Senator Murkowski. I want to thank each and every one of 
you for your testimony. Please know that if there's anything 
further that you would like included, that you can also submit 
addendums to your statement. With that we can close out this 
panel and bring up Panel No. 2, please.
    Mr. Williams. Thank you very much.
    Senator Murkowski. Thank you.
    [Applause.]
    Senator Murkowski. I will apologize for not giving everyone 
a stretch break but we ran over a little bit with that first 
panel and we don't want to short change Panel No. 2 here, so 
we'll just keep moving. If those of you need to get out and 
stand up, it's a little bit warm in here, but without 
disturbing the proceedings here, we would encourage you to do 
that. We're joined again this morning, Panel No. 2, by Mr. 
Myron Naneng, Matthew Nicolai, Gene Peltola and Ron Hoffman. 
Gentlemen, I welcome all of you, appreciate all that you do in 
your respective capacities. And, Myron, if you would like to 
lead off, Myron, of course, is the president of the Association 
of Village Council Presidents located here in Bethel, thank 
you, and good morning.

 STATEMENT OF MYRON NANENG, PRESIDENT, ASSOCIATION OF VILLAGE 
                       COUNCIL PRESIDENTS

    Mr. Naneng. Good morning. Quyana (In Native) Chairman 
Murkowski, welcome and welcome to all the staff and people who 
are here today to hear testimony regarding an issue that's 
really affecting each and every one of us in our own 
communities. It's nice to have you back here in Bethel, Senator 
Murkowski.
    Senator Murkowski. Thank you.
    Mr. Naneng. And it's the hub of the Yukon-Kuskokwim Delta. 
The Association of Village Council Presidents is a non-profit 
human and social service entity that represents 56 federally 
recognized tribes that make up the region. You have brought the 
committee here because while the energy crisis affects America, 
it is crushing Alaskan villages. Current prices, as of this 
week, updated from my written submission, written testimony, we 
called around yesterday, the Lower Kuskokwim averages, from 
Bethel, we have $5.98 per gallon for gas, which is up 63 cents 
since June 25th. $6.43 per gallon for heating fuel, which is up 
$2.02 per gallon. The Upper Kuskokwim averages $6.30 per gallon 
for gasoline, $6.60 per gallon for heating fuel. Lower Yukon 
averages, and we got these from Emmonak, $7.25 per gallon for 
gasoline which is up $1.34 per gallon since June 25th, and 
$7.83 a gallon for heating fuel, which is up $2.98 per gallon.
    Senator Murkowski. From June?
    Mr. Naneng. From June. The Middle Yukon averages, and these 
are from the village of Marshall, $6.41 per gallon for 
gasoline, which is up 28 cents per gallon and $7.15 per gallon 
for heating fuel and this is up 39 cents per gallon since June. 
And on the coastal villages, Chevak and Scammon Bay, pay $6.50 
per gallon for gas, $6.61 per gallon for heating fuels.
    Those are the prices that are currently being paid by 
people in our villages.
    The irony of the situation, this national energy crisis and 
debate focuses on Alaska, while rural Alaskans cannot afford to 
heat our homes, drilling in the Arctic National Wildlife Refuge 
is being debated and it has been debated for a long time, 
especially in Washington, D.C. With the energy crisis it's more 
of a hot button issue in this election year, especially in 
other rural areas of the Lower 48 states. A Republican in 
Colorado has toured ANWR this week to make her decision about 
it in her race against her opponent who opposes drilling. 
Missouri voters are asking their congressman what he thinks 
about drilling in his bid for Governor. So other parts of the 
country are talking about what they can get out of Alaska. But 
this does not even matter that the rise of oil prices have 
enriched Alaskan treasure, it still cuts the throat of many who 
live in Alaskan villages, especially in rural Alaska, even with 
the resource rebate. The State approved a bonus of $1,200 along 
with the Permanent Fund Dividend for each resident to help 
relieve some of the energy burden, our people expect things to 
get much worse. Last years fuel prices in our communities on 
the average 60 cents higher than the U.S. average. With each 
successful seasonal fuel shipment the cost always increases. 
There's never a decrease in fuel prices when they deliver them. 
And our first snow is barely two months away and we're going to 
have a critical winter, we can anticipate one.
    Citgo Native American Heating Program gave our villages 
some relief last winter and it's going to be needed again.
    A University of Alaska study published in May showed that 
rural Alaskans will spend 40 percent of their annual income on 
energy this winter compared with four percent for average 
Alaskan households, that means the urban areas. Our winters are 
brutal, the winds and elements plus our aging and poorly 
constructed early BIA HUD homes, commercial properties and 
public and tribal facilities, energy upgrades for older 
facilities will make the most immediate and sustainable impact 
on energy costs.
    Fuel price and other energy costs and use. Prices for 
residential heating and regular gasoline increased over 100 
percent since 2007 in many of our villages and the estimation 
does not include taxes. Alaska Village Electric Cooperative, 
which serves 53 small villages in Western Alaska, or most of 
them in Western Alaska had a fuel bill that went up $26 million 
from $14 million last year. Village residents are paying an 
average of $300 a month in electric bills with an average 
household income of 17,500. Many families are unable to 
maintain their livelihood and support their households. Locally 
owned utilities face power shut-downs and brown-outs throughout 
the winter in order to conserve fuel and save energy costs. 
Some of the villages have not increased their fuel prices 
because they're trying to help their residents in their 
communities.
    The quotes that I submitted for sample fuel prices per 
village from the Tundra Drums from January is no longer in 
effect. I've stated the increases that I just noted for parts 
of the areas within our region, and you can see the big 
difference of that, they've increased substantially.
    Taking charge biennial energy plan for 2008 and 2010. AVCP, 
Calista working with the organizations that are represented 
here are working to create the regional energy plan through 
Nuvista Light and Power Cooperative in order to conduct energy 
feasibility studies for the region and for the developing 
project at Donlin. The energy study was completed by Nuvista in 
2002 and was followed up with a feasibility study in 2004. 
Nuvista is now engaged in energy planning and development for 
the process for the AVCP Calista region. One of our partners, a 
village located in (In Native), Chaninik Wind Group received 
4.8 million grant in 2008 to develop energy projects and 
determine feasibility of subregional wind energy for four 
villages.
    Regional wholesale cooperative is being considered for many 
of the organizations within the region as well as the villages 
because like the previous people that commented, some of the 
school districts are having to reduce the salaries of their 
teachers in order to meet their energy costs for the winter, 
and that's going to be the same for many of the village 
businesses.
    Energy planning for the subregion. AVEC has established 
three wind energy--wind generation projects, one in Toksook Bay 
and one in Hooper Bay and in Kasigluk. Hooper Bay is 
revitalizing the wind energy that they used to have in the 
community many years ago before even talked about wind energy. 
I grew up in a house that had wind generation on top of the 
house and we lit our homes with one light bulb before we had a 
generator in the community, a diesel generator in the 
community. So other wind energy projects are feasible along the 
Bering Sea Coast, the Lower Kuskokwim and the Bethel area. In 
heavily treed areas of the Middle Kuskokwim and Lower Yukon 
biomass projects could provide community facilities with 
heating needs with biomass boilers and wood chippers that would 
provide feed stock for these and a variety of community 
facilities and home heating boilers.
    In-stream turbines in other areas of the Kuskokwim and 
Yukon Rivers and more powerful tributaries are worth 
investigating as is ocean wave energy along the Bering Sea 
Coast. But we know that ice conditions can limit some of that 
ability. There is a geothermal potential at the NYAC mine with 
the hot springs along with in-river hydroelectric potential for 
nearby communities.
    We have also identified two potential targets for 
hydrocarbon exploration. On top of supporting more energy 
sourcing exploration, the plan considers an inter-tie to the 
railbelt based on the economic development potential for 
projects such as Donlin Creek Mine.
    Developing fish oil and bio diesel from off shore-based and 
floating salmon processors on the Kuskokwim and Yukon using the 
Morse engine generator at a 50/50 raw fish oil-diesel blend.
    Regional energy coalition is being talked about right now. 
It is imperative to call for development of a regional energy 
coalition that includes all utilities, major electrical 
consumers, fuel operators in the region. And such a coalition 
would enable regional electrical utilities and fuel agreements 
in order to achieve energy cost savings and efficiencies. A 
bulk fuel cooperative by the regions most solid businesses and 
institutions would hold an immediate short-term solution that 
could bring sustained savings. Right now non-profits are able 
to buy fuel for their facilities at lower costs than those in 
communities that have to buy it for their member villages.
    Oil and gas exploration are conditionally green lighted. 
The tribes within our region for the first time recently 
rescinded a long-standing resolution that banned oil and gas 
exploration. A change of heart came as a result of the energy 
crisis. However, the technologists have dramatically changed 
that since the destructive and crude exploration and discovery 
processes first threatened our perception of land and 
subsistence food resource safety. Along with pollution concerns 
it is important to respect the rights and privileges of each 
land owner, stakeholder directly involved in the utilization 
and development of renewable resource energy on their property, 
the communities have to have a say in what goes on with their 
renewable energy projects, including oil and gas exploration.
    What the state should do and can do. Provide a renewable 
resource deployment assessment of the regions based on the MM/
BTU cost. This mandate will help us ascertain the development 
and deployment of renewable energy projects based upon 
available renewable energy resource in the region. State 
financing should lead to local takeover of energy distribution 
and management.
    A continuation of the Power Cost Equalization Program and 
improving its qualifying requirements to include schools and 
other government facilities affected by the current energy 
crisis would address immediate and dire needs and current 
budget constraints.
    State of Alaska should create a Department of Energy 
cabinet office that includes regional representation for direct 
support, training and technical assistance.
    The State should establish a dedicated Renewable Energy 
Deployment/Energy Efficiency Equipment Loan and Grant Fund in 
coordination with statewide and local banking and financing 
institutions.
    The AVCP region supports the planning, development and 
utilization of North Slope gas for rural Alaskan communities.
    The creation of more bulk fuel refineries in rural outposts 
such as those as Flint or Nikiski to meet heating fuel, 
gasoline, diesel, aviation and propane needs in a way that 
minimizes the costly shipment demands.
    In closing. We'd like to thank the Committee on Indian 
Affairs and you and your staff for coming all the way from 
Washington, D.C., to address a very critical issue in a very 
remote and challenging part of the country during our energy 
crisis that affects us all.
    Alaska may be the only state out of many you serve to hear 
our needs and attempt to address our concerns but we are 
grateful and earnest in helping you to build the record that 
will hopefully result in actions.
    I understand that some of the members of the Alaska 
Legislature and other concerned citizens and business owners 
throughout this state are in the audience today and I hope that 
this testimony has brought you into agreement that the wealth 
of the state of Alaska does not translate into a wealth of 
infrastructure in most of rural parts of Alaska. We should have 
had these--I know the energy issue had come up over and over 
again throughout the last 20 or 30 years and we don't want to 
shame Alaska or any of the urban areas anymore about this, we 
want action, we want investments and we want returns in the 
form of stable and sustainable energy source.
    Alaska is a massive state with innumerable natural 
resources and alternative energy options that we should be 
striving hard to develop and utilize. Protecting our way of 
life in the face of developing more responsible energy use and 
consumption should be possible in this day and age.
    We look forward to working with you to continue to press 
this issue and seek solutions to make day to day living 
possible in one of the most unique parts of the world.
    With that, thank you.
    [The prepared statement of Mr. Naneng follows:]

 Prepared Statement of Myron Naneng, President, Association of Village 
                           Council Presidents















    Senator Murkowski. Thank you, Myron. Appreciate your 
leadership on behalf of so many in so many villages.
    [Applause.]
    Senator Murkowski. Matthew Nicolai. Matthew it's always a 
pleasure to be with you. Thank you for all that you do and your 
comments this morning.

     STATEMENT OF MATTHEW NICHOLAI, PRESIDENT/CEO, CALISTA 
                          CORPORATION

    Mr. Nicolai. Thank you, Madam Chair. We appreciate being 
invited to address the Senate Indian Committee on Indian 
Affairs. Welcome to Bethel and I hope that you had a good and 
joyful night and got to visit with a lot of the people here in 
Bethel.
    We want to present our views regarding high fuel prices and 
the effect to our shareholders and also to Calista. I have been 
president of Calista for the past 13 years. I'm a 33 year 
employee of the company.
    Something that we want to share with you that's very 
important for the Federal Government to understand is we have 
regional statistics of the region that the U.S. Senate must 
understand. We have two census bureaus, Bethel and the Wade 
Hampton. The statistics in our region gathered in the year 2000 
and 2002, when we look at the poverty level on the national 
scale and also on the state scale, Bethel Census Bureau has 20 
percent that has the impoverished district in the Bethel 
Census. Wade Hampton is the most impoverished, is the Emmonak 
area, where the average salary per capita in our region is 
$8,717, while the state median income is $22,660. That's 
considered the most impoverished district in the country. And 
the reason we want to share this with you, we've gathered 
information that Mr. Naneng read to you regarding the fuel 
prices in our region, when you consider what was being 
presented by a lot of the shareholders over the rest of the 
summer that we just passed through, the subsistence hunting and 
fishing activities, a lot of the shareholders in our region has 
been curtailed as a result of high fuel prices. We're hearing 
from, village by village, that families could not gather the 
foods that they needed because of high gasoline prices. I made 
multiple trips throughout the region and I hear that in the 
Yukon River and the Kuskokwim River. We're going to see this 
winter a result of high gasoline prices, many families that may 
be without subsistence hunting and the foods that they've 
gathered this summer.
    Removing subsistence will definitely have a major impact 
and this is the reason why Calista, you know, we've always said 
that at AFN and we've always said that to you and we've always 
said that to any candidate, Calista is the only regional 
corporation that spent $4.8 million. We put in Title VIII of 
ANILCA, no one did, we're the region that worked with AVCP 
president, then Carl Jack, and we worked hard to make sure 
Title VIII was protected. Because the effect of subsistence is 
very important to our people. Calista, even though we're a 
profit corporation, it was number 1 agenda, that we protect the 
subsistence economy in our region. That's the reason why the 
high gasoline prices are impacting the people that we serve.
    For Calista, the energy costs that we're seeing this year, 
we're seeing the exploration of our subsurface properties 
curtailed. Each summer we have programs, I want to walk through 
the past 12 years that I've been president, seeing exploration 
programs on our subsurface properties, the highest number of 
employment that we offered one summer was a little over 690 
shareholders those were exploration jobs in NYAC, in Donlin, in 
Goodnews Bay and New Stuyahok, these are the four major 
exploration areas that we have. This summer the junior 
companies that we're used to seeing explore our lands did not 
show up. This summer we only had 135 employees actually work at 
projects that we had and those are mainly Donlin Creek. So 
we're seeing that effect of high diesel cost that the 
exploration companies need for them to look at our properties 
that we have.
    Under ANCSA VII (i), Calista is holder of 6.5 million acres 
of subsurface properties. It is our duty and the director's 
understanding and our vice chair is here, Willie Kasayulie and 
one of our directors, also George Guy and John are here, their 
duty is to make sure that we meet the requirements of VII (i) 
to ensure that we explore our properties are for future value 
and the future value of high diesel cost this year has been 
curtailed for future generations because any time when we're 
not spending money looking at our subsurface properties it 
curtails down into the future that future jobs are at stake. 
Donlin, right now, one major issue for Donlin Creek and 190 
million has been invested Barrick and NovaGold were up to last 
year, where we haven't seen the new numbers for this year, if 
energy was resolved to Donlin it would be a mine today, it 
would have been in operation by 2008. If the mine became a 
project, if Donlin became a project it would employee 500 
people in our region. Right now we can't deliver the project 
because of one major issue, energy. With the recommendations 
that we want to offer to you, especially this committee, has a 
trust responsibility to Alaska Natives and Native Americans, we 
appreciate that you came here to listen to our views and I hope 
that the committee does move forward on the recommendations 
that you heard this morning to the tribes and also to the 
regional corporations.
    Something that's very important, as I read the policies of 
the Federal Government, when I try to understand how the Office 
of Indian Energy addresses Alaska Native organizations, 
something the village corporations have tried in our region to 
apply for funds through that organization, they're not eligible 
because of the language that's in that program. And the reason 
why I say the village corporations in our region, we have 17 
utility companies and I have to speak for them, they're the 
owners of the surface properties, under the agreement of the 
Office of Indian Energy, the TERA, Tribal Energy Resource 
Agreements, do not include village corporations in Alaska. That 
means in my village George Guy runs a utility company, he 
cannot apply for funds for planning purpose that he wants to 
address for wind power or down in (In Native), those four 
communities, cannot get those federal funds because one, 
they're not eligible. So because a surface owner is a village 
corporation, they should be eligible to receive those monies. 
So I do hope that this committee looks at addressing that 
issue.
    I'm one that generally does a lot of research on 
information on energy and something that we want to see in a 
long-term basis that we hope that the State and also the 
Federal Government address on the issue in developing a 
partnership that can address and resolve energy problems to the 
Bush Alaska. This has been done before. Historically, when you 
look at the Appalachian Commission, it developed the Tennessee 
Valley Electric Association that resolved energy to 16 states. 
And that was a partnership of 16 states that basically 
addressed energy and this is the 16 states even smaller than 
Alaska. So you look at Alaska, you have to look at it as a 
multiple state even though we're one state, we're the size of 
those 16 states. So I hope you carry that forward to the Senate 
Affairs, Indian Committee members that you cannot look at 
Alaska as one, you have to look at Alaska as multiple states 
with energy problems that can be resolved.
    One major issue for regional corporations, we hold a lot of 
the subsurface properties that we want to look at alternatives. 
I hear from our neighbors up in NANA, that they want to address 
western coal. Imagine if they'd be able to turn biomass of that 
facility and develop gas out of that that can be used in light 
of Western Alaska. We can't do that today because so many 
barriers that NANA has to go through to develop coal. We try to 
introduce coal into this region, we got shot, saying our people 
are going to die from black lung, you go to Salt Lake City, no 
one's dying from black lung. Right by the airport is a major 
coal facility, it doesn't even drop one single iota of 
pollution. The only pollution that they have is C02, and you 
know how the greenies talk about C02, that we're lighting up 
the world and we're having problems with what you call 
greenhouse effect and it's affecting the Arctic. That's the 
politics that we hear out of the greenhouse issues on 
pollutants that come out of coal. Coal is a major resource in 
Western Alaska owned by a regional corporation that will 
benefit 223 village corporations, 12 regions because of the VII 
(i) agreement if it was developed into a major energy source, 
and I'm just explaining one project that can have a multiple 
impact to the people that we serve.
    So what we're asking you, I hope that you take into 
consideration, and you've heard some recommendations made this 
morning, we would like to see a partnership that you in the US 
Senate could offer to this Governor that we have, and we just 
had an energy conference in Anchorage that Senator Stevens, 
Senator Inouye and Governor Palin listened to the concerns that 
we had in AFN and I was very happy that Ralph Andersen carried 
those forward and those are the same messages that we heard. We 
want to see public private partnership to resolve rural energy.
    Anchorage, I've lived there 33 years, I have the cheapest 
power, guess where I get my power from, rural Alaska. I get it 
there. North Slope Borough, everybody in Anchorage thinks it's 
part of Anchorage, it's not, it's rural Alaska providing power 
to Anchorage and we get the greatest subsidy that we resolve 
from oil tax subsidies that we got this huge money for cheap 
energy for urban communities and guess what urban communities 
do, they don't want to hear problems, and I'm glad Nancy's 
here, they don't want to hear about rural problems. This is the 
reason why I'm stating this. This is something that you, as a 
leader of the committee, can offer a public private partnership 
with this Governor. This Governor appointed a very good person, 
Steve Haggenson to lead energy direction and he's looking for 
alternatives that will resolve problems that we have.
    We've been studied to death.
    When we hired Bob Charles in the back, back there, to lead 
Nuvista Light and Power on behalf of this group, we found $25 
million worth of studies came to our region and not even one 
resolution yet, $25 million of state money and not even one 
resolution. We hired one individual, Frank Bettine, that's the 
father of that Railbelt Energy, he recommended a railbelt to be 
addressed to Fairbanks, we hired him and he found through the 
records what we need to address regionally, that's the reason 
why this body here is working together and we've submitted to 
you 13 recommendations that we have, I'm not going to go 
through those, in the energy plan that we have. This plan is 
still in a draft plan, we gave it to you in rough draft form 
with many deletions in there so you could understand the 
working committee here, we are trying to address the problems 
but we need your help. The committee can be of assistance to us 
in resolving energy problems--resolving energy problems, Madam 
Chair, will spur economic development and create jobs and I do 
hope that you carry forward that to the chair, who I'm very 
happy sent letters to us and said we want to read your 
recommendations and we are going to be moving those forward.
    Thank you, Madam Chair.
    [The prepared statement of Mr. Nicolai follows:]

    Prepared Statement of Matthew Nicholai, President/CEO, Calista 
                              Corporation













    Senator Murkowski. Thank you so much, Matthew.
    [Applause.]
    Senator Murkowski. I Appreciate your leadership. We also 
have with us this morning Gene Peltola. Gene has done wonderful 
work in the area of health care as the President and CEO of the 
Yukon-Kuskokwim Health Corporation, so if you can enlighten us 
on what's happening in the health care world as a result of 
higher energy prices.

   STATEMENT OF GENE PELTOLA, PRESIDENT/CEO, YUKON-KUSKOKWIM 
                       HEALTH CORPORATION

    Mr. Peltola. Okay, good morning, Madam Chair. I'm Gene 
Peltola, for the record, president and CEO of the Yukon-
Kuskokwim Health Corporation. And we thank you for bringing 
this forum out to us here in rural Alaska.
    The Yukon-Health Corporation has been contracting with 
Indian Health Service since before the enactment of the Indian 
Self-Determination Act. Today we provide comprehensive health 
care to 28,000, largely Yup'ik Eskimo people across a roadless 
area larger than the size of Oregon.
    Where the average per capita income is less than 15,000. 
Gas in our hub city of Bethel, as stated earlier, is almost $6 
per gallon. In our villages it's approaching $8 a gallon, the 
same price we pay for milk. When considering the high energy 
food and personnel costs against the IHS appropriation that 
does not allow for mandatory medical inflation costs, providing 
health care for our 58 tribes is a daily and extraordinary 
challenge. For the past three years YKHC has accommodated for 
dramatic energy increases. Regarding utility costs in fiscal 
year 2000 YKHC saw a 21 percent increase or a $1.1 million 
increase over anticipated utility costs. Fiscal years 2007 and 
2008 YKHC utility costs increased on an average of 8 percent or 
half a million dollars. The fiscal year 2009 budget includes an 
anticipated 22 percent increase or another $1.4 million worth 
of utility costs. The total increase in utility costs for the 
last three fiscal years total over $3 million.
    Increases related to fuel have also been dramatic. For 
fiscal year 2009, our freight, patient and corporate travel 
costs will increase over $700,000. YKHC is committed to 
delivering health care at a high level and expanding services 
where they are needed and/or financially feasible. However, 
with relatively flat revenues and substantially increase in 
expenses, the delivery of health care cannot help but be 
affected out here.
    Although YKHC's budget amounts, our corporate totals, we 
should notify you of our increased costs at the village level. 
One of YKHC's main partners, our tribal and city governments in 
our 50 YKHC communities are suffering too. In our member 
villages, either the tribe or city governments own their 
respective health clinics. The governments receive a monthly 
rental fee from YKHC that is used for their rent, fuel, 
janitorial services and general upkeep. This is called an IHS 
Village Built Clinic Lease Program. According to IHS, current 
lease funding covers only 55 percent of operating costs. Many 
tribes and cities are requesting increased rental payments for 
clinics to accommodate expected utility increases. YKHC is 
tentatively expecting 30 percent or $187,000 to subsidize these 
increases.
    For organizations that compact or contract IHS and BIA 
programs an energy solution exists that is already authorized 
by law, the full funding of contract support costs.
    And just to give you a head's up, if Congress were to fully 
fund or negotiated contract support costs over 50 percent of 
those funds nationwide would come back to Alaska. We're so 
advanced over the Lower 48 in assuming IHS and BIA programs.
    Over 20 years ago former Chairman Inouye of this committee 
wrote that the single greatest impediment to the success of 
tribal self-determination was a failure of the Indian Health 
Service to pay contract support costs. I can testify that what 
Chairman Inouye said in 1987 is just as true today.
    In Fiscal Year 2007 YKHC's annual true shortfall exceeded 
$10 million for the very first time. It has gone up 
approximately one million each year as we seek to take on ever 
growing IHS programs in a climate of ever rising costs. This is 
truly a crisis. To give you an idea, that $10 million is true 
costs, it's cost of utilities, it's cost of workman's comp, 
it's cost of personnel benefits, and where do we make up those 
costs, we have to cover those costs from third-party revenues. 
Most people hear about contract support costs and their eyes 
glaze over but these are very real costs. Either the fixed 
costs of our overhead, such as utilities or else the cost of 
providing workman's compensation insurance, as I said, and 
health and retirement benefits to our staff, that's what 
contract support cost, they are fixed and they are real.
    In 1992 and 1993, when we began operating the IHS hospital 
here in Bethel, we suffered a shortfall of over $2.2 million on 
contract support costs. The impact to YKHC and the region and 
the people we served was immediate. Over 40 positions were laid 
off within months after hospital operations began. Subsequent 
rounds of reduction in force and layoffs occurred in 1997, 
2006, 2007. These events have had a very severe impact on the 
quality of health care that YKHC can provide, however, the 
impact is not just measured by the $10 million shortfall. As a 
result of this underpayment YKHC cannot employ as many primary 
care providers or provider teams. The care that those teams 
provide to our patients is typically billed to Medicaid, 
Medicare or third-party private insurance payors. The result is 
that the $10 million in reduced direct care services translates 
into approximately an additional $6 million in lost revenue 
from these sources. So the real loss is at least $16 million to 
our programs, to the people we serve, and the tribal 
governments that we serve. And even more when you consider that 
we direct those lost third-party revenues back into staffing 
additional teams throughout our villages.
    I have four recommendations today.
    First, the committee should consider requesting additional 
funding for energy efficiency and conservation projects for 
aging federal facilities like the Yukon-Kuskokwim Delta 
Regional Hospital. Our hospital is now over 30 years old. And 
we have done the necessary study, the environmental work, the 
engineering work, we have a membrane roof on our hospital. It's 
patched, it's leaking all over again, and we have determined 
that at a cost of $1.2 million we can replace that membrane, we 
can insulate that roof, put some additional insulation in the 
roof and we'd have a cost savings in our heating bills 
immediately of $120,000 a year. But the mere funds that are 
appropriated by Congress to renovate and upgrade federal 
facilities, that type of funding is not available to Alaska. 
Funding for research and deployment of realistic long-term 
energy technologies should also be considered, especially when 
Alaska's potential for wind, hydro, geothermal and tidal 
solutions is tremendous.
    YK, like has been said, is one of the four partners who's 
been working along with Calista and AVCP and our housing 
authority in developing a regional energy plan. Matthew 
referred to the draft version that we made available to you. 
There's a couple action plans in there that I want to speak 
about.
    One is that we've decided to go forward and look at 
creating a fuel purchasing cooperative, made up of not only the 
four of us, of the CDQs, municipalities, our school districts, 
our utilities, our village corporations. Hopefully, we can 
achieve economy of scale and bring the cost of fuel in the YK-
Delta down. Another thing we've been talking about, and I 
relate back to a discussion I had with Senator Stevens in 
Anchorage last winter, we were talking about the ever 
increasing cost of fuel and the cost of utilities in rural 
Alaska, and he made the comment that, Gene, what we need in 
rural Alaska is a refinery. And I thought to myself and for 
some time I gave it a lot of thought and I didn't believe then 
that the volume was out here in rural Alaska, in Western Alaska 
to be able to sustain a refinery. And just recently as the four 
groups were meeting, we're discussing the opportunity that the 
Aleut Corporation has in Adak. Basically all the supportive 
infrastructure for a refinery exists in Adak, along with over 
20 million gallons of storage facilities already in place. They 
have a deep sea port. They have some of the longest runways in 
the state of Alaska. They're geometrically located where they 
can purchase fuel from Indonesia, the Sulkan Islands or Valdez. 
If the Chukchi leases that were just given out ever go into 
production for a small window during the summer, you could 
tanker crude right directly to them, I mean you still have to 
look at the volume to sustain it. They're geographically 
located so they could--fishing vessels in that portion of the 
Aleutian Chain and the Bering Sea don't have to go back up to 
Adak to fuel up, they are just north of the east/west North 
Pacific shipping lanes. And you take a look at it and not 
looking at longitude and latitude, but just looking at a map, 
they're as close or closer to Hawaii and the South Pacific 
Islands than the West Coast of the United States is and that's 
where they're barging their fuel in. And with the military 
requirements at Guam, I think then that you have the volume to 
be able to sustain an operation like that. And if our regional 
corporations from NANA, Bering Straits, Calista, Bristol Bay 
and Aleut could get together, I think a feasibility study 
should be determined whether that's economically feasible.
    Second, the committee should consider directing the General 
Accountability Office to study the actual impact of the 
continuing shortfalls tribes are suffering in their contract 
payments. I am sure that YKHC's experience is not unique. And 
hopefully a GAO report will help energize Congress to do its 
part in remedying the situation. As part of the GAO study some 
examination should be made into IHS' new policy announced only 
two years ago. And that is not to provide any contract support 
costs whatsoever, for any new contract or compact operation 
regardless of circumstance and notwithstanding Congress making 
available up to $5 million for this purpose every year. The 
current situation is bringing to a stop all forward progress in 
tribal self-determination and self-governance nationwide.
    Third, the committee should examine why the IHS Village 
Built Clinic Lease program is currently not eligible for 
contract support costs and why lease funding has remained 
virtually the same since 1989. This is especially disheartening 
given tribal compactors and contractors subsidize the lease 
program with their own health care monies due to the sharply 
increasing energy costs.
    Finally. I would ask the committee to look into the status 
of pending contract support litigation. After 12 years of 
litigation YKHC recently settled its old claims, but this is an 
exception. For other tribes with old and new claims, litigation 
is grinding on in various courts and boards.
    The fairest approach would be for Congress to extent the 
statute of limitations for all tribal contractors to pursue 
their claims over historic IHS underpayment for prior years.
    A more comprehensive approach would be a Legislative fix to 
create a new claim payment mechanism that would permit all 
tribes to receive appropriate compensation through the Judgment 
Fund without draining litigation that takes years to resolve.
    Ultimately, receiving full contract support costs is not 
about money, for tribal organizations like YKHC it means being 
able to systematically address cancer, suicide and other major 
challenges like high energy costs.
    It is the ability to hire a provider to perform portable 
mammographies in our villages to detect breast cancer early in 
Stage 1 when the five year survival rate is over 90 percent 
versus a later stage. Or our ability to hire a counselor to 
deploy to our communities wide behavioral health initiatives in 
order to save a teenager from taking their own life.
    Most importantly, receiving full contract support costs is 
an ability to provide an array of health services to a 
population suffering dramatic health disparities and even pay 
our light bill. In an environment without full contract support 
costs, flat IHS appropriations and dramatically increasing 
energy costs, eventually YKHC, as well as other health 
providers in our state will have to decide on which services to 
cut in order to pay our light bills and fuel bills.
    The funding for full contract support costs, and more 
importantly it's relationship to directly improving American 
Indians and Alaska Native Health's status is a matter entirely 
within Congress' power to address.
    And I'd like to say that full funding of contract support 
costs is one small step for Congress but it's one giant leap in 
addressing the health care of Native Americans nationwide.
    I want to thank this opportunity to thank you for bringing 
this committee to Bethel and giving me the honor of addressing 
you.
    Thank you.
    [Applause.]
    Senator Murkowski. Thank you for your leadership on the 
issue of contract support costs. You've come back to Washington 
to testify on this issue several times and I think it's been 
very enlightening, very helpful for the committee.
    Mr. Peltola. And I won't give up.
    [The prepared statement of Mr. Peltola follows:]

  Prepared Statement of Gene Peltola, President/CEO, Yukon-Kuskokwim 
                           Health Corporation









    Senator Murkowski. Last on the panel here this afternoon is 
Mr. Ron Hoffman. Ron is the CEO of AVCP Housing Authority and 
he's also President of the Alaska Housing Authority, so, 
welcome.

         STATEMENT OF RON HOFFMAN, PRESIDENT/CEO, AVCP 
 REGIONAL HOUSING AUTHORITY; PRESIDENT, ASSOCIATION OF ALASKA 
                      HOUSING AUTHORITIES

    Mr. Hoffman. Thank you, and good morning. For the record my 
name is Ron Hoffman, I am the President and CEO of AVCP 
Regional Housing Authority and of the Statewide Association of 
Alaska Housing Authorities.
    I'd like to welcome each and every one of you to Bethel.
    I wanted to express a special thank you and welcome to you, 
Senator Murkowski. Thank you for holding this hearing on an 
issue that is a crisis for the people of rural Alaska. I hope 
the information you gather can be used to craft legislation 
that provide both immediate relief to desperate rural Indian 
families and long-term solutions to the unbelievable high costs 
of energy in rural Alaska.
    Our Regional Native Housing Authorities were created to 
provide safe, sanitary and affordable housing, in particular, 
to rural Alaska.
    For example, my housing authority serves Bethel and the 
Wade Hampton census district area representative Alaska off the 
road system. We are this committee's people. The Bethel census 
district population is approximately 78 percent Alaska Native; 
Wade Hampton's population's about over 90 percent Alaska 
Native.
    We also have unemployment rate at more than 15 and 23 
percent respectfully. Looking at the numbers, the Native people 
of rural Alaska are living with the highest unemployment at 
poverty rates in the country. Factor in the crisis and you 
begin to have a picture of the critical need for immediate 
relief and a long-term solution.
    Off the road system, in Hooper Bay, with a population 
approaching 2,000, gasoline is at $7.24 per gallon. Heating 
fuel is at $7.37 per gallon. In the village of Kakhonak on Lake 
Iliamna the gas is nearly $9 a gallon, with heating fuel at 
9.25.
    In May the Institute of Social Economic Research at the 
University of Alaska reported that in 2000, an Anchorage family 
spent 5.5 percent of its income on energy, while a family in 
rural Alaska spent 16 percent. By 2008 the Anchorage family was 
spending nine percent of its income on energy, the family in 
rural Alaska had to spend 47 percent of its family income on 
energy. Imagine that. The gap between the two families has more 
than tripled. The rural families is spending one-half of its 
family income on energy. Beyond the direct impact on families, 
energy affects the cost of doing business with increases passed 
on to its residents, air fares, groceries, our electric bills 
are through the roof. These costs are passed on to an Alaska 
Native population that simply cannot support them.
    For the people of rural Alaska to survive two things need 
to happen; unemployment and poverty numbers must be brought 
down through funding of training for current and future jobs.
    Second, we must explore all energy possibilities, including 
development of alternative sources of energy.
    As one example, the Alaska Electrical Cooperative is using 
wind through lower costs and reduced dependency on fuel, 
projects like this should be supported by funding and tax 
credits.
    Other solutions for consideration.
    Expediting a gas pipeline from the North Slope with Alaska 
access to that particular energy source.
    Legislation to allow and require the refining of Alaska oil 
here in Alaska with a product accessible to all Alaskans.
    Other proposals to consider, opening ANWR for exploration 
and drilling.
    Relaxing the excess tax on fuel for rural Alaska.
    Energy and transportation subsidy for rural Alaska.
    I would like to expand on this just briefly. The Housing 
Authority recently, or this spring procured construction 
materials for our housing development, the transportation cost 
was roughly 40 percent of the actual cost.
    And the development of a central bulk fuel area, such as 
Gene related to Adak Naval Base.
    In some places in this country, the high cost of fuel is 
inconvenient, in rural Alaska this winter, our families will 
have to decide between feeding their children or keeping warm.
    This winter hundred dollar barrel oil will begin to take 
not just livelihood but the lives of rural Alaska.
    I ask you to come up with immediate relief and a short-term 
solution that will allow us to get more from our present 
resources while we explore new technologies for safe, clean and 
affordable energy.
    Thank you for the opportunity to testify.
    [Applause.]
    [The prepared statement of Mr. Hoffman follows:]

Prepared Statement of Ron Hoffman, President/CEO, AVCP Regional Housing 
    Authority; President, Association of Alaska Housing Authorities














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    Senator Murkowski. Thank you. I have a whole series of 
questions that intended to ask, unfortunately I'm not going to 
be able to do as many as I would like because it's already 
11:45 and we still have our last panel to hear from. So what I 
intend to do is submit those questions to you and ask that you 
respond to them as part of the record.
    I would like to ask a question, though, and this follows up 
from one of the questions that I asked the first panel in terms 
of conservation. And we recognize that when it comes to our 
housing there are things that we can do, the programs that the 
State has with weatherization, the energy assistance programs 
that are out there, but to be eligible for at least one of the 
state programs, an energy audit is required. Do I understand 
that AVCP is working to train auditors, do we have any auditors 
out here, can we even take advantage of these State funds out 
in the rural areas right now?
    Ron.
    Mr. Hoffman. Please allow me to respond to that.
    Senator Murkowski. Yes.
    Mr. Hoffman. Over the past couple months the Housing 
Authority has been actively supporting and sponsoring training 
for our residents, and we do have certified individuals right 
now that are able to conduct energy audits.
    Senator Murkowski. How many do you have, do you know?
    Mr. Hoffman. It's well over 10.
    Senator Murkowski. Well, the word that I hear in Anchorage 
is, yes, we've got energy auditors, but we don't have enough 
and it is fully a six month wait to get an energy auditor into 
your home and, of course, you've got timelines that are at 
play. So we set up programs with all wonderful intentions and 
then we don't have the individuals that can move through the 
eligibility requirements. So I'm pleased to know that there's 
10. I'm hopeful that they're actually able to get out and to 
respond to the community needs.
    Mr. Hoffman. Yes. We plan to expand that training program 
for, you know, our region, but we are establishing other 
training programs. In fact, the Association of Alaska Housing 
Authorities plan to go ahead and sponsor such a training 
program.
    Senator Murkowski. That would be helpful.
    Mr. Hoffman. The legislative appropriation for the 
weatherization, you know, came forth very quickly and I'd like 
to thank and recognize Senator Hoffman for his sincere efforts 
in expediting this process. Then we were under emergency 
regulations in May, then we finally got the final regulations, 
so that there impacted as to how we do business. And, of 
course, one of the mandates was that we have an energy audit or 
an assessment on a unit prior to utilizing those dollars. But I 
feel confident that we will overcome this and we will, you 
know, renovate and weatherize the homes that are badly needed, 
especially in our region.
    Senator Murkowski. Gene, I wanted to ask you one quick 
question. Back in Washington several months ago, you indicated 
to me that one of your concerns about your increasing costs was 
what you--what YKHC would anticipate spending for medivac's 
because of the cost of fuel to fly the medivacs. What have you 
experienced this summer in terms of your costs due to increased 
fuel for your medivac operation?
    Mr. Peltola. Senator. Our medivac costs of this summer, 
since the advent of fuel being barged out here this spring, has 
gone up significantly. And like you said earlier, we're finding 
that the acuity of the medivacs coming in from the villages to 
our hospital are greater because they can't afford to come in 
when----
    Senator Murkowski. So they delay care.
    Mr. Peltola. Pardon?
    Senator Murkowski. They delay care coming into town.
    Mr. Peltola. Yes. And then we ship a medivac out when 
acuity gets to the point that they need to be medivac'd into 
Bethel or on to Anchorage.
    Senator Murkowski. So not only are you seeing increased 
costs to your budget, but you're seeing patients coming in that 
are probably higher risk than they would have been?
    Mr. Peltola. Yes. And then another step we're working on is 
we anticipate our efforts between Providence Alaska and their 
LifeGuard Program and our AeroMed Program, we've been working 
for a number of months now to merge those two into one 
comprehensive effort, medivac operation, and achieve economy of 
scale and that should take place around November 1st this year.
    Senator Murkowski. Good. Hopefully that will make a 
difference. I want to applaud AVCP and Calista and those that 
are part of the regional plan here for really taking that 
initiative and setting forth proposals. I think as the State 
works through its plan and incorporating the various regional 
plans that have been proposed, that's how we get the best 
operations put together, is when it comes from the ground up. 
You know better out here what works rather than us in 
Washington saying, we think that, you know, the entire state of 
Alaska needs to be powered by X, Y or Z. The solutions coming 
from the ground up are very important so I appreciate your 
leadership on that.
    With that, I'll thank the members of the panel and you can 
look forward to my questions and, again, if you'd like to 
supplement your testimony we welcome that.
    And we will come to the final panel please.
    [Applause.]
    Senator Murkowski. Gentlemen, thank you for coming so far 
to be with the committee here today and to be with the people 
of Bethel and the region. I think you've heard from the 
previous two panels that there is no issue that is more 
paramount in the minds and in the lives of those out in the 
region, whether it's individuals or whether it's from the 
health care, education perspective, energy is it. We welcome 
you today. Appreciate the fact that you have traveled from 
Washington, D.C., to present your testimony. Again, the easy 
thing for this committee to do in a field hearing would have 
been to stay in Anchorage but I don't think that you get the 
full perspective by staying in Anchorage, so I think the extra 
flight out here allows you an opportunity to see another part 
of our incredible state and to perhaps gain a deep appreciation 
of what we face here.
    We will start here this morning with Mr. Steve Morello, who 
is director of the Indian Energy Policy and Programs with the 
Department of Energy. Mr. Morello, we've had an opportunity to 
have many conversations before, appreciate your leadership and 
if you can provide your testimony to the committee.
    Thank you.

  STATEMENT OF STEVEN J. MORELLO, DIRECTOR, OFFICE OF INDIAN 
        ENERGY POLICY AND PROGRAMS, DEPARTMENT OF ENERGY

    Mr. Morello. Thank you, Madam Vice Chairman. My name is 
Steven J. Morello. I am the Deputy Assistant Secretary for 
Intergovernmental and External Affairs at the Department of 
Energy and I'm also the director of the Office of Indian Energy 
Policy and Programs. I'm a proud citizen of the Bawating 
Anishinabeg people, the first people of the rapids, federally 
recognized as the Sault Ste Marie Tribe of Chippewa Indians. 
I'm delighted to be here to have this opportunity to discuss 
with you energy solutions for Alaska Native communities.
    And before I turn to my prepared remarks, I want to take an 
opportunity to thank Dr. Robert Middleton, who has been my 
partner during the past year that I have been in office, the 
Department of Interior has worked very, very closely with the 
Department of Energy and we have tried to marshal our resources 
so that together we're more powerful than if we were separated 
for the benefit of Indian country and for the Alaska Native 
people.
    Since Secretary Bodman named me to be the first Director of 
the Office of Indian Energy Policy and Programs just a year ago 
in September of 2007, I have made it a personal priority to 
visit Indian country and Alaska in order to assess the serious 
energy challenges facing tribes and Alaskan Natives, while also 
exploring the tremendous opportunities for the development of 
renewable energy resources. This trip marks my fourth visit to 
Alaska in my capacity as director and during each of these 
trips I have had the privilege of meeting Alaska Native people 
and understanding their issues. Clearly, the most pressing 
issue facing the Interior villages is the high cost of energy. 
My real concern is that if we do not find a way to provide 
affordable energy to these villages, we could face, as soon as 
this winter, an out-migration of huge scale.
    The best hope for long-term relief is to implement a 
portfolio approach using various renewable technologies, 
including biomass, geothermal, solar, wind and hydro. In 
tandem, a robust regional transmission grid could allow 
Alaskans to be energy independent and lead to a net export of 
some excess electricity. Likely short-term solutions are the 
combination of conservation and energy efficiency measures with 
small localized biomass generators located in the Interior 
villages to replace the diesel powered generators currently 
being used there. Additionally, some villages may well generate 
electricity from hydro, solar or wind as well.
    The role of private investment in the success of these 
energy solutions is important because if the power generating 
projects have customers much of the power generating capacity 
can be financed privately. Since my time as director, I have 
worked closely to try to bridge the gap between Native people 
seeking out sources of investment funding and private sources 
who recognize that assisting Indian Country and Native Alaska 
is just good business.
    The Department of Energy is committed to being a good 
partner in search for a solution to the energy shortfalls in 
the rural Alaska Native villages. For example, the Tribal 
Energy Program within the Office of Energy Efficiency and 
Renewable Energy is currently soliciting requests for 
information to identify ways to accelerate renewable energy 
development in the Alaska Native villages.
    I'd like now to provide more specific details regarding the 
types of renewable energy projects that could help solve the 
energy crisis in Interior Alaska.
    I'll begin with Biomass.
    Interior Alaska is well situated for using biomass 
resources because of its tremendous supply of wood waste and 
fish oil processing at the villages. The development of a model 
project to demonstrate the success of biomass in Alaska is 
essential. Furthermore, Alaskan villages could employ local 
people to participate in the entire production chain from the 
cultivation and harvest of the biomass material to the 
building, operation and maintenance of the generation facility.
    I'm pleased to report that just this month the Department 
of Energy announced plans to make available up to $2.2 million 
for two renewable energy project awards selected for 
negotiation, pending further collection of data and 
environmental review, based on this competitive solicitation. 
One of which is aimed at advancing biomass in an Alaskan 
village and serving as the model project demonstrating the 
viability of this technology in rural Alaska. The Council of 
Athabascan Tribal Governments, under the Fort Yukon Wood Energy 
Project, plans to use wood fuel from a region rich in forest 
resources to displace diesel fuel being used for heating. The 
project plans to displace up to 30,000 gallons of fuel oil 
annually, typically flown or barged into this community by 
using biomass to heat the Ft. Yukon school and gym.
    The prospect of stand-alone biomass units are another area 
of potential for Alaska. Portable generating units that rely on 
biomass may be ideally situated for power production in the 
remote villages of Alaska. I'm hopeful that future progress 
will make this a viable option for Alaska villages in the 
short-term.
    Geothermal.
    Geothermal's another renewable energy resource that is 
found in many Native American lands and Alaskan lands as well. 
According to the geothermal resource map of Alaska, there's a 
geothermal resource belt located throughout the NANA region.
    The Department of Energy is funding a feasibility study 
that is currently underway with the NANA Corporation in 
attempting to ascertain the geothermal power generation 
potential for remote off-road village scale application.
    Further, the Department of Energy's Geothermal Program has 
provided $565,000 and $1.2 million respectively for a 
geothermal resource assessment and technology demonstration of 
low temperature geothermal power plant in Alaska at Chena Hot 
Springs outside of Fairbanks.
    Solar.
    The promise of solar power is another important 
consideration for Alaskan Natives. The Department of Energy has 
funded several feasibility studies on the potential of solar 
power for off grid use in the remote villages. And I want to 
also commend the efforts of the Cold Climate Study Group at the 
University of Alaska-Fairbanks, because they are studying--
leading the way in Alaska in studying the various applications 
of solar throughout the state.
    Wind.
    The State of Alaska has wind resources that could allow 
cost competitive wind energy production. The Department has 
supported five wind feasibility projects including the Sealaska 
Native Corporation, among others, here in the state. And I 
recently met with representatives of the American Wind Power 
Association who expressed that many of their commercial members 
are seriously interested in pursuing wind projects here in 
Indian Country and in Alaska. My role will be to continue to 
forge these partnerships between commercial entities and tribal 
constituencies.
    Transmission issues.
    An essential part of a long-term solution to the problem of 
power in Alaska's Interior villages and elsewhere for that 
matter is a regional power grid. I have become aware of an 
important study by the Southeast Conference to address the 
concept of building a network of power transmission lines 
connecting most of the communities in the region. This 
Southeast Alaska Inter-Tie study includes the delivery of hydro 
generated electricity to several of the Alaska Native villages 
in the region. The Department of Energy officials from the 
Office of Energy Delivery and Energy Reliability provided 
technical assistance to the researchers, and we believe this 
report could provide important data regarding transmission 
requirements in Alaska and we look forward to reviewing the 
findings.
    I also want to bring to the committee's attention to what's 
being to other states for leading the country with regard to 
renewable energy as a potential road map for what might be done 
here in Alaska.
    California's Renewable Energy Transmission Initiative 
(RETI) is a statewide program to help identify the transmission 
projects needed to accommodate renewable energy goals, support 
the future energy policy and facilitate transmission corridor 
designation, siting and permitting. The RETI will assess all 
competitive renewable energy zones that can provide significant 
electricity to California's consumers by the year 2020, and 
will identify those zones that can be developed in the most 
cost effectively and environmentally benign manner.
    In Texas, the Competitive Renewable Energy Zones (CREZ) are 
being designated in the most viable areas of the state. An 
electric transmission infrastructure will be constructed to 
move renewable energy from those zones to markets where people 
use the energy the most. The state's transmission operator is 
charged with collecting wind data and nominating a number of 
CREZ's based on the transmission cost calculation for each 
CREZ. In other words, they are putting the transmission where 
the renewable energy is and not expecting that you can't build 
renewable energy in a certain place because there is no 
transmission.
    The Department of Energy has long recognized the renewable 
energy production potential on American Indian and Alaska 
Native land. We look forward to continued successful 
relationships with tribal governments as we work together to 
meet the growing demand for affordable, clean and reliable 
energy, especially in the midst of the particular crisis of 
energy costs here in Alaska.
    This concludes my statement, and I would be pleased to 
answer any questions the committee may have.
    [The prepared statement of Mr. Morello follows:]

  Prepared Statement of Steven J. Morello, Director, Office of Indian 
            Energy Policy and Programs, Department of Energy
    Vice Chairman Murkowski, I am Steven J. Morello, Deputy Assistant 
Secretary for Intergovernmental and External Affairs, Director of the 
Department of Energy's Office of Indian Energy Policy and Programs, and 
a proud citizen of the Sault Ste Marie Tribe of Chippewa Indians. I 
would like to thank you for the opportunity to discuss energy solutions 
for Alaskan Natives.
Introduction
    Since Secretary Bodman named me to be the first Director of the 
Office of Indian Energy Policy and Programs in September 2007, I have 
made it a personal priority to visit Indian Country and Alaska in order 
to assess the serious energy challenges facing Tribes and Alaskan 
Natives while also exploring the tremendous opportunities for the 
development of renewable energy resources there. This trip marks my 4th 
visit to Alaska in my capacity as Director. During each of these trips 
I have had the privilege of meeting Alaskan Native people and 
understanding their issues. Clearly the most pressing issue facing the 
interior villages is the high cost of energy needed to heat and light 
their homes and workplaces. My real concern is that if we do not find a 
way to provide affordable energy in these villages we could face, as 
soon as this winter, an out migration of huge scale.
    The best hope for a long-term relief is to implement a portfolio 
approach using various renewable technologies including biomass, 
geothermal, solar and wind. In tandem, a robust, regional transmission 
grid could allow Alaskans to be energy independent and lead to a net 
export of some excess electricity. Likely short term solutions are the 
combination of conservation and energy efficiency measures with small 
localized biomass generators located in the interior villages to 
replace the diesel power generators currently being used almost 
exclusively. Additionally, some villages may well generate electricity 
from hydro, solar or wind sources as well.
    The role of private investment in the success of these energy 
solutions is important because if the power generating projects have 
customers much of the power generating capacity can be financed 
privately. Since my time as Director, I have worked closely to try to 
bridge the gap between native people seeking out sources of investment 
funding, and private sources who recognize that assisting Indian 
Country and Native Alaska is just good business.
    The Department of Energy is committed to being a good partner in 
searching for a solution to the energy shortfalls in rural Alaskan 
Native villages. The Tribal Energy Program within the Office of Energy 
Efficiency and Renewable Energy is currently soliciting information to 
identify ways to accelerate renewable energy development in Alaskan 
Native villages. The deadline for this Request for Information is 
September 19, 2008.
    I'd now like to provide more specific details regarding the types 
of renewable energy projects that could help solve the energy crisis in 
interior Alaska.
Biomass
    Interior Alaska is well-situated for using indigenous biomass 
resources because of its tremendous supply of wood, wood waste, and 
fish oil processing at the villages. The development of a model project 
to demonstrate the success of biomass in Alaska is essential. 
Furthermore, Alaskan villages could employ local people to participate 
in the entire production chain from the cultivation and harvest of the 
biomass material to the building, operation, and maintenance of the 
generation facility.
    I'm pleased to report that just this month, the Department of 
Energy announced plans to make available up to $2.2 million for two 
renewable energy project awards selected for negotiation, pending 
further data collection and environmental review, based on a 
competitive solicitation, one of which is aimed at advancing biomass in 
an Alaskan village and serving as the model project demonstrating the 
viability of the technology in rural Alaska. The Council of Athabascan 
Tribal Governments (CATG), a consortium of ten remote villages along 
Alaska's Yukon River, under their Fort Yukon Wood Energy Project plans 
to use wood fuel from a region rich in forest resources to displace 
diesel fuel used for heating. The project plans to displace 30,000 
gallons of fuel oil annually, typically flown or barged in to this 
community, by using biomass to heat the Fort Yukon School and gym. The 
award will be cost-shared, with the Council of Athabascan Tribal 
Governments providing a proposed $1.1 million and DOE providing up to 
$1.0 million.
    The prospect of stand-alone biomass units are another area of 
potential for Alaska. I am aware of on-going efforts in the private 
sector to pilot the use of wood chips to produce biomass off the grid. 
Portable generating units that rely on biomass unit may be ideally 
situated for power production in the remote villages of Alaska. I'm 
hopeful that future progress will make this a viable option for Alaskan 
villages in the short term.
Geothermal
    Geothermal is another renewable energy option on many Native 
American lands. According to the geothermal resource map of Alaska, 
there is a geothermal resource belt located in the Northwest Alaska 
Native Association (NANA) region. The communities of Deering, Buckland, 
Kotzebue, Shungnak, Ambler and Kobuk may have access to this resource. 
Local knowledge of geothermal pools in the vicinity of Deering, 
Buckland and Shungnak, coupled with exploratory wells in Kotzebue 
documenting hydrothermal resources at 160 degrees Fahrenheit further 
indicate that there is geothermal power generation potential in the 
NANA region.
    As a result of Department of Energy funding for a feasibility study 
that is currently underway, the NANA Regional Corporation (NRC) is 
attempting to ascertain the geothermal power generation potential for a 
remote, off-road, village-scale application.
    Further, the Department of Energy's Geothermal Program has provided 
$563,000 and $1.2 million respectively (53 percent of the total cost) 
for a geothermal resource assessment and technology demonstration of a 
low-temperature geothermal power plant in Alaska at Chena Hot Springs 
Resort outside of Fairbanks. The 400kW geothermal power plant, designed 
and built by United Technologies Corporation, was brought online in 
July 2006 and is pushing the envelope for low-temperature power 
generation. Again, this and other projects like it will act as models 
for the deployment of renewable energy heat and/or power systems 
throughout the State.
Solar
    The promise of solar power is another important consideration for 
Native Alaskans. The National Renewable Energy Laboratory estimates 
that there is potential from ten to fourteen kWh/m\2\/day of solar use 
during the summer months in portions of northwestern and southern 
Alaska.
    DOE has funded several feasibility studies on the potential of 
solar power for off-grid power use in remote villages. One such study 
addresses the villages of Venetie and Arctic, located above the Arctic 
Circle in northeast Alaska. These villages studied the feasibility of 
powering the villages using solar energy during the season of the 
midnight sun. The solar electric photovoltaic systems currently 
installed are replacing diesel generator power during the summertime, 
and proving solar can be a viable option in rural Alaska.
Wind
    The State of Alaska has wind resources that could allow cost 
competitive wind energy production, especially along its coasts and 
western regions, many of which exist in rural Alaskan tribal 
communities. The National Renewable Energy Lab estimates that at least 
30 communities have wind energy production potential. The Department 
has supported five wind feasibility-related projects including the 
Sealaska Native Corporation, the Yukon-Kuskokwim Health Corporation, 
the Bristol Bay Native Corporation, the Kenaitze Indian Tribe, and the 
Aleutian Pribilof Islands Association.
    I recently met with representatives of the American Wind Power 
Association who expressed that many of their commercial members are 
seriously interested in pursuing wind projects in Indian country. My 
role will be to continue to forge partnerships between commercial 
entities and tribal constituencies.
    These projects are just a few examples of renewable energy options. 
Please see the attachment, Table 1, which lists all Alaskan Native 
renewable energy projects funded through DOE's Tribal Energy Program.
Transmission Issues
    An essential part of a long term solution to the power problem in 
Alaska's interior villages, and elsewhere for that matter, is a 
regional power grid.
    I have become aware of an important study by the Southeast 
Conference to address the concept of building a network of power 
transmission lines connecting most of the communities in the region. 
This Southeast Alaska Intertie Study includes the delivery of hydro-
generated electricity to several of the Alaskan Native Villages in the 
region. DOE officials from the Office of Electricity Delivery and 
Energy Reliability provided technical assistance to the researchers. We 
believe this report could provide important data regarding transmission 
requirements in Alaska, and look forward to reviewing the findings.
    California's Renewable Energy Transmission Initiative (RETI) is a 
statewide program to help identify the transmission projects needed to 
accommodate renewable energy goals, support future energy policy, and 
facilitate transmission corridor designation, siting, and permitting. 
RETI will assess all competitive renewable energy zones that can 
provide significant electricity to California consumers by the year 
2020, and will identify those zones that can be developed in the most 
cost effective and environmentally benign manner.
    In Texas, Competitive Renewable Energy Zones (CREZ) are being 
designated in the most viable areas in the state. An electric 
transmission infrastructure will be constructed to move renewable 
energy from those zones to markets where people use the most energy. 
The state's transmission operator is charged with collecting wind data 
and nominating a number of CREZs based on transmission cost 
calculations for each CREZ.
    EPAct 2005 and The Energy Security and Independence Act (EISA) of 
2007 contain initiatives, to be implemented by DOE's Office of 
Electricity Delivery and Energy Reliability, to bolster transmission 
development and modernization. EPAct 2005 contains several 
transmission-related initiatives, one of which required the Department 
to designate National Interest Electric Transmission Corridors, which 
will help to put transmission development on an equal footing with 
other alternatives to relieving electric transmission congestion by 
giving the Federal Energy Regulatory Commission (FERC) back-stop siting 
authority. Title 13 of EISA has provisions furthering the development 
of a Smart Grid as well as Energy Storage technologies, helping to 
foster the type of modernization our existing transmission will need to 
keep pace with rapidly growing energy demand and a changing fuel supply 
mix.
    EPAct 2005 also required the Department to work with other federal 
Agencies to designate energy transport corridors. The Office of 
Electricity Delivery and Energy Reliability recently begun scoping for 
the designation of energy transport corridors in the Eastern States, 
Alaska, and Hawaii. A Notice of Intent to conduct a Programmatic 
Environmental Impact Statement regarding corridor designations in these 
remaining 39 States will soon be published by the Agencies.
    Also, as the challenges to continued electric reliability are not 
only technical, but also structural, DOE is also working to harmonize 
the multitude of State and Federal regulatory rules such that they 
complement, rather than conflict with each other. Today, a key 
challenge to timely development of the appropriate network of wires and 
other facilities required to reliably deliver new electricity to 
American consumers is the rigorous and lengthy State and Federal 
authorization requirements. Hopefully, addressing these regulatory 
rules will provide us with solutions to apply in Alaska.
Conclusion
    The Department of Energy has long recognized the renewable energy 
production potential on American Indian and Alaskan Natives land. We 
look forward to continued successful relationships with tribal 
governments as we work together to meet the growing demand for 
affordable, clean and reliable energy, especially in the midst of the 
particular crisis of energy costs in Alaska. This concludes my prepared 
statement and I would be pleased to answer any questions the Committee 
may have.



    Senator Murkowski. Thank you, Mr. Morello, appreciate your 
traveling all the way.
    And now the last individual to speak before us this 
afternoon, Mr. Bob Middleton, who's the director of Indian 
Energy and Economic Development at the Department of the 
Interior. Welcome Mr. Middleton.

        STATEMENT OF DR. ROBERT W. MIDDLETON, DIRECTOR, 
OFFICE OF INDIAN ENERGY AND ECONOMIC DEVELOPMENT, DEPARTMENT OF 
                          THE INTERIOR

    Mr. Middleton. Thank you, Madam Chair. And thank you so 
much for inviting the Department of Interior to this important 
field hearing.
    I'm going to keep my remarks very short. We have the 
written statement that we put forward. I know that we're under 
a little bit of time constraint, so I just want to mention a 
few things.
    I've been fortunate enough as a career Department of 
Interior employee to travel to Alaska quite a bit, probably 
over 20 times during my career and I've seen energy issues in 
Alaska go from being an inconvenience to a concern, and then 
most recently from being a concern to being a crisis. And it's 
not a crisis of dollars and cents so much as a crisis of social 
and cultural issues. When we see the out-migration from 
villages to more urban areas, we see a destruction of the 
social fabric in many areas. And I believe that this is 
unacceptable in 21st Century America.
    I have several programs that we manage at the Department of 
the Interior that I think could be of benefit and provide some 
solutions. But as Mr. Morello pointed out, we've been working 
very closely in partnership since he took office because I 
believe that we do need these partnerships, and it needs to be 
more than the Department of Interior and the Department of 
Energy. We need to include USDA, we need to include Department 
of Commerce, Small Business Administration, as well as the 
corporations, the State, Congress and the Native villages 
themselves. But I think that a partnership that comes together 
to look at the various programs that we all could bring to bear 
would be able to allow us to find solutions to the crisis that 
we're now facing.
    Three programs that I'd like to point out that are in my 
office that I think could come to bear and provide some of 
those solutions are a Work Force Training and Development 
Program. Most of the Alaska Native villages participate in the 
Public Law 102-477 program, which allows the participants to 
commingle federal dollars that come from the Department of 
Commerce, HHS as well as the Department of Interior to provide 
work force training, and up to 25 percent of those funds can, 
in fact, be used for economic development activities.
    As we face solutions in Interior Alaska on the energy 
issues, I would really like to see my program being used in 
such a way that we train folks, in fact, address the energy 
issues that are facing the remote areas, providing the training 
needed to be able to either build, manage or operate remote 
energy systems. I think this is one solution. It also will keep 
the dollar cycling in the villages as opposed to hiring 
somebody from the outside to come in to either repair or manage 
these systems.
    We have the Guaranteed Loan Program in my office. It 
provides an opportunity, where we can, to be able to use the 
Guaranteed Loan Program to provide the capital investment for 
developing renewable energy resources. We think there are 
opportunities for us to be innovative in this so that we can, 
in fact, look at the savings that may come from putting in a 
remote--a renewable energy system and use that to service loans 
that would be able to put these facilities in place.
    We're currently working with the city of Nome, looking at 
the wind energy project they have there and we're also working 
with the city of Hoonah, or the village of Hoonah to look at 
the Inter-Tie program. I was just down there last month talking 
with them about that and we're trying to find innovative ways 
to use that.
    And then, of course, I have an Energy and Minerals 
Development Program. And we have several projects that are 
going on in Alaska looking at geothermal resources, looking at 
wind resources to try and find the resources that could be put 
in place that will allow us to do some of this renewable energy 
development to defray some of the costs.
    Economic development for us means not only finding ways to 
find jobs and businesses to create economies but also cost 
avoidance and this is a very important issue.
    With that, I'd like to close my remarks. I thank you again 
for the opportunity and I'm willing to take some questions to 
see if we could find additional solutions.
    [The prepared statement of Dr. Middleton follows:]

  Prepared Statement of Dr. Robert W. Middleton, Director, Office of 
   Indian Energy and Economic Development, Department of the Interior



















    Senator Murkowski. Well, thank you. I appreciate your 
involvement in not only the energy issues, but from the 
perspective of the Interior and your focus on some of our 
challenges that we face here in the state.
    Let me ask both of you, in terms of the technical 
assistance that might be made available to areas such as the 
Bethel region here, you had an opportunity to hear the comments 
from the other panelists. We've got programs within the state, 
we heard from the Alaska Energy Authority in terms of what may 
be available there, the fact that the State has just recently 
established a renewable energy fund, so we're putting together 
the pieces, where it seems like we could use a little more help 
to facilitate is how we bring this all together. Do you have 
within the respective departments, Energy and Interior, 
programs or opportunities that could be made available to 
provide for the technical assistance? Let's say we get beyond 
identifying where the resource is, you've spoken of some of the 
geothermal projects that you're working out on the Aleutian 
chain, what can you offer in terms of ideas and concepts from 
the federal perspective that we could dovetail more closely 
with what is available at the State, for both of you?
    Mr. Middleton. Both of our programs can provide technical 
assistance. We have geoscientists that can provide some of the 
same skills necessary that the Department of Energy could bring 
to bear, but we also have other programs that, I think, are 
greatly in need.
    One of the technical assistance aspects that was raised 
today was the need for grant writing. And we actually have a 
number of programs we started in my office to look at bringing 
in academia to help tribes and we've been taking advantage of 
it mostly in the Lower 48 but we've formed business 
partnerships with many of the leading business schools across 
the United States, where we provide some funding to a tribe to, 
in fact, hire a top notch graduate student and their faculty 
advisors to come in and develop economic models, to look at 
business plans, to develop the financial instruments that 
tribes need to take to the capital investment market, and it's 
worked very well. We've had close to eight or nine projects 
that we've moved forward over the last couple of years that 
have shown some great results. As a matter of fact the model is 
so good we're moving that to the engineering schools and we're 
going to be working with academic engineering schools to be 
able to provide the tribes with that skill that they need to 
look at for civil engineers for community planning or 
electrical engineers for utility work and many of the tribes 
are very interested in this opportunity.
    But we also have the opportunity to, in fact, provide the 
wherewithal for tribes or Native Alaska villages to bring in 
the experience they need to start looking and applying for 
grants.
    Senator Murkowski. Do you get many requests from the tribes 
in Alaska for assistance?
    Mr. Middleton. We have not to this point but----
    Senator Murkowski. Why do you assume that is?
    Mr. Middleton. I think it's simply that they're unaware of 
the program right now. My office really was only put into 
effect in 2005 and so we're still expanding and we're still 
getting the word out the capabilities our programs can bring. I 
have had a chance to talk to a number of folks in Alaska over 
the last couple of years and we're getting an increase in 
interest and we're finding ways to make our programs better 
known.
    Senator Murkowski. Are you planning on attending the AFN 
Convention this year?
    Mr. Middleton. Yes. I was there last year and I plan on 
getting up there, unfortunately there is a conflict with NCAI 
also this year.
    Senator Murkowski. I'm just thinking out loud here that it 
would be a good opportunity to spread the word in terms of the 
availability of these grant opportunities, these training 
programs because I think this is an area where we do recognize 
there's a gap there and we're not quite able to figure out how 
we get from where we are over here to access whether it's those 
federal grant monies, so just making that more readily known, I 
think, it would be helpful and I would encourage you to do 
that.
    I'm assuming that you heard the comment that Matthew 
Nicolai made in stating the concern that village corporations 
can't access certain energy grants. Can either one of you speak 
to that issue and tell me what it is that we need to do to make 
sure that there is the ability to access.
    Mr. Middleton. I think he was specifically referring to 
Title V of the Energy Bill 2005, which is part of my programs, 
the Tribal Energy Resource Agreements that can be developed. 
And unfortunately the legislation specifically excluded Alaska 
villages and corporations from the activities under that 
provision of the bill. I'm not exactly sure why, I wasn't 
working on that at the beginning when the legislation started. 
But I think that early in the 2000s when the legislation was 
being developed and starting to be incorporated into the 
previous energy bill that people were focusing in on more of 
fossil fuels, oil, gas and coal, and they really weren't 
thinking in terms of renewable energy resources, which I 
believe the--if included in Title V would be available to 
Alaska Native villages, but unfortunately as the legislation 
moved through the process, they were excluded.
    Senator Murkowski. That was in the 2005 Energy Act. In the 
most recent energy independence, is there anything that we 
included in that that would provide for greater access?
    Mr. Middleton. No. But beyond being specific to Title V of 
the Energy Bill of 2005, I mean there are opportunities for the 
Alaska villages and corporations to take advantage of some of 
our other programs that would deal with energy issues.
    Senator Murkowski. Well, and, of course, part of that 
problem, though, is providing the funding----
    Mr. Middleton. Yes.
    Senator Murkowski.--so that the Native corporations could 
avail themselves of that----
    Mr. Middleton. Yes, sure.
    Senator Murkowski.--and that's something that we would 
certainly like to work with you on is to ensure that we don't 
just put the authorizing language into play but then have 
nothing to show for it as a consequence of that.
    Mr. Middleton. Yes.
    Senator Murkowski. I think in order for these programs to 
have success, we've got to put our money where we've said there 
was a priority there.
    Mr. Morello, can you speak to what might be available 
through the Department of Energy that could be made available, 
whether it's technical assistance, grant writing assistance, is 
it pretty much in line with what Mr. Middleton has stated here?
    Mr. Morello. Well, one of the--or four or five of the crown 
jewels of the Energy Department are technology labs, our Los 
Alamos Lab, our Sandia Lab, our Idaho National Lab, NREL lab 
that we have in Golden, Colorado, each of these labs are hot 
houses of scientific research in various aspects of energy also 
including renewable energy. And while these labs don't offer 
grants, what they do offer is, in their contracts with the 
Department, is the opportunity for tribes and Alaska Native 
villages and other organizations to approach them with 
technical problems. They will seek to provide solutions to 
these technical problems without charge. And we have a tribal 
liaison at each of the labs and I'd be happy to assist anybody 
that has a technical problem that wants to go into the lab for 
assistance. But a perfect example of this is the Desert Rock 
Project, the coal to electric project that the Navajo Nation 
just had permitted by the EPA. One of the outstanding issues 
with that permit was how to sequester carbon, and we have is a 
lab that is studying that very diligently and is working with 
that tribe on carbon sequestration techniques. The same kind of 
issue comes up when you want to do coal to liquid, which is a 
very viable option here in Alaska, which has recently been 
announced as a project that the Crow Nation is going to 
undertake in Montana. There's a concern that in the coal to 
liquid process there may be some carbon released so we're 
looking at ways to capture that carbon and sequester it in the 
ground.
    Those are technical advisory services which our labs can 
provide to Indian Country and to Native Alaska and which we're 
delighted to do.
    Senator Murkowski. So if you wanted to provide for some 
hydrokinetic energy project in a river, tap the currents there 
but the concern is we don't want to interfere with the fish in 
the river, obviously a huge subsistence resource here----
    Mr. Morello. Sure.
    Senator Murkowski.--you're not going to trade your energy 
for your food source.
    Mr. Morello. Right.
    Senator Murkowski. Are you saying that we could tap the 
brains there at Sandia and Los Alamos and say, help us figure 
out a way that we can have the energy resource without 
impacting the fishery resource?
    Mr. Morello. Yes. If there is a technical question with 
regard to how to do that project, we'll find an expert 
somewhere in our labs and put them to work on it to assist 
the----
    Senator Murkowski. All right. We'll work with you because 
we need to figure out a way to get there without impacting the 
fisheries resource there.
    I think the concern that I have heard from Alaskans is 
we've got the resource back in Washington, D.C., through 
Energy, through Interior but we don't see how it translates out 
here in Alaska, we don't see how it translates out into rural 
Alaska. You've given some examples of where you are working 
with us on various projects, of course, we know the geothermal 
up in Chena Hot Springs, but, again, the issue is, well, you've 
got $563,000-$565,000 here, you've got a million dollars there, 
but as you can see the need here is enormous and the 
initiatives that we will have to undertake in order to allow 
for a level of energy security in this, in all parts of the 
state, I think, are going to be challenging, so we need to work 
with you to make sure that the funding is there for the good 
programs that we have put in place. We've been very frustrated 
that the Indian Energy Programs as authorized under the Energy 
Act in 2005 just, we haven't seen that momentum, and it's not 
just here in Alaska, it's all over Indian Country. And I think 
that is a reality that we should not have accepted. And I think 
we're now seeing, because of the high energy prices, a push on 
a lifestyle, a subsistence lifestyle, a culture that has been 
part of this land from time immemorial, and we kind of reach a 
tipping point, if you will, and I think we're seeing out here 
in many parts of Alaska that you will have that destruction of 
a culture brought about by energy that is not accessible unless 
we all act, and we is everyone in this room. It's those at the 
federal level, it's those at the State level, at the local and 
the tribal and the personal, the individual in their home, 
their families.
    I will tell you I'm very concerned with where we are as a 
nation right now in terms of our energy insecurity. We've got 
challenges, we're going to be working on those when we get back 
to Washington, D.C., but from a state perspective I'm very 
concerned about the people that I represent and how many of 
those people--how many of them and their families are going to 
make it through the winter. And I know they're going to be 
calling me, I know they're going to be calling Bob and Nancy 
and Lyman and our new representative here, and they're going to 
be seeking quick and easy answers and we simply have quick and 
easy answers.
    We need to be working with you for these longer term 
solutions. And they're difficult and they're often very, very 
costly. But the consequence, I think, of inaction is not 
acceptable. The answer is not for the people in this region to 
move to town, and we should not have situations in place where 
people are forced to leave their home land, leave the land that 
they grew up on and their grandfathers and their great-
grandfathers grew up on because they simply can no longer 
afford to live here and because their subsistence lifestyle is 
no longer sustainable. So we've got a lot of work to do.
    [Applause.]
    Senator Murkowski. I will work with all of you. We will 
work with all of you.
    I want to thank all of the witnesses that have joined with 
us this morning. Many of you have come from quite a ways away 
but it was, again, very significant to be here in Bethel.
    I want to thank the University of Alaska, the Kuskokwim 
campus, I want to thank AVCP, the Native leadership here in the 
YK-Delta. I also want to thank Senator Dorgan, the Chairman of 
this Committee, Senator Dorgan has been a wonderful Chairman to 
work with on the Indian Affairs Committee. He has some 
challenges in his home state of North Dakota as well and we 
have an opportunity to talk about those challenges. I keep 
telling him that one of these days I'm going to go visit some 
of the reservations in North Dakota and I'd like to be able to 
bring him here and introduce him to some of you fine people.
    Again, we do invite any written comments and testimony that 
people would care to submit.
    I apologize that our forum doesn't allow for additional 
oral testimony but all of the comments that you have heard 
today, as well as any supplements that they might be willing to 
submit, will be part of the official record. The hearing record 
will be kept open until, as I said, Friday, September 12th. And 
your comments will be printed in the official record, the 
government printing office will print this up sometime in the 
next couple months, copies will be made available free of 
charge, all you need to do is contact our office, we'll make 
sure that you receive that. Your comments can be emailed to 
[email protected], and, then, again, if you would 
prefer to submit comments by mail we will give you an address 
to send them in.
    I do hope that from this hearing this morning, we have 
spurred people's creative juices. We've caused you to think 
about, not only the problems, but what the potential solutions 
may be. I firmly believe that with all of the challenges that 
we face in this state brought about by Mother Nature and our 
beautiful geography, and all that it has to offer, our problems 
are all solvable, that we have more options and certainly more 
options when it comes to energy sources than any other state in 
the union, and it's just up to us to figure out how we use our 
creative juices to tap into them. And we haven't had to over 
these past years because we've been able to just--families have 
been able to get by, now we're at that point where it's much 
more difficult and we need to be more creative and we need to 
be more collaborative. But I fully believe that even with these 
very large challenges that face us, we can figure out the path 
forward to sustainable communities brought about because we 
have sustainable renewable affordable energy. So that's what 
we're going to be working for.
    I have a huge action list after my 24 hours in Bethel and I 
thank you for what you have given me, and I thank you for what 
you have given to the Committee by sharing the record today.
    And, with that, we will adjourn the hearing and thank you 
for your participation.
    [Whereupon, the Committee was adjourned.]
                            A P P E N D I X

Prepared Statement of Carl Berger, Executive Director, Lower Kuskokwim 
                      Economic Development Council
    Thank you for the opportunity to submit written testimony for 
inclusion in the field hearing, regarding the effects of the energy 
crisis on Alaska's people, especially in rural Alaska and across the 
Yukon Kuskokwim Delta.
    My name is Carl Berger, for 16 years I have been the executive 
director of LKEDC, one of eleven Alaska regional economic development 
organizations (ARDORs) representing most areas of Alaska. Organized as 
a 501(c)(3) non- profit organization, our mission is to advance Alaska 
natives and rural residents of the Y-K Delta toward economic self 
sufficiency, by promoting small business and economic development 
activities in Bethel and 26 surrounding villages.
    An ongoing problem toward local enterprise and small business 
development in our region are the high costs of electricity, motor gas 
and diesel fuel used for home heating throughout our region of mostly 
treeless tundra. With the most recent increases in these product costs, 
the problems to local residents are greatly exacerbated. Though the 
State of Alaska has maintained a Power Cost Equalization program for a 
number of years, its benefits do not extend to small businesses, who 
have to pay the full cost of power, currently 0.36c/kWh in Bethel and 
much higher in the surrounding villages. Likewise, an energy rebate to 
all Alaskans eligible for the Permanent Fund Dividend, recently granted 
by the state legislature in the amount of $1,200 is woefully inadequate 
to rural residents, who will be paying over $6-8/gal for motor gas and 
diesel home-heating fuels. Maintaining heat in all the sub-standard 
housing throughout our region at these prices will certainly be a 
budget buster for most of us. Finally, the proposed energy rebate paid 
out in this way is subject to federal taxes, further diminishing its 
effect.
    The following are recommendations, for the Senate Indian Affairs 
Committee's consideration:

        1. The United States and State of Alaska governments need to 
        take immediate action to subsidize transportation of all fuel 
        types to rural Alaska.

        2. Ongoing renewable energy project grants need to be provided 
        to rural communities, in order to harness wind energy, biomass, 
        solar and hydro power as available, and assist the tribal 
        governments to develop their alternative energy.

        3. The SOA Power Cost Equalization program needs to be modified 
        to include commercial small business users in its energy 
        savings plan.

        4. Buy down the debt of rural utilities in order to reduce 
        costs passed on to consumers and include a price cap on fuel 
        stock purchased.

        5. Expand and support bulk fuel purchasing, transportation and 
        cooperative purchasing agreements.

        6. Invest some of our excess earnings throughout Alaska toward 
        projects that promote renewable or alternative energy and 
        conservation.

    Thank you for the opportunity to provide this testimony. I urge 
you, the Senate Committee on Indian Affairs, to provide increased 
energy assistance or other similar actions, which will provide a much-
needed solution to the energy crisis now facing our state and its 
citizens.
                                 ______
                                 
      Prepared Statement of John Wallace, Resident, Bethel, Alaska
    I appreciate this opportunity to record my comments concerning the 
effect of high energy prices on our Native communities in rural Alaska.
    I have lived in rural Alaska for the majority of my life. I am not 
an Alaska Native by blood history. I am married to a lady from 
Nunapitchuk and we are living and raising our family in Bethel.
    As part of my life history, I have had many opportunities to travel 
extensively throughout the Yukon-Kuskokwim region of Alaska. As an 
Alaska National Guard search and rescue crewchief, I flew to almost all 
of the villages in the area. Presently I operate a small business, 
Alaska Technologies, providing technology assistance and Internet 
installations in the whole of the area. In other words, I have spent a 
great deal of time with ``boots on the ground'' in the villages.
    I want to share just a few of my experiences of the effects of 
energy prices in the towns and villages of rural Alaska.
    I would like to begin by saying that although the nation now is 
experiencing high energy prices; we in rural Alaska have had to deal 
with this issue for the last 8 years or so.
    When the local retailer in our area sold to an Australian 
conglomerate, our fuel prices rose 40 percent in one day!! I will never 
forget the year that my wife and I were so excited because our kids 
would both be in school and we could count on the added money in our 
pockets because we wouldn't have to deal with childcare. Our joy was 
short lived because that year the price of fuels rose $1.00 as the 
barge delivered fuel. The price increase took all of the money we would 
have saved plus extra.
    As the fuel wholesalers have changed hands over the years we have 
had to deal with price increases that include a more than 340 percent 
increase in the cost of fuel since 1996. I have attached the cost 
calculation from the Alaska Cooperative Extension service for the 
committee members. The point is that though this issue is at the 
forefront on the national stage, it has been an issue for several years 
in rural Alaska.
    I would like to share an experience that I have never forgotten: In 
the Y-K Delta, as in many areas of rural Alaska, residents do not have 
jobs per se. Many subsist off the land as the seasons roll through the 
year. I was in Tuntutuliak, Alaska, waiting for my ride to the Village 
Office in which I would be working. As I sat waiting near the local 
Fuel Sales business, an old man pulled in with an 18 foot skiff loaded 
with his family. I said Hi and asked where he was going. He said they 
were headed berry picking. He told the Fuel guy that he needed to fill 
up, but the pump wasn't working. The Fuel guy told him that it worked, 
but he would have to pay before he could fill his boat. There was also 
no more credit available, so he would have to pay cash.
    The old many reached into his pocket and pulled out twenty dollar 
bill. He asked if it would fill his boat. Unfortunately it would only 
buy a couple of gallons, not enough for the berry picking venture. The 
man went back to the boat and drove back to his parking spot. Berry 
picking would not happen today.
    That story has never left my memory. That family would have been 
doing three things that are very important to village life.

        1) Conducting and passing on the tradition of subsistence.

        2) Providing important foodstuffs that are an important part of 
        the native lifestyle as well as not having to live on processed 
        and imported foods.

        3) Conducting an activity. This simple task of having something 
        to do is important to every human. It is this or sitting 
        around. Rural Alaska has a great suicide rate. Doing instead of 
        sitting is very important.

    But of all the problems of life in rural Alaska, what would be the 
solution?
    My opinion is that it cannot be in the form of cash payments to 
residents. Band aid approaches have never worked and will never work. 
Turning on the money hose and hosing the area down with money will not 
work. Whatever form of aid is giving has to be well thought out and 
long term so that the aid will incentivize the aid.
    A friend of mine, a river boat captain, and I were hauling fuel to 
the villages one winter. The village tanks at the time were too small 
to hold an entire fuel supply because the Government had added more and 
more housing without a tank farm with enough supply to keep the homes 
heated for the year. That coupled with funding that was bi-annual, made 
it so we had to haul fuel in the dead of winter with small trucks. A 
very inefficient form of transportation, but it was the only 
alternative. We were taking break one afternoon and we saw a mink 
scurry around. I asked him why people didn't trap them anymore because 
they are the most desirable mink in the world. ``Too damn easy to go to 
the Post Office,'' he said. I asked what he meant and he said that it 
was too easy to go to the Post Office and get a check rather than do 
something productive. A hardnosed evaluation maybe, but it has some 
validity. Whatever aid is produced needs to be evaluated to make sure 
it has the desired effect.
    The best example of this kind of aid actually comes from Germany. 
In Germany, the Government provided 50 percent instant tax rebates for 
all alternative energy installations. They made it a huge incentive for 
a person or business to reduce their energy use. Germany went from one 
of the largest consumers of energy in Europe to one of the smallest.
    Lastly I want to mention one impact of high energy prices that is 
probably the most insidious of all of them. High energy prices have 
begun to start an exodus of sorts from rural Alaska. Anchorage School 
District has had to hire 18 positions more than they anticipated 
because of the influx. As more and more people leave rural Alaska, the 
problems in rural Alaska will be exacerbated.
    Due to the large area of Alaska and the lack of residents, we are 
considered ``Rural.'' But for all intents and purposes, each village is 
a Micro-Urban environment. Each village, as a unit, depends upon its 
residents for its survival. Villages as little tribal elements cannot 
survive if there is a great out flux of people. The impact of this is 
that the many unique aboriginal traditional elements of the native 
tribes will be eliminated. This above all may be the worst impact of 
the high energy costs.
    The Yupik/Cupric culture is one of the last in the country that 
still survives in language and tradition. Yes it is changing, but to 
see it destroyed would be a true tragedy.
    I would like to thank the committee for the opportunity to make 
these comments. I would especially like to thank Senator Lisa Murkowski 
for bringing the hearing to rural Alaska. Her insight into our lives 
has been truly beneficial for Alaska and the Nation at large.


                                 ______
                                 
    Prepared Statement of Loretta Bullard, President, Kawerak, Inc.








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