[Senate Report 106-405]
[From the U.S. Government Publishing Office]
Calendar No. 795
106th Congress Report
SENATE
2d Session 106-405
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SOUTHEASTERN ALASKA INTERTIE SYSTEM
_______
September 11, 2000.--Ordered to be printed
_______
Mr. Murkowski, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany S. 2439]
The Committee on Energy and Natural Resources, to which was
referred the bill (S. 2439) to authorize the appropriation of
funds for the construction of the Southeastern Alaska Intertie
System, and for other purposes, having considered the same,
reports favorably thereon without amendment and recommends that
the bill do pass.
purpose of the measure
The purpose of S. 2439, as ordered reported, is to
authorize appropriations to the Secretary of Energy for use in
assisting in the construction of an electrical transmission
intertie connecting communities throughout southeastern Alaska.
background and need
Southeastern Alaska is made up of a large group of islands
stretching over 400 miles in what is known as the Alexander
Archipelago. There are few roads, and access between
communities is limited in most cases to air and marine
transportation. The Forest Service owns 85% of the land in the
region. Historically, the region's economy has been resource-
based, with timber, commercial fishing and tourism as the major
components.
Immediately following World War II, the Federal Government
took steps to encourage development and settlement in the
region. In 1947, Congress passed the Tongass Timber Act, which
was designed to attract investment by offering a guaranteed
quantity of timber to those willing to invest in physical
plants capable of processing the timber in southeast Alaska.
Also in 1947, the first Federal study on a regional electrical
intertie was prepared by the Federal Power Commission
(precursor to the Federal Energy Regulatory Commission) and the
Forest Service. Entitled ``Water Powers of Southeast Alaska'',
the joint study identified over 200 potential hydro power sites
and observed, ``In developing a power system many of these
projects would logically be connected with high voltage
transmission.'' Numerous subsequent studies, including a 1987
study by the Alaska Power Administration (a Federal agency
under the Department of Energy) concluded that the region's
economic viability would be enhanced if its communities were
electrically interconnected.
While tourism and commercial fishing employment is highly
seasonal, the Federal timber processed through two pulp mills
(one in Sitka, the other in Ketchikan) attracted to the region
as a result of the long-term contracts under the Tongass Timber
Act became the chief component of the year-round private sector
employment. In 1990, Congress passed the Tongass Timber Reform
Act, which substantially altered the terms and conditions under
which the pulp mills were to operate on the National Forest, at
the same time precluding extractive uses on additional Federal
acreage on the Tongass. Since 1990, harvests of timber from the
Tongass have fallen from 470 million board feet annually to 120
million board feet, and both pulp mills, as well as a number of
mills for sawn wood products, have ceased operation.
The consequences of this change in Federal policy have been
substantial.
Since 1995, Ketchikan's population has declined by 800
residents, and total employment and payroll are down 12%. Real
payroll is down 16%.
In Wrangell, real payroll is down 29% from 1994, and
population has dropped 7%.
Timber receipts (Federal stumpage sharing with local
governments for schools and roads) have been reduced from $900
per student in rural southeast Alaska to $180 per student in
1999, an 80% decline.
With these changes under way, consensus began to form among
the communities that the region required reliable, clean and
reasonably priced electrical power in order to promote
diversification of their economies. Historically, the
communities of the region had relied primarily upon locally
generated electricity, which in many cases meant diesel-fired
generation and systems known for their unreliability and high
costs. In other areas, hydroelectric power was cheap and
abundant.
In 1997, the Southeast Conference--a regional group
composed of municipalities, businesses, concerned individuals
and government leaders--commissioned a study to obtain
technical information in support of an electrical intertie
between unconnected southeast Alaskan communities. The study
proposed a 25 year plan for utilizing existing and planned
power generation sites throughout southeast Alaska in
conjunction with an electrical intertie serving communities
throughout the region. The intertie itself would be a
combination of overland and submarine cables designed to link
communities, provide reliability and enhance the economics of
power delivery.
The region now has a system of hydroelectric dams and on-
site diesel electric generating facilities. In rural
communities, many of which are inhabited predominantly by
Alaska Natives and where unemployment and poverty are high,
electrical rates are extremely high. For example, in Kake,
Alaska, electricity is in excess of 38 cents per kilowatt hour.
the Intertie would allow the connection of hydro power dams
with communities currently producing electricity independently,
and provide a grid for increasing the reliability of load
management.
The study estimated that the cost of completing such a
system would be in excess of $435 million in 1996 dollars.
Under the Intertie proposal described in the study, a phased
construction schedule would allow a state-chartered regional
authority to gain equity through the orderly construction and
capitalization of the system. The report stated ``Participants
recognize that a combination of State, Federal and Community
funding will be required.'' Under S. 2439, the Secretary of
Energy would be authorized to provide such sums as are
necessary as Congress would provide in future appropriations to
assist in the construction of the system.
The Intertie plan is not site-specific except in general
relationship to the communities which would receive service
from the proposal. Under S. 2439, each component of the system
would be required to adhere to all State and Federal laws and
regulations.
legislative history
S. 2439 was introduced by Senators Murkowski and Stevens
April 13, 2000. The full committee held a hearing on the bill
May 18, 2000.
At the business meeting on June 7, 2000, the Committee on
Energy and Natural Resources ordered S. 2439 favorably reported
without amendment.
committee recommendation and tabulation of votes
The Committee on Energy and Natural Resources, in open
business session on June 7, 2000 by a voice vote of a quorum
present, recommends that the Senate pass S. 2439.
committee amendments
During the consideration of S. 2439, the Committee adopted
no amendments.
section-by-section analysis
The legislation is self-explanatory.
cost and budgetary considerations
The following estimate of the cost of this measure has been
provided by the Congressional Budget Office.
S. 2439--A bill to authorize the appropriation of funds for the
construction of the Southeastern Alaska Intertie system, and
for other purposes
Summary: S. 2439 would authorize the appropriation of such
sums as may be necessary to assist in the construction of the
Southeastern Alaska Intertie system. Based on information from
a study by the Southeast Conference in Alaska, CBO estimates
that construction costs for the entire intertie system would be
$500 million or more over a 30-year period. CBO estimates that
the federal cost for the first phase of the project would be an
additional $20 million over the 2001-2005 period. (The project
has already received $20 million in prior appropriation acts.)
The bill would not affect direct spending or receipts;
therefore, pay-as-you-go procedures would not apply. S. 2439
contains no intergovernmental or private-sector mandates as
defined by the Unfunded Mandates Reform Act (UMRA).
According to the Southeast Conference, the intertie system
is planned as a five-stage project, linking Alaskan power
plants over more than 400 miles. The first stage of the
Southeastern Alaska Intertie system would link the Swan Lake
and Lake Tyee hydroelectric plants over 57 miles, and is
estimated to cost around $85 million. The state of Alaska has
identified about $65 million in funding for this project,
including $20 million that was appropriated through the Alaska
Power Administration, the Denali Commission, and the Forest
Service over fiscal years 1998 through 2000. Under S. 2439, the
federal government could fund all of the remaining costs of the
complete system, or it could share the costs with the state of
Alaska
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 2439 over the next five years is shown
in the following table. The costs of this legislation fall
within budget function 270 (energy).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------
2001 2002 2003 2004 2005
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SPENDING SUBJECT TO APPROPRIATION \1\
Estimated authorization level...................................... 20 0 0 0 0
Estimated outlays.................................................. 8 8 8 8 8
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\1\ The table shows estimated incremental funding needed for the federal share of the first stage of the
Southeastern Alaska Intertie system and estimated outlays over the next five years. Outlays include balances
from previously appropriated funds. CBO estimates that completing the system would cost at least $400 million
over a 30-year period. With nearly all of the costs coming after 2005. Some of those costs would be borne by
the state and local governments in Alaska
Basis of estimate: The state of Alaska has identified about
$65 million in funding for the first stage of the intertie
system. Assuming appropriation of $20 million, the remaining
amount needed to complete the first stage, CBO estimates that
spending on construction could start in 2001. Estimated outlays
are based on historical spending patterns for similar
activities.
S. 2439 would authorize the federal government to fund all
segments of the intertie system. We estimate that the remaining
four segments of the project would cost at least $400 million
over 30 years. Outlays in later years could be large, depending
on future appropriations and the amount funded by the state of
Alaska.
Pay-as-you-go considerations: None.
Estimated Impact on State, local, and tribal governments:
S. 2439 contains no intergovernmental mandates as defined in
UMRA. The state of Alaska and some local governments in that
state would benefit from federal funding to assist in
constructing the intertie system. Any costs incurred by the
state or local governments to construct and manage the intertie
system would be voluntary.
Estimated impact on the private sector: This bill contains
no new private-sector mandates as defined in UMRA.
Estimate prepared by: Federal costs: Lisa Cash Driskill;
impact on State, local, and tribal governments: Victoria Heid
Hall; impact on the private sector: Sarah Sitarek.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
regulatory impact evaluation
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out S. 2439. The bill is not a regulatory measure in
the sense of imposing Government-established standards or
significant economic responsibilities on private individuals
and businesses.
No personal information would be collected in administering
the program. Therefore, there would be no impact on personal
privacy.
Little, if any, additional paperwork would result from the
enactment of S. 2439, as ordered reported.
executive communications
The Department of Energy submitted testimony concerning S.
2439 as follows:
Statement of the U.S. Department of Energy on S. 2439, Southeastern
Alaska Intertie
Mr. Chairman, in response to your request the Department of
Energy hereby submits written testimony providing our views on
S. 2439. This bill would authorize Congress to appropriate to
DOE ``such sums as may be necessary to assist in the
construction of the Southeastern Alaska Intertie system as
generally identified in Report #97-01 of the Southeast
Conference * * *''
Mr. Chairman, the Department of Energy does not support the
enactment of S. 2439. Additional analysis of the proposed
intertie and possible alternatives should be undertaken before
Congress authorizes the expenditure of a substantial sum of
domestic discretionary funds--approximately $450 million.
The Administration recognizes that distribution and
transmission infrastructure costs to provide electric service
to sparsely populated areas can be higher than the costs of
providing service to more densely populated regions. The Rural
Utilities Service (RUS) and, its predecessor, the Rural
Electrification Administration (REA), have done a tremendous
job of helping to electrify rural America by making loans
available to rural cooperative utilities.
However, loans are not issued automatically. In some areas
the cost of providing service is so prohibitive that loans are
not issued because of poor prospects of repayment. That is why
S. 1047, the Administration's comprehensive electricity
restructuring legislation, proposes that Congress authorize $20
million annually for seven years to fund a rural and remote
communities electrification grants program.
The Department of Energy recognizes that certain
communities in southeastern Alaska suffer from relatively high
energy costs and that it is possible that the RUS loan program
may not be able to help this region reduce its electric costs.
Moreover, many small communities in the area currently rely
extensively on diesel-powered generation for their electricity
supply. It is important that the region diversify its source of
electricity for both environmental and economic reasons.
The Administration's proposed electricity restructuring
bill would help part of the region move in that direction by
authorizing $20 million to provide financial assistance to
Alaska ``to ensure the availability of adequate electrical
power to the greater Ketchikan area in southeast Alaska,
including the construction of an intertie.'' The intent of this
provision is to authorize funding that could be used to pay for
the alternative that is ultimately determined to be the best
means of making additional power available to this area. This
could include the construction of a subset of the intertie that
is being proposed in S. 2349 to make excess hydropower capacity
available to certain communities in the area, and could also
include alternative mechanisms designed to reduce reliance on
diesel generation in the Ketchikan area.
Nevertheless, we believe more analysis is needed before
Congress considers S. 2439. While the bill does not include a
specific price tag for the proposed southeastern Alaska
intertie, DOE understands that approximately $450 million in
federal funding would be required. Given the amount that would
be needed, it is essential that Congress and the Administration
thoroughly examine the proposed intertie and all possible
alternatives. For example, great advances have been made in
fuel cell technologies. Although natural gas may not be
available in the region, it is possible that fuel cells
operating on alternative fuels could be used to replace
existing diesel generation. In addition, there could be some
potential for locally produced hydropower in certain
communities in the region. Moreover, it might be less expensive
to promote increased energy efficiency initiatives aimed at
reducing the region's reliance on dirty and costly diesel
generation. These and other possibilities should be thoroughly
examined before Congress commits itself to expend $450 million
on the proposed intertie.
Thank you for this opportunity to submit our views on this
legislation.
MINORITY VIEWS
S. 2439 contains an open-ended authorization of federal
funds to construct an electrical intertie in Southeastern
Alaska. I am not opposed to providing federal assistance to
provide reliable and affordable power to Southeastern Alaska.
Regrettably, however, I was forced to oppose S. 2439 for four
reasons.
First, the bill broadly authorizes a five-stage project
that may cost $500 million or more and take over 30 years to
complete. I believe the project should be authorized in phases,
rather than commiting the Federal Government to the entire
project upfront.
Second, the bill authorizes ``such sums as may be
necessary,'' rather than specifying a maximum amount. The
Congressional Budget Office estimates that the entire intertie
system will cost ``$500 million or more over a 30-year
period.''
Third, the bill does not require any contribution from the
State of Alaska or the project beneficiaries. Federal aid to
build rural electrical systems has, in the past, taken the form
of loans, which must be repaid over time. S. 2439 contains no
requirement that the federal contributions be matched or
repaid.
Fourth, more analysis is needed before Congress commits
itself to the project. The Administration has indicated that
Southeastern Alaska's electricity needs may be better met
through distributed generation, fuel cells, local hydroelectric
projects, and increased energy efficiency. Such alternatives
should be examined before Congress commits itself to building
the intertie.
In sum, S. 2439 is simply too broadly conceived, too
expensive, too open-ended, and too poorly thought out for me to
support in its present form.
Jeff Bingaman.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the Committee notes that no
changes in existing law are made by the bill S. 2439, as
ordered reported.