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Executive Summary

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BILL SHEFFIELD GOVERNOR

Dear Alaskan:

STATE 0 F ALASKA

OFFICE OF THE GOVERNOR

JUNEAU

February 1, 1985

I am pleased to introduce the State of Alaska Energy Plan for 1985. The plan presents a complete description of State agencies' current activities for energy development and conservation, and it outlines options available to us for further energy-related efforts. ·

Options for Alaska's energy future must be selected in the context of what needs to be done, what the State government can do best, and what our financial resources will allow us to do. We seek a future in which conservation , new energy projects large and small , and the development of new fuel resources can provide long-term energy security at reasonable cost to the consumer, stimulus for economic development, and perhaps public revenue as well. The State's role in the realization of this future must be to facilitate energy projects and energy resource development that will provide tangible, long-term economic benefits not otherwise obtainable by private interests and local agencies working on their own.

• The State should play a role in the development and financing of energy projects that 1) represent the lowest long-term total system costs among all possible alternatives, and 2) can be planned, financed, and constructed by the State more effectively than by local utilities. The State's participation should encourage the development of optimal energy generation, transmission and distribution systems. This will result in the lowest energy cost to consumers in the long-run .

• The statutory mechanism for distributing the State's cash investment in past and future hydroelectric projects- pooled debt in the "Energy Program for Alaska" - must be developed to achieve the full measure of fairness to which all Alaskans are entitled. Future electric power projects, as well as the projects in the Four Dam Pool, should provide sufficient long-term savings to allow reduction of the very high cost of electricity production where only diesel generation is feasible.

• Conservation is a proven technique for decreasing energy costs. Efforts to weatherize homes should be promoted. Our goal should be to reach a high percentage of qualifying homes within the decade. Also the Power Cost Equalization program must be monitored to prevent economic disincentives to conservation that it may create.

• New Alaska fuel sources are likely to play an important role in domestic and foreign markets, providing economic devefopment and future public revenue as well as meeting in-State energy needs. For example, North Slope natural gas may yet be transported by pTP'eline to foreign or domestic markets. Private industry is looking at marketing LNG in the Pacific Rim . North Slope natural gas could also play a significant role in supplying future Railbelt energy needs. In addition, increased exploration and overseas market development for Alaska's coal resources may result in significant reductions in the cost of coal for in-State consumption .

The State of Alaska is committed to the development of an equitable energy future for all Alaskans. By facilitating the construction of optimal energy systems, by accelerating conservation and weatherization, by assuring equitable benefit from State investment, and by seeking new fuel sources, we can all share in Alaska's wealth .

Sincerely,

Bill Sheffield Governor

ARLIS . Alaska Resources

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Executive Summary db qso'L , (j s "<; Ass I 'l ~5,

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Alaska's Energy Plan 1985

Governor Bill Sheffield

Prepared by:

State of Alaska

Department of Commerce & Economic Development

Office of Energy

Loren Lounsbury Commissioner

Jack Roderick Director

February 15, 1985

Table of Contents

Introduction 1

Energy Issues and Strategies 3

Energy Assessment 13

State Energy Programs 21

Summary and Conclusion 25

List of Exhibits

Chart 1: Alaska's Energy Goals

Chart 2: Alaska's 1985 Energy Issues

Chart 3: Energy Issues, Summary and Options

Chart 4: Consumption of Energy by Sector and Fuel Type for Alaska

Chart 5: Alaska's 23 Energy Regions

Chart 6: Alaska's Known Oil and Gas Provinces

Chart 7: Alaska's Known Coal and Peat Resources

Chart 8: Alaska's Major Hydroelectric Installations and Geothermal Resources

Chart 9: Alaska's Timber Resources

Chart 10: Agency Responsibilities by Energy Functional Areas - 1984

Introduction

Alaska's Energy Plan - 1985 is the fifth in a series of reports developed under Alaska Statute 44.83.224. Previous plans reported energy demand, assessment of energy supply options, research, conservation, and emergency planning. These plans provided basic information and examined the long-term view of Alaska's energy future. Emphasis was directed to reporting current energy production and consumption, and assessing Alaska's future to the year 2000. Those plans failed to highlight energy policy and Alaska's future in the near-term.

Alaska's Energy Plan - 1985 combines the efforts of nine State agencies to define each agency's programs, provide guidelines for future State action, and set the energy policy direction for Alaska in the coming years. Alaska's Energy Plan - 1985 adopts the view presented by energy specialist Peter Drucker who said:

"Long-range planning does not deal with future decisions, but with the future of present decisions."

Through the cooperation of State agencies, and from public input provided at all stages of plan development, Alaska's Energy Plan - 1985 seeks ways to coordinate energy programs so that maximum benefit is provided to Alaskans in both urban and rural areas in 1985, and for many years to follow.

Alaska's Energy Plan - 1985 provides an understanding of the State's current energy picture, consolidates the energy issues related to that picture, and illustrates what can be done in the future to clarify and improve upon the present status of energy in Alaska. The plan is divided into three separate publications: Executive Summary, the Energy Plan, and the Regional Data Summary. While the Data Summary contains only data, the other two publications cover the following:

Energy Issues and Strategies: Energy issues are consolidated into eight discussion areas. Each portrays what the State has done thus far and discusses future strategies and program options.

Energy Assessment: A resource inventory and energy use summary portrays Alaska's energy balance today, and projects potential energy supply and demand in the future.

State Energy Programs: State energy programs are illustrated under functional areas titled energy conservation, energy subsidies, electrical systems, utility regulation, alternative technologies, and leasing/marketing.

Summary and Conclusions: 1985 Energy Plan findings are summarized and future energy policy direction is stated.

~--- State's Decision-making Process for the 1985 Energy Plan

6 Goals ~

8 Issues ~

Strategies ~

Program Options ~

State Action

2

Development of Alaska's Energy Plan - 1985 began with the premises that numerous energy issues face Alaska, and that an action plan was needed to resolve those issues.

The first step was to determine Alaska's present and future energy goals. Next, State programs were summarized and Alaska's eoergy production and consumption balance was quantified. The six goals, State programs and energy balance were then collectively analyzed within eight energy issue areas. Finally, energy strategies evolved which described an approach or solution for resolution of all or part of each issue. Each strategy includes one or more program options which are the basis for State action in the future. These strategies and options are the main thrust of Alaska's Energy Plan - 1985.

_____________________ Chart 1

Alaska's Six Energy Goals

1. Ensure that ALL Alaskans have an adequate supply of quality energy at reasonable costs to the consumer and the State.

2. Improve energy-related services by coordinating the activities of State Government agencies in a fiscally responsible manner.

3. State agencies will work with industry, public utilities, nonprofit organizations and consumers when developing energy plans and programs.

4. Improve the capabilities of local governments and organizations, industry and utilities, in planning and developing energy services.

5. Foster efficient uses of energy that are consistent with environmental and social concerns, emphasizing local impact.

6. Encourage the development of alternative energy technologies, particularly those that utilize local resources .

. Alaska's Energy Plan - 1985 plan gives direction to the economic and financial objectives of Governor Sheffield's energy development policy, which supports orderly, prudent resource development that currently or potentially contributes in a substantial way to the economic vitality of the State. By placing emphasis on the short-term and long-term strategies of State agencies having direct responsibility for energy programs and using an interagency workgroup to write the plan, State agencies have more effectively coordinated informational needs and decision-making procedures. Alaska's Energy Plan - 1985 provides a mechanism for developing Administrative policy on Alaskan energy issues.

3

Energy Issues and Strategies

Numerous energy issues face Alaska, and the Energy Plan provides the mechanism to form an action plan that seeks to resolve those issues. Alaskan energy issues were identified and aggregated into eight energy issue statements. Each energy issue area was analyzed, defining the scope of problems and opportunities associated with it. Within that focus, one or more energy strategies evolved which described an approach or solution for resolution of all or part of each issue statement. Each strategy includes one or more program options with a specific action to carry it through to completion. The issues, strategies, and options determined from that analysis follow. A more complete description of strategy program options can be found in the Energy Plan document separate from this Executive Summary.

------------------------------------------Chart2 Alaska's 1985 Energy Issues

1. Energy Planning 5. Energy Systems 2. Energy Price 6. Alternative Technologies· 3. Energy Subsidies 7. Technical Assistance 4. Energy Conservation 8. Major Energy Projects

------------------------------------------Chart3 Energy Issues, Summary and Options

1. Energy Planning

Alaska will face a number of energy choices in the future and a comprehensive plan is needed to chart the course which best meets the State's goals.

Comprehensive piC3,nning underlies the development of a strategic energy plan to meet the six energy goals for the State. This plan uses an interagency approach to make full use of all the State resources. The planning process will emphasize short-term and medium-term strategies as well as a long-range effort. The Department of Commerce and Economic Development will annually revise and prepare a long-term plan.

Strategy 1: Improve the State's knowledge of Alaska's primary energy resources.

Option Agency Action

1. Coal Assessment Department of Natural Resources Ongoing Matanuska*

2. Coal Assessment Department of Community & Regional Ongoing Cape Beaufort* Affairs

3. Reconnaissance and Feasi- Alaska Power Authority Ongoing Key

bility Work * * Continuation Prog rams

4. Unalaska Geothermal Explora- Alaska Power Authority Ongoing Require Additional Budget

tion ProjecH Requests in FY '86 + Administrative Act ion

5. Computer Library and Mapping Department of Natural Resources Ongoing Expected in FY '86

Program* NA No action currently planned

4

Strategy 2: Develop capabilities for the State to routinely collect regionalized data on Alaska's energy consumption by end-user and determine prices at the local, regional and State level.


1. Reporting Units Workgroup* Office of Energy Budget Request

2. Electric Consumption* Alaska Power Authority and Alaska Public Budget Request Utilities Commission

3. Export/Import Data* Office of Energy and Department of Budget Request Natural Resources

Strategy 3: Establish methodologies for energy projects which involve State funding that provide a reasonably accurate and objective determination of the engineering, economic and environmental feasibility of a proposed project and its alternatives.

1.

2.

Option

Alaska Power Authority Process Adoption+

Uniform Format to Request Project Funds*

Agency

Office of the Governor

Office of Energy

Action

Administrative Order

Ongoing

Strategy 4: Develop a contingency plan for the State which ranges from local emergencies (i.e., diesel generator failure) to the impacts on Alaska from fossil fuel market failures.


1. Rural Mini-Cabinet Alaska Power Authority and Ongoing Generator Failure Task* Department of Community & Regional

Affairs

2. Market Failures Plan* Office of Energy Budget Request

3. Circuit Rider Program (NA) Alaska Power Authority Budget Request

Strategy 5: Planning should be systematic and involve all levels of effort, including participation by local communities, utilities, and nonprofit groups.

Option

1. Long:rerm Planning Coordination*

2. Power Systems Planning*

3. State Block Grants*

4. Expand Community Profiles (NA)

Key

--__,____ * Continuation Programs

Require Additional Budget Requests in FY '86

+ Administrative Action Expected in FY '86

NA No action currently planned

Agency Action

Office of Energy Ongoing

Alaska Power Authority Budget Request

Department of Community & Regional Budget Request Affairs

Department of Community & Regional Budget Request Affairs

2. Energy Price

There are significant disparities between urban and rural Alaska in the price of energy.

The cost for electricity, space heating fuels and transportation fuels is higher in rural Alaska than in urban Alaska. Although the current cost of energy to the rural consumer has decreased because of recent State assistance, the costs still remain high, and as long as the actual costs remain high, the rural consumer is vulnerable to price increases if and when funding for State assistance programs is reduced.

Strategy 1: State agencies should continue to expand efforts to reduce the actual costs of energy in rural Alaska with emphasis on electrical generation and residential space heating.


1. Generator Sizing and Operator Alaska Power Authority Budget Request Training*

2. Fuel Oil/Fuel Tank Grants Department of Community & Regional Ongoing and Loans* Affairs and Division of Investments

3. Weatherization* Department of Community & Regional Budget Request Affairs

4. Waste Heat Development* Alaska Power Authority Ongoing

5. Cooperative Fuel Buying (NA) Department of Community & Regional Budget Request Affairs

Strategy 2: Develop administrative mechanisms which reduce consumer price disparities between regions of the State.


1. Advisory Committee on Office of the Governor Administrative Order Power Costs*

2. Continue Power Cost Alaska Power Authority Budget Request Equalization Program and Investigate Alternatives*

3. Real Power Cost Alaska Power Authority Budget Request Comparisons (NA)

4. Price Comparison Between Alaska Power Authority and Budget Request Fuels and Regions (NA) Office of Energy

5

6

3. Energy Subsidies

State subsidies directed to energy projects and energy consumers may result in less efficient use of energy and produce inequities between regions or communities.

The State has provided substantial subsidies for many energy projects and programs. These subsidies have provided needed relief to recipients and provided a means for distributing State wealth.

Subsidized energy prices can result in higher levels of demand and subsequent inefficient uses of energy may occur when higher levels of demand are encouraged. A long-term concern is that subsidies will encourage wasteful consumer habits and inefficient generation systems that can only be sustained by a substantial amount of subsidy. The ability of the State to continue these subsidies after oil revenues start declining is also uncertain. Effort needs to be directed toward reducing actual costs as well as price.

Strategy 1: Implement conditions and standards for electrification grants which improve the cost effectiveness of projects.


1. Grants Administration* Department of Community & Regional Ongoing Affairs and Department of

Administration

2. Design and Feasibility Alaska Power Authority Ongoing Criteria For Grants (NA)

3. Advance Funding For Design Alaska Power Authority Budget Request and Cost Estimating (NA)

4. Systematic Energy Grant Office of Energy Memorandum of Understanding Review (NA)

5. Grant Completion Department of Community & Regional Budget Request Follow-up (NA) Affairs

Strategy 2: Structure energy subsidy programs to include incentives for improved efficiencies.


1. Amend PCE for Utility Alaska Power Authority Regulation Change Eligible Cost Reductions (NA)

2. Amend PCE For Utility Office of Energy Legislation Customer Benefit (NA)

3. Prevent Fuel Substitutions (NA) Alaska Power Authority Regulation Change

Strategy 3: Examine alternative subsidy rates and mechanisms which would result in more equitable distribution of State wealth.

·a pt ion

1. Target Essential Needs (NA)

2. Power Subsidies to Customers (NA)

Agency

Office of Energy

Alaska Power Authority

Action

Legislation

Regulation Change

7

Strategy 4: Continue to administer federal low income assistance to needy Alaskans.


1. Continue Low Income Home Department of Health & Social Ongoing Energy Assistance Program* Services

2. Seek Federal Block Grant Department of Health & Social Ongoing Money* Services

4. Energy Conservation

The State can reduce energy costs for its facilities and for the residential and commercial sector by expanding its energy conservation efforts.

Energy conservation is now given credence as an economically efficient source of energy. Energy cost reductions have been made to residential, commercial and State facilities from weatherization improvements, and future programs and regulations offer an opportunity to make further energy savings.

Strategy 1: Fulfill statutory requirements for energy conservation programs.


1. Fulfill Regulation Department of Transportation & Public Ongoing Key AS 46.11.010, Public Facili- Facilities ties*

* Continuation Programs

2. Fulfill Regulation Department of Community & Regional Ongoing Require Additional Budget Requests in FY '86

AS 46.11.040, residential Affairs + Administrative Action standards* Expected in FY '86

3. Life Cycle Costs in Department of Transportation & Public NA No action currently planned

Ongoing State Constructed Faci lilies Facilites under AS 35.10.160-.200*

4. Energy Conservation Plan (NA) Alaska Power Authority Budget Request

Strategy 2: Improve the thermal efficiency of Alaska's housing stock.

Option Agency Act ion

1. Furnace Retrofit Program Department of Community & Regional Budget Request Expansion* Affairs

2. Energy Rating Systems* Office of the Governor Administrative Order

3. HUD Adoption of Local Department of Community & Regiona l Ongo ing Requi rements* Affairs

4. Review Energy Conservation Department of Community & Regional Ongoing Programs* Affairs

5. Low Interest Conservation Office of Energy and Division of Budget Request Loans* Investments

6. Energy Education* Department of Community & Regional Budget Request Affairs

7. Building Incentives (NA) Department of Community & Regional Budget Request Affairs

8

Strategy 3: Reduce the operational maintenance costs of public facilities by improving thermal and lighting efficiencies.


1. Design Build Competition* Department of Transportation & Budget Request Public Facilities

2. State/Federal Match to Department of Community & Regional Budget Request Institutions* Affairs

3. Complete Audits (NA) Department of Transportation & Public Budget Request Facilities

Strategy 4: Reduce transportation expenditures of State agencies . •


1. Telecommunications Instead Department of Administration Ongoing of Travel*

2. Encourage Car Pooling and Department of Transportation & Public Ongoing Mass Transit* Facilities

3. Improve Gas Mileage of Department of Transportation & Public Ongoing State Motor Vehicle Fleet* Faci lilies

5. Energy Systems

Improvements are needed in Alaska's electrical energy systems in order to safely, reliably and economically meet existing and future demand.

In many cases, Alaska's energy delivery systems, particularly electrical distribution lines, do not .__ _ _. meet acceptable standards. Also, Alaska's growing population is straining some of these energy

delivery systems. In order to safely, reliably, and efficiently meet Alaska's current demand and to accomodate future growth, attention should be paid to improving the existing energy systems.

Strategy 1: Upgrade Alaska's existing rural electrical distribution system to reduce line losses and outages and to provide extensions.


1. Provide Financing to Alaska Power Authority Budget Request Utilities (NA)

2. Statewide Assessment of Alaska Power Authority Budget Request Distribution Lines (NA)

3. Criteria For Upgrade or Alaska Power Authority Regulation Change Replacement (NA)

4. Amend Rural Electrifi·" Alaska Power Authority Regulation Change cation Revolving Loan Fund (NA)

Strategy 2: Provide fuel storage facilities to small rural villages as a way to assure continuing power product~

1.

Option

Inventory of Bulk Fuel Facilities and Needs (NA)

Agency

Department of Community & Regional Affairs

Action

Budget Request

Strategy 3: Explore regional grid or utility intertie opportunities to lower power costs and improve reliability.

Option

1. Anchorage-Fairbanks lntertie Power Dispatching*

2. Regionalize Grid Requirements*

6. Alternative Technologies

Agency Action

Alaska Power Authority Ongoing

Alaska Power Authority Budget Request

Alternative energy technologies have some potential in Alaska and should be given an opportunity to compete with conventional technologies.

The State has sponsored many alternative energy projects with varying degrees of success. The State should continue its efforts with alternative energy demonstration projects and determine whether the State should assume an active role in alternative energy demonstration projects or provide an attractive climate for the private investor.

Strategy 1: Alternative energy demonstration projects should emphasize applied research and commercial applications.

Option

1. Project Manager Procedure*

2. University of Alaska Research Coordinated With Other State Agencies (NA)

Office of Energy

Office of Energy

Agency Action

Ongoing

Budget Request

Strategy 2: Consider the use of third-party financing in order to provide the State with a market test for a proposed project and to tap state-of-the-art expertise.

Key

9

1.

2.

Option

Advertise Alaskan ThirdParty Financing Interest*

Provide Low- Interest Loans (NA)

Agency

Office of Energy

Division of Investments

Action *

Ongoing

+

Legislation NA

Cont inuation Programs Require Additiona l Budget Requests in FY '86 Adm inistrat ive Ac tion Expected in FY '86 No action current ly planned

Strategy 3: Establish a technical network of people in State agencies which can be called on to provide technical advice for demonstration projects.


1. Advisor Group (NA) Off ice of Energy Budget Request

Strategy 4: Establish regulations and tax laws that favor investments in alternative energy projects.

Option

1. Expand State Loans (NA)

2. Tax Credits (NA)

Office of Energy

Office of Energy

Agency Action

Legislation

Legis lat ion

10

Strategy 5: Develop a grants program for research and development in alternative technology areas.

1.

Option

Innovative Research Grants Program*

Office of Energy

Agency Action

Ongoing

Strategy 6: Use the Power Cost Equalization program to provide incentives for alternative technologies that are feasible.


1. Allow Alternative Tech· Office of Energy and Alaska Power Legislation nology Development While PCE Authority Active (NA)

7. Technical Assistance

Local communities need technical assistance from the State if they are to incorporate proper planning and project management capabilities when developing energy projects such as electrification .

....._____. Most communities in the State do not have available the technical abilities that are needed for adequate energy planning or for proper d~sign and installation of a project. Nevertheless, many of these communities are receiving State appropriations for such activities. It is incumbent on the State to offer these communities the technical assistance that is needed.

•

Strategy 1: Provide State financial support for technical assistance programs.

Option

1. Use APA Technical Assistance For Power,System Problem Resolution*

2. Utilities Mini-Cabinet Technical Assistance Work· group*

3. Integrating Program Activities +

4. Support Community Energy Management Program (NA)

Key

* Continuation Programs Require Additional Budget Requests in FY '86 Administrative Action Expected in FY '86


Agency Action

Alaska Power Authority Ongoing

Department of Community & Regional Ongoing Affairs

Alaska Power Authority and Department Memorandum of Understanding of Community & Regional Affairs

Department of Community & Regional Budget Request Affairs l

\

8. Major Energy Projects

The State can participate in the planning, financing, and construction of energy projects that assist local utilities and communities to realize savings from the selection of energy alternatives that offer the lowest long-term system cost.

11

Di:ect resource extraction for oil , gas, and coal has been primarily conducted and financed by the pnvate sector. The ~tate maintains an active interest in the marketing and transport of those r~source~, and by ~1rtue o! enacted legislation and appropriations, has decided to also play an active role m developmg major Alaskan power projects.

Primarily, the Energy Program for Alaska has been responsible for construction of major projects, including the Anchorage/Fairbanks lntertie and the "Four Dam Pool" hydroelectric projects. Additionally, the State has also expressed interest in providing a long-term solution to railbelt power needs. Solutions could include hydroelectricity, coal, natural gas (new Cook Inlet discoveries or North Slope natural gas), tidal or a mix of these resources. In conjunction with such projects, some resources could also be exported to Pacific Rim markets. The State will continue to pursue energy alternatives that offer the lowest long-term system cost and support orderly, prudent resource development which currently or potentially contributes in a substantial way to Alaska's economic vitality.

Strategy 1: Obtain power sales agreements for the Four Dam Pool.

Option Agency

1. Long-term Supply at Equitable Alaska Power Authority Costs*

Action

Ongoing

Strategy 2: Continue efforts to determine if the Susitna Project should proceed to construction.


1. Continue Susitna FERC Alaska Power Authority Budget Request Application*

2. Negotiate Susitna Power Alaska Power Authority Ongoing Sales Agr'eemenH

3. Susitna Finance Plan* Alaska Power Authority Ongoing

Strategy 3: Continue efforts to develop the Bradley Lake project.


1. Continue Bradley Lake FERC Alaska Power Authority Budget Request Application*

2. Negotiate Bradley Lake Alaska Power Authority Ongoing Power Sales Agreement*

3. Bradley Lake Finance Alaska Power Authority Ongoing Plan*

12

Strategy 4: Encourage further production of Cook Inlet natural gas.


1. Gas Leasing* Department of Natural Resources Ongoing

2. Domestic/Foreign Sales* Office of Energy Ongoing

3. Electric Conversions to Office of Energy Ongoing Natural Gas*

4. Motor Vehicle Conversion Office of Energy Ongoing to Natural Gas*

5. Exploration Incentives (NA) Department of Natural Resources and Legislation Office of. Energy

Strategy 5: Examine feasibiity of using North Slope gas for electric and thermal needs in the railbelt area.


1. Keep Advised of Pacific Office of Energy Ongoing Rim Gas Development*

2. Comparison to Other Alaska Power Authority Budget Request Energy Alternatives (NA)

3. Feasibility Studies (NA) Alaska Power Authority Budget Request

Strategy 6: Develop a step-by-step process which provides control over the development of a major power project from the reconnaissance stage through completion of construction.

Option Agency

1. Alaska Power Authority Project Alaska Power Authority Approval Process Adoption+

Key

* Continuation Programs Require Additional Budget Requests in FY '86 Administrative Action Expected in FY '86


----

........

Action

Ongoing

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Energy Assessment

Alaska's production of energy far exceeds in-State needs due to the massive crude oil and natural gas resources available in the State. Limited refinery capacity necessitates the import of some refined petroleum products despite the excess production. Alaskans have the nation's largest average energy consumption level and this consumption occurs through a variety of commercially proven and alternative energy technologies. (How consumption and production balance in Alaska is the subject of this section.)

Consumption

Alaskans consumed 411 trillion Btu's of energy in 1982, continuing an increasing consumption trend that has prevailed since statehood in 1959. In 1982, Alaska consumed 1.15 billion gallons of petroleum, 238 billion cubic feet of natural gas, 672 million pounds of coal, 2.3 billion kilowatt hours of electricity. In total, Alaska ranked first in consumption compared to all other states in the nation, and per capita consumption of 926 mill.ion Btu's was three times the national per capita average of 305 million Btu's. Alaska's increasing consumption of 5 percent per year since statehood closely parallels the overall economic growth of 3 to 5 percent.

Fossil fuels are the main source of energy in Alaska today. Diesel engines are the principal source of electric generation for most of Alaska's rural villages and many of its smaller cities, having a nameplate capacity of 265.5 MW. Alaskan coal-fired steam plants have a nameplate capacity of 87.0 MW with all of this capacity located in the Fairbanks area. Combustion turbines using natural gas are another source of power in Alaska, with total nameplate capacity of 901.6 MW. Peat, also considered a fossil fuel, has potential as a heat source.

Renewable energy resources are gaining greater usage in Alaska. Both uti lity sized and smaller privately owned microhydroelectric projects are on line. (Combined with fossil fuel production, a total of 2.4 billion kilowatt hours of electricity was produced for consumption in 1982.) Wind generators are becoming more popular and there are presently more than 150 wind generators statewide. Photovoltaic systems are being used in low wattage, remote uses such as fish-counting equipment, communication equipment and railroad crossings as well as to supplement other sources of intermittent power such as wind generators. Wood consumption and the use of biomass products to supplement heat and power sources are also used. Biomass consumption is unquantified for Alaska, but wood consumption for heating exceeds 50,000 cords annually. Geothermal energy generation is becoming more important, but like biomass, is not clearly documented in. Alaska.

Production

Alaskan energy production continued to expand in 1984. On a daily basis, in-State refineries produced approximately 4.4 million gallons of refined liquid petroleum products and over 1.6 million barrels of crude oil flowed from the North Slope to Valdez. On the Kenai Peninsula, 1984 saw 1.0 million tons of ammonia and urea and 1.0 million tons of liquified natural gas produced from Cook Inlet natural gas. Coal production from the railbelt was 800,000 short tons. Renewable energy sources also provided power for Alaska in 1984, as hydroelectric capacity reached 217 MW and alternative energy projects in the form of wind and geothermal began approaching a point of commercializat ion at select Alaskan sites.

14

------------------------------------------Chart4 Consumption of Energy by Sector and Fuel Type for Alaska

(Trillions of Btu's)

Statehood 1960 1982 1981 1980

Residential Total 8.1 34.3 33.1 38.8

Coal 0.4 0.0 0.0 0.0 Natural Gas 0.2 8.1 8.1 10.8 Petroleum2 5.2 7.0 5.4 6.8 Electricity3 2.3 19.2 19.6 21.2

Commercial Total 7.5 34.5 31.9 41.2

Coal 0.8 0.0 0.0 0.0 Natural Gas 0.0 16.9 16.6 24.9 Petroleum 2 5.2 4.8 4.4 4.8 Electricity3 1.5 12.8 10.9 11.5

Industrial Total 17.2 138.7 109.2 266.9


Transportation Total 27.6 89.4 101.1 102.4

Coal 0.1 0.0 0.0 0.0 Natural Gas * 0.1 0.3 0.3 Petroleum 2 27.5 89.3 100.7 102.0 Electricity3

* * 0.1 0.1

All Sectors Combined Total 60.3 297.1 275.2 411.4


1 Information from U.S. Department of Energy, State Energy Data Report, Consumption Estimates 1960-1982.

2 Includes Distillate Fuei,...Kerosene, and LPG. 3 Electric sales and electric energy losses due to transmission generation. * Less than 0.1

15

------------------------------------------ Chart5 Alaska's 23 Energy Regions

Arctic Ocean

State of Alaska Chukchi sea

1. North Star 2. Kobuk 3. Nome 4. Yu kon-Koyukuk 5. Fairbanks North Star 6. Southeast Fairbanks 7. Wade Hampton 8. Bethel 9. Dillingham

10. Bristol Bay 11 . Aleutian 12. Matanuska-Susitna 13. Anchorage 14. Kenai Peninsula 15. Kodiak 16. Valdez-Cordova 17. Skagway-Yakutat-Angoon 18. Haines 19. Juneau Bering Sea

20. Sitka 21. Wrangell-Petersburg Gulf of Alaska

22. Prince of Wales-Outer Ketchikan 23. Ketchikan 23

11

0 Atka Island •,. .,

(;:) • . c:::Pr:::;?c? ,.. Unalaska Island

Oil & Gas

Oil and gas are Alaska's primary energy resources. Total petroleum production in Alaska since the turn of the centu_ry has _b~en ove~ 4.3 billion barrels of oil (one barrel equals approximately 42 g~llons), and c:w~r 7.9 t~1ll1on cub1c feet of natural gas. Estimated reserves of 9 billion barrels of 011 and 39.9 tnll1on cub1c feet of natural gas are known.

Competitiv~ leasing is the method used to provide temporary access to below-ground petroleum reserves, w1th leased tract~ spread f~om the Gulf of Alaska to the Beaufort Sea on federal and State land~. The story of 011 exploration and subsequent leasing have formed Alaska's present oil and gas p1cture.

The State has held 43 competitive lease sales since 1959, leasing 7.7 million acres of State-owned land. A total of 1,479 leases covering 4.6 million acres are currently active. The State of Alaska plans to hold an additional 16 sales through the year 1989. In addition , the Federal Government will conduct 11 lease sales on the Outer Cont inental Shelf (OCS) through 1987, including areas in Cook Inlet, the Gulf of Alaska, St. George Basin , the Diapir Field (Beaufort Sea), areas near Kodiak Island and in areas near the Shumagin Islands.

Exploratory activities are occurring in Cook Inlet, the Beaufort Sea, St. George Basin, Navarin Basin and on the North Slope. Marginally economic fields, such as the Kuparuk and Lisburne formations, are beginning to be produced due to their close proximity to the super-giant field,

16

Prudhoe Bay. Additionally, development plans are being formulated for the Endicott formation located east of Prudhoe Bay, and a at Seal Island in the Beaufort Sea west of Prudhoe Bay.

Alaskan petroleum supplies come largely from oil flowing through the Trans-Alaska pipeline (TAPS) from Prudhoe Bay and from oil and gas production in Cook Inlet. Crude oil and natural gas are refined for in-State consumption and export. TAPS provides 1.6 million barrels of crude oil per day. Alaskan refineries process 124,100 barrels of refined petroleum products and 230 million cublic feet of natural gas per day. Annually, 1.1 million tons of ammonia and 1.0 million tons of urea are also produced from natural gas.

------------------------------------------Chart6 Alaska's Known Oil and Gas Provinces

Coal

' Atka Island • •

Chuckchi Basin

Tertiary Province

Alaska's coal r~sources are plentiful and widespread, providing long-term development potential for export _and rn-State us~. Coal de'posits range from Cook Inlet to the North Slope and offer a vast exploitable resource. Alaska produced 336,000 short tons of coal in 1982. Alaska's measured coal res~rves are approximat~ly_ 6.3 billion short tons (one short ton equals 2,000 pounds) with hypothetical reserves of 5.6 b1ll1on short tons. (See Chart 7 for location of Alaska's known coal resources.)

Only one coal mine was active in 1983-84 and there was a low level of exploratory drilling. In 1985, this activity will increase. Potentially, Diamond Shamrock will develop a 12-million-ton per year coal production facility in the Beluga area, the Usibelli mine at Healy will increase production, Usibelli coal will be shipped via the Alaska railroad to Seward for export to South Korea. Recently

17

------------------------------------------Chart? Alaska's Known Coal and Peat Resources

q;;:a , Atka lslanp "' •

Chukchi Sea

Cape Beaufort

St. Lawren~ Isla nd

Bering Sea

. &=I • • c:::::PCS?C? • Unalaska Island

Arctic Ocean

Gulf of Alaska

Explanation

Potential for fuel -grade peat deposits Low , High

Explanation

• Coal exploration in 1983

~Coal Field

leased acreage in the Matanuska area will be developed, and a $2 million appropriation by the Alaska State Legislature will fund a feasibility study of a Cape Beaufort coal mining facility.

Peat

Alaska has only a small portion of the known world supplies of usable peat. Peatlands with fuel grade potential cover 4.4 million acres of Alaska. With a minimum deposit thickness of five feet, these peat deposits will yield approximately 880 million tons of moisture-free, fuel grade peat.

Peat assessment is now focused at Dillingham as part of the Bristol Bay Native Association Peat Harvesting Project at Roger's Creek and Houston areas in the Susitna Valley and on the Kenai Peninsula. Horticultural peat is mined from four pits in the Fairbanks area and at two locations in Willow. Production during 1983 is estimated at 15,000 cubic yards (See Chart 7 for location of Alaska's known peat resources.)

Hydroelectric Power

Alaska has more undeveloped hydroelectric potential than any other state in the U.S. In the 1960's, the U.S. Bureau of Reclamation investigated thousands of potential hydroelectric sites throughout Alaska; 252 sites have been identified with a potential for a hydroelectric project of 2,500 KW or more. Alaskan hydroelectric projects on line today have a nameplate capacity of 197.7 MW, with an additional 20.0 MW just coming on line with the completion of the Terror Lake project. These projects will generate 1.04 million MWh of electricity annually (See Chart 8 for Alaska's Major Hydro Installations.)

18

Wind

Wind power, suitable for generation of energy in the form of electricity, heat or mechanical power, occurs mainly in Alaskan coastal areas and mountain passes. Favorable wind conditions tend to prevail in the winter months when most communities experience their peak electrical demand and, of course, peak heating demand.

There are over 150 wind generators erected in Alaska today. They are distributed across all regions of Alaska, and have peak power capacities ranging in size from less than 0.5 kW to over 10 kW. Several potential sites with expected good wind potential are being monitored today in select Alaskan locations.

Geothermal

Alaska's geothermal resources occur in over 100 surface manifestations including hot springs, fumaroles, mud pots and wells. Over 11 million acres in the State have significant geologic evidence for geothermal energy development. To date, the quantity of power produced from geothermal has been limited.

The use of hot springs in Alaska for health and recreational purposes is well documented in the historic record. Commercial baths and spas have been developed at numerous sites in southeast and northcentral Alaska. At least six of these establishments have also used low-temperature geothermal fluids for other direct uses such as space heating in lodges, cabins, and greenhouses.

------------------------------------------Chart8 Alaska's Major Hydroelectric lnstaUations and Geothermal Resources

Atka Island

Chukchi Sea

St.Lawren~ Island

Bering Sea

Bristol Bay

Arctic Ocean

- Existing Transmission Systems

:~:~:~,· . frlJper Lake

;;: Gulf of Alaska •• ·! Kod•ak erl\tr- a Potential for geothermal resources

• Geothermal Site ~0

~ Moderate to high temperature (more than 150' C)-Suitable for electrical 'el generation and cascaded direct use; located in areas of active or recently

active volcanic systems

Low to moderate temperature (less than 150' C)-Su itable for direct use in space heating, agriculture, aquaculture, rec reation, recreational facilities, and industrial processes; located in areas with deep circulation of water along fracture systems assoc iated with granitic intrusive bod ies

The State of Alaska has conducted three geothermal drilling programs since 1979. These were at Pilgrim Hot Springs on the Seward Peninsula, Summer Bay on Unalaska Island, and Makushin Volcano on Unalaska Island. These each had reservoir temperatures ranging from 122° to 380°F.

In addition to the State projects, the U.S. Department of Navy has been investigating the possibility of developing geothermal resources for electrical generation on Adak Island. The Navy is planning a geothermal exploration program for 1985. (See Chart 8 for Geothermal Resources of Alaska.)

Solar

19

Solar energy has good potential for use as an additional source of energy in Alaska. Varying levels of daylight experienced in Alaska actually permit 230 hours more sunlight in Alaska than at the equator each year. Solar energy can be used in one of four forms: passive heating, active heating, photovoltaics, and daylighting; and although the actual experience with solar energy in Alaska is limited, solar may be a valuable energy resource. The amount of solar use is not well documented.

Tidal

The ebb and flow of the tide produces kinetic energy which can be harnessed to produce electricity if there is sufficient tidal range. The principal tidal resource in Alaska is Cook Inlet which has the second highest tides in the world. Cook Inlet is a major;: tidal estuary which is approximately 180 miles long and ranges in width from approximately 80 miles near its mouth to approximately 20 miles at the confluence of the Knik and Turnagain Arms. Some 16 sites have potential for a tidal power plant. However, the density of the kinetic energy in tidal currents is relativ~ly low and harnessing this energy source is capital intensive. To date, no substantial contribution to power generation has come from this resource.

Biomass - Wood

Alaska has tremendous biomass potential, particularly from forestry p~oduct waste material. In 1983 262 million board feet of logs were harvested, resulting in production of 146 million board feet of 'lumber, 240,000 short tons of pulp, and 7,000 short tons of chips. (Additionally, Native corporations exported 233 million board feet of logs.) Thi~ producti?n of lumbe~ ':lnd pulp comes . from Alaska's 240 sawmills which have a total production capac1ty of 532 m1lllon board feet. Th1s production could provide a sizable amount of biomass for power generation.

Wood is used for space heating in many parts of Alaska. Firewood removal from National Forest Service lands in Alaska from October 1982 to September 1983 totalled 11,226 cords of wood and State lands provided an additional 38,890 cords of wood; for a total energy equivalent of 860 billion Btu's. About 40 percent of that consumption was in Fairbanks, 40 percent in all Southeast, and the balance spread statewide (see Chart 9 for Alaska's Timber Resources).

Conservation

Energy saved through conservation is one method to provide more energy service from a given level of power, and represents one of the more accessible energy resources available in Alaska. Conservation includes improvements brought about through increasing thermal efficiencies in buildings, power generation efficiencies for electrical production, increased miles per gallon in transportation, and changes in consumer attitudes on energy use. Thus, conservation offers potential benefits through more comfortable living accommodations with lower life-cycle costs and reduced levels of energy spending. Like many energy resources used in the home or extracted for personal consumption, the exact levels of energy saved are not quantified.

In Alaska, conservation reaches all aspects of the consuming public. Building insulation leads the list in providing maximum energy savings for minimum investment. Other simple forms include insulation of hot water heaters, installation of flow restrictors in hot water faucets, and elimination

20

Alaska Timber Resources

~0 0 . = ~·.

Atka Island

Chukchi Sea

St. Lawren~ Island

Bering Sea

.' ••• ,.J;::.c2__c? - c:::;.-;" Unalaska Island

Chart 9

Arctic Ocean

Gulf of Alaska

...,.. Commercial - Well -stocked

Noncommercial-Poorly stocked

of dripping faucets. On a larger scale is the use of properly sized, newer and more efficient diesel generators for electricity generation, and the use of waste heat from the generator jacket and flue gas emissions to heat nearby buildings.

Alaskans are separated by great distances, and have worked to improve economies in transportation and communication. Transportation efficiencies have been brought about through widening, paving, and generally upgrading road surfaces and through carpooling and mass transit programs in Anchorage and Fairbanks. Travel by air and sea have realized greater efficiencies through engine modifications, adjusted travel scheduling, and increased design efficiencies. Communication improvements through the electronic media have reduced the need for travel as well.

--

21

State Energy Programs

The State of Alaska continues to give high priority to domestic and export energy issues. Virtually every State agency has some direct or indirect involvement in energy. Several departments have direct responsibility for implementing energy projects or programs. The involvement of the State agencies tends to be based on peripheral concerns, such as environmental permitting.

State agencies with direct responsibility for energy programs are:

1. Department of Commerce and Economic Development (DCED)

• Office of Energy (OE)-Energy planning, alternative energy development, marketing of fossil fuels.

• Division of Investments-Energy loan programs.

• Office of Minerals Development-Assists in ·developing contacts and encouraging mineral development in-State.

• Alaska Power Authority (APA)-Pianning and development of dtstrict heating and elec-trical systems. ·

• Alaska Public Utilities Commission (APUC)-Regulation of electric and gas utilities and pipeline carriers. ·

• Oil and Gas Conservation Commission-Regulates oil and gas production.

2. Department of Community and Regional Affairs (DCRA)

• Division of Community Development (DCD)-Weatherization program, public information efforts, community planning.

• Municipal and Regional Assistance Division (MARAD)-Community grant and bulk fuel loan administration.

3. Department of Health and Social Services (DHSS)

• Division of Public Assistance-Low Income Housing Energy Assistance Program.

4. Department of Natural Resources (DNR)

• Division of Geological and Geophysical Surveys-Investigates oil, gas, coal and geothermal resources.

• Division of Oil and Gas-Manages oil, gas and geothermal leasing programs, royalty oil sales, and issues permits for exploration and development plans.

• Division of Mining-Manages coal leasing programs.

5. Department of Transportation and Public Facilities (DOTPF)

• Research Section-Energy conservation in public facilities.

6. Department of Administration (DOA)

• Direct grants administration of legislative appropriations to · incorporated communities.

22

7. University of Alaska (UA)

• Energy Extension Service-Provide information on energy conservation and conduct alternative technology research.

• Institute of Water Resources-Energy education and research.

• Geophysical Institute-Mineral exploration.

8. Department of Revenue (DOR)

• Research Section-State revenue forecasting.

9. Department of Military and Veterans Affairs (DMVA)

• Division of Emergency Services- Civil defense and natural disaster emergency planning.

10. Office of the Governor (GOV)

• Office of Management and Budget (OMB)-State budgeting.

,,

23

__________________________________________ Chart 10

Agency Responsibilities by Energy Functional Areas · 1984

Functional Area

Energy Conservation

Conservation Education

Energy Grants

Institutional Conservation

Largescale Electrification

Rural Electric Loans

Rural Technical Assistance

Small scale Electrification

Thermal and Light Standards

Utility Loans

Waste Heat

Weatherization

Energy Subsidies

Power Cost Assistance

Power Cost Equalization

LIHEAP

Audit Grants

Residential Weatherization Loans

Alternative Technology Loans

24

(Continued)

Functional Area

Electric Systems

Bulk Fuel Loans

Bulk Storage Grants

Legislative Grants

Alternative Energy

Demonstration Projects

Information

Alaska Energy Center Projects

Research

Grants and Loans

Utility Regulations

Leasing and Marketing

Royalty Program

Oil and Gas Leasing

Coal Leasing

Geothermal Leasing

Resource Marketing

------

25

Summary and Conclusions

Alaska's Energy Plan - 1985 gives direction to the economic and financial objectives of Governor Sheffield's energy development policy, supporting orderly, prudent resource development which currently or potentially contributes in a substantial way to the economic vitality of the State. By placing emphasis on the short-term strategies of State agencies having direct responsibility for energy programs and using an interagency workgroup to write the plan, State agencies have more effectively coordinated informational needs and decision-making procedures. Alaska's Energy Plan - 1985 provides both a snapshot of State energy programs and energy use today, and a mechanism for developing Administration policy on Alaska energy issues in the future.

In the short term, the State will continue to place a major emphasis on energy through the programs administered by some 20 different State agencies. The bulk of those programs is conducted by the Department of Commerce and Economic Development, the Department of Community and Regional Affairs, and the Department of Natural Resources. State energy programs provide aid to private development of Alaska's natural resources through direct subsidies in the form of loans and grants, and through the pursuit of specific demonstration and power development projects.

State subsidies are the backbone of the rural energy program. The Power Cost Equalization program provides funding to rural utilities to reduce consumer electrical costs. Heating costs will be reduced by the construction of bulk fuel storage facilities, through grants and loans for improvements to electrical generation and transmission facilities, by development of waste heat recycling facilities, and through low-interest loans and grants for conservation improvements. Weatherization continues to be provided to low-income households, and conservation education programs are widely used. The State also administers over $11 million in federal funds to help low-income Alaskans pay for their energy requirements.

Power development projects and demonstration projects for alternative technologies are either contemplated , under construction , or in place. The Rural Elect rification Revolving Loan Fund permits rural utilities to extend electrical services, and the Power Project Loan Fund develops new ones. Reconnaissance and feasibility studies precede State participation in these endeavors. Alternative energy projects for wind, solar, peat, bioenergy, woodstoves and geothermal are in place. Future activities are being funded with loan programs and through direct State development efforts. Those efforts also include oil, gas, coal, and geothermal leasing of State lands.

Alaska's long-term energy future has been projected in many econom ic models. One such model, by A. D. Little in 1983, projects a real growth in the economy of 2-3 percent per year, and a population increase of 3-4 percent through the year 2000. Pacific Rim nations are expected to need increased levels of natural gas and oil by 1995. Given Alaska's ability to provide those fuels, additional employment opportunities attached to increased Alaskan production for these Pacific Rim markets can be expected to begin around 1990.

Certain projects will continue to play a dominant role in determining Alaska's energy future. An FY '85 loan appropriation of $210 million was made to the Four Dam Pool (Ketchikan, Wrangell, Petersburg, Kodiak and Valdez) hydroelectric projects, $100 million to the Susitna hydroelectric program, $50 million to the Bradley Lake Dam, and $21.7 million for rural Power Cost Equal ization. 1984 saw the acquisition of the Alaska Railroad by the State which will begin hauling coal from Usibelli Coal Mine, near Fairbanks, to Seward for shipment to Korea and the issuance of coal leases in the Palmer area.

Long-term electrical power source(s) for the Railbelt - where three-quarters of Alaskans live - is a question still waiting to be answered. Alternatives to the Susitna hydroelectric project appear to be mine-mouth coal (Beluga), or gas~f ired turb f.r;~es supplied from either Cook Inlet or North Slope natural gas, or a combination of these. The Govennor's Council on Railbelt Electricity (G-CORE), fo~med in 1984 with representatives of local utilities, is attempting to address the questions of the pnce of Susitna power to Rail belt consumers and 'which alternative(s), if any, might be preferable. The State will look to the electrical utilities to indicate which power source(s) should be promoted for the Railbelt.

26

Either a tidewater (TAGS) or cross-Canada (ANGTS) pipeline may bring North Slope natural gas to foreign and domestic markets within the next decade. It is possible, with 40 trillion cubic feet of gas on the North Slope, that liquefied natural gas (LNG) could be shipped to the Pacific Rim nations and natural gas piped to the South-48, concurrently. At the moment, natural gas prices make either venture appear uneconomic. In 1985, Atlantic Richfield Company is expected to begin a pre-feasibility study of the Japanese market for Alaskan LNG. Companion studies of Korean and Taiwanese markets are anticipated.

Funding for Alaska's energy programs will largely be determined by available revenues. On the positive side, removal of federal prohibitions may provide additional revenue to the State. Presently, federal legislation prohibits the export of Alaska oil. As a result, approximately 800,000 barrels of Alaska crude are now being shipped each day to the Gulf Coast on U.S. flag vessels at a cost of over $5.00 per barrel. By shipping to Japan, even in U.S. flag vessels, a substantial cost per barrel savings, perhaps as great as $3.00 per barrel, would be experienced. On the negative side, declines in petroleum revenues from reduced North Slope production after 1990, decreasing world oil prices in the near future, and changes to the level of oil consumption worldwide may potentially reduce State revenues. Development of Alaska's energy programs and overall economic growth may directly depend on the revenues dictated by these actions.

What energy policy should the State embrace? Expectations for reduced State revenues and Alaska's continual growth must work hand in hand, which means applying today's revenues to assure a quality Alaska tomorrow. To do so requires Alaska's energy policy to be founded on the premise that all Alaskans can be assured an adequate supply of acceptable quality energy at a fair price within the financing limits of the State. Extracted resources must provide optimum benefits without leaving the State with energy shortfalls. Alaska must use today's revenues to protect Alaska from future energy "shocks."

Major energy projects must be weighed aga,inst less costly options, and potential in-State and export revenue generating capabilities must be quantified. Large projects that require energy must reflect a balance between Alaska's needs for revenue generation and personal needs of State residents. These same nonenergy projects must be analyzed for potential power generation opportunities, such as incorporating tidal power generation with a road crossing of Cook Inlet, for example. Rural Alaska power should be made more accessible, reliable, and less costly through the use of interties, alternative technologies, and more efficient use of cogeneration capabilities where they exist. Generally, Alaska must plan a stepped approach to assuring quality power, a growing economy, and adequate life-cycle cost of every large project undertaken.

Aggressive pursuit of short-term projects with long-term benefits must start today. Weatherization is a proven method to lower power costs and assure a warm, comfortable home and should be provided in line with developing statewide thermal and lighting standards. Conservation must be a byword. Knowing how and where .to conserve is a primary step, and education is the key to successful implementation. In schools, and at the consumer levels, Alaskans must have their energy consciousness raised to a point that efficiency is expected. Reducing consumption through efficiencies without degradating accustomed lifestyles, must be a key objective. Reductions to State energy subsidies would benefit from such savings as well. Generally, active pursuit of programs and projects that are relatively low cost yet widespread over rural and urban areas will net considerable energy savings now and in the long run. Ultimately, Alaskans will determine where the State goes on economic. expansion and energy development.

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