Sitka Dam Project Gets FERC License

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Category: ROOT

Created on Thursday, 31 May 2012 08:19

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    About nine minutes into his address to the Chamber of Commerce Wednesday, state Sen. Bert Stedman scanned the crowd at the Westmark looking for Chris Brewton.
    He found Sitka’s utility director at a table to the right of the podium in the banquet room, where Chamber talks are held, and told him to stand up.
    Brewton had an important announcement. {mosimage}
    The city, earlier that morning, had received word that the Federal Energy Regulatory Commission (FERC) had licensed the project to expand the Blue Lake hydroelectric dam.
    Brewton called it a “red letter day” for the project, which is expected to cost more than $100 million. And while many regulatory steps remain before contractors can break ground on the dam-raising, including review by a host of federal agencies, receiving the FERC license meant the project had passed a “major hurdle,” Brewton said.
     Up next? Filing a series of reports showing the Blue Lake project complies with federal laws like the Endangered Species Act, Clean Water Act, and the Federal Power Act.
    The city began working on the FERC license application in 2007 and formally filed it in November 2010. Brewton said that in a “perfect world,” the city would be ready to “move earth” in 120 days. Bids for the dam project, with construction estimated to cost $40-$60 million, are scheduled to be opened on July 17. Brewton said he wants to award a contract in November.
    The city estimates the project will cost just over $100 million, but won’t be able to firm that number up until the construction bids are opened in July.
    The city has received close to $50 million in state funding for the project and Brewton’s announcement fit well with part of Stedman’s message to the Chamber: energy costs are key to the economic future of Southeast.
    Stedman, who spent a good deal of his speech discussing local capital projects he helped fund during the 2012 legislative session, said he was concerned about hikes in Sitka’s electric rates.
    The Sitka Republican, who co-chairs the influential Senate Finance Committee, said electric rates here are not cheap when compared to what Anchorage residents pay to heat their homes with natural gas.
    He said he wants the state to consider paying off the outstanding debt on the Green Lake dam, or perhaps help Sitka purchase diesel fuel for when the Blue Lake hydroelectric system is taken off-line during construction.
    Stedman said he plans to meet with city officials to “try to cook up a conspiracy on how we’re going to attack the energy costs here in town.”
    “We’re creative,” Stedman said. “We’ll come up with something that will make a dent, I hope.”
    Stedman said stimulating the economy in the region could help stem the population decline in Southeast. He said that if the population continues to drop it will hurt Sitka’s, and the region’s, political influence in the state and drive up the cost of living here.
    “We just gotta keep chugging forward and listen to the static up north about them being the center of the universe and we’re barely part of Alaska and continue to try and move our region forward,” Stedman said.
    Stedman was appointed to a Senate vacancy in 2003 and was elected to full terms in 2004 and 2008. He faces a re-election fight this fall against Sen. Albert Kookesh, an Angoon Democrat. The two incumbents were paired in a new Southeast district by the Alaska Redistricting Board. The district closely resembles the one that Stedman represents now, and still includes Ketchikan and Sitka. Stedman did not make mention of the election during his appearance Wednesday.
    Sitka projects did well in the capital budget this year, with than $40 million in capital spending allocated by the Legislature and approved by Gov. Parnell.
    Stedman said he’d like to keep the statewide capital budget around $3 billion each year, with money going around the state to help with infrastructure projects and “diversify the economy.”
    Alaska is currently flush with cash, thanks in large part to the high price of oil, which was trading at $103 a barrel today.
    Stedman said Parnell limited the growth in the state’s operating budget to four percent this year – he said the growth rate had been 13-15 percent a year under Gov. Palin – and that the Legislature had added another $3 billion into savings, bringing the state’s cash reserves up to around $20 billion.
    Stedman said he didn’t initially support a $450 million bond package for transportation projects around the state that moved forward during the 2012 session, preferring instead to pay for the projects with cash.
    The bond package, which will go before the voters in the November election, includes $21.5 million for Sitka projects. Stedman said Sitkans should vote for the bond package.
     The bonds would fund a $14 million road to the back of Katlian Bay that would allow Shee Atika Corp. to access a quarry site, and $7.5 million to replace the bulkhead dock at the Sawmill Cove Industrial Park.
    Stedman addresses the Chamber a few times a year and typically spends a good deal of time talking about oil issues. He made it through his speech Wednesday without discussing Parnell’s proposal to reduce oil taxes, which has met stiff resistance in the Senate by Stedman and others.
    But a question from the audience got Stedman talking about the resource that funds about 90 percent of state operations.
    Stedman said the operating and capital budgets passed by the Legislature this year “break even” if oil averages $107 a barrel over the next year.    
    He said state officials projected that oil would average about $110 a barrel.
    Parnell, a former oil lobbyist, has spent the last two legislative sessions pushing hard for a reduction in Alaska’s oil taxes. His proposal has won support in the House of Representatives, but has been held up by the Senate. In his fight to lower oil taxes, Parnell has received strong backing from the petroleum industry, a large part of Alaska’s business community and others who are concerned with declining production on the North Slope. Critics have called the proposal a $2 billion “give away” to the oil industry.
    Stedman said Wednesday that two international oil consultants hired by the Legislature believe Alaska’s tax regime, known as Alaska’s Clear and Equitable Share (ACES), works fine when the price of oil is around $100 a barrel.
    ACES was passed under Gov. Palin after a wide-ranging political corruption scandal cast a shadow over the previous oil tax reforms instituted under Gov. Frank Murkowski.
    Stedman has acknowledged that ACES may have to be tweaked to lower the tax rate when oil prices are $120 or above, but said the decline in production occurring on the North Slope was the “natural decay of one of the top 10 super oil fields on the planet.”
    “It’s decay that has been forecasted for decades,” Stedman said.
    He added that if the oil tax rate was dropped to zero there would not be an instant uptick in production.
    “It’s a nice sound bite, but the taxes are irrelevant,” Stedman said.
    He said there are “mechanical” and “technological” issues preventing companies from getting more oil out of the ground.
    “There are some challenges there,” Stedman said. “But it’s not a simple `change the (tax) rate and things fall into line.’”
    He said industry officials have estimated it will cost about $3-5 billion a year to stem the production decline in Prudhoe Bay. The industry has proposed spending about $5 billion over eight years, which Stedman said was “not even a starter.”
    Oil production peaked in 1988, when about 2.1 million barrels a day flowed through the pipeline. These days, the pipeline is running under 600,000 barrels a day.
    Stedman said that if the state can keep the pipeline running at about 700,000 barrels a day, the state coffers will be “in high cotton for a long time.”
    At 350,000-400,000 barrels a day, the state will face budget issues, Stedman said.
Edgecumbe Pool
    There was $5 million in the capital budget for an aquatic center at Mt. Edgecumbe High School, bringing the funding for that project to $25 million. Stedman said initial state estimates have put the project cost at $35 million, which Stedman said was too high.
    “I think 35 is too high and actually I took that proposal and threw in the garbage right in the middle of a meeting and told them we’re not going there,” Stedman said. “I was not happy with the overall dollar amount they gave, but we’re working on that.”
Other Issues
    –Stedman said he is frustrated with the “inability to get quick action” from Fish and Game on the issue of invasive species in Whiting Harbor. The capital budget included $500,000 to help eradicate tunicates. “They cry about not having money or they can cry about manpower or make any excuse they want. Every day they delay dealing with issues like that, they get worse, not better.”
    –Stedman expects an announcement in the next couple of weeks on the Alaska Troopers’ plans to build a driving course in the Indian River Valley for use by the Department of Public Safety training academy.
    –Stedman said the stretch of Sawmill Creek Road from the roundabout to Sitka National Cemetery will get a “temporary fix” this summer, with a more permanent repair still a few years off. He said he hopes Parnell gets to see that stretch of road during a scheduled visit to Sitka next week.
    “I don’t know who in the community is on point to take the governor around,” Stedman said. “Whoever that is needs to take him on that road. Drive him out Halibut Point Road too. I mean, these roads are horrible. They should have been fixed years ago. And if they were in Anchorage, or Juneau, they would have been done years and years ago. Yeah, I would definitely take the governor for a ride on the roads. He’ll find it appalling too, I’m sure. Especially if (the car) is one with a worn out suspension.”
    Sawmill Creek Road, between Whale Park and Sawmill Creek, and HPR between Swan Lake and the ferry terminal, are scheduled to be repaired. Stedman said the HPR project will be put out to bid in coming weeks, with the SMC work going out to contractors in the fall.

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