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Governor rekindles massive Susitna dam proposal

Sean CockerhamMcClatchy-Tribune News Service

JUNEAU -- Gov. Sarah Palin's goal for Alaska to receive 50 percent of its electricity from renewable energy by 2025 is reviving long-held dreams of the state building a giant hydro project like the Susitna dam. It's also inspiring skeptical questions about realism and expense.

"On the Railbelt in particular, we have a number of opportunities, be it Susitna, Chakachamna, Mount Spurr," said Joe Balash, the governor's special assistant for energy.

"We may have to make a big investment here for this generation but it will pay off for the next generation," he said.

Palin is planning to start this year by asking the Legislature to approve bringing the six Railbelt energy utilities into a single new power corporation. That's the only way to do a project like the Susitna dam, Balash said.

"We know for sure that it's big, it's going to take a long time and there's not a single one of the electric utilities in the Railbelt today that can do it themselves," he said.

The idea is that in 10 years all utility customers along the Railbelt -- from Kenai to Fairbanks -- would pay mostly the same rate for electricity, he said.

The governor is also pushing to restart an idled Healy coal plant and get an in-state natural gas pipeline built within five years. Mark Foster, an independent energy consultant and former member of Alaska utilities commission, said it's a stretch to think an in-state pipeline and big hydro project could both have enough financing and customers.

"It's far from clear to me that when you start stacking these projects on top of themselves you have something that makes sense at all given the small size of the market," he said.

Foster said it could happen -- if the price of oil went to $300 a barrel. But that's about twice as much as the record high hit last summer and some seven times the current price. Such a price would give the state money to subsidize projects as well as create economic activity and enough energy customers. "It's really only in what strikes me as a pretty extreme scenario can you make all that work," he said.

Balash said that's not so. Healy coal would only provide a small percentage of the Railbelt power and, if there were a pipeline shipping natural gas, he said, the gas supply would allow the reopening of the Agrium fertilizer plant on the Kenai or a new industrial use for the energy.

North Pole Republican Rep. John Coghill agreed, saying electricity from hydro would free up gas for other uses. "I think the economy can handle that," he said.

But Anchorage Democratic Rep. Mike Doogan said the state should take care in spending billions of dollars based on what he thinks was a "number plucked out of the air" by Palin as a renewable energy goal. He said the original Susitna dam project was controversial and too expensive, although he's willing to look at whatever updated plan comes out.

MULTIBILLION-DOLLAR DAM

Balash said the governor's office came up with the goal based on the fact Alaska already gets 24 percent of its electricity from renewable sources, mostly hydro power in Southeast. Getting to 50 percent is doable, he said, and once the debt from construction is paid off what's left is cheap energy.

It would be next year before the governor was ready to go to the Legislature and start talking about financing for big projects. She might have a tough time this year anyway, since the state faces a potential deficit in the billions as a result of the drop in the price of oil.

There's a belief among many legislators that the governor specifically has a Susitna dam in mind with her renewable energy goal. "It would be a challenge to do it without Susitna," conceded Balash.

But he said the governor's office is not convinced yet that Susitna is feasible. A combination of other projects could also work. The state has hired consultants to update old studies done on the Susitna project and expects to receive a report in the next month or so.

State officials began talking about damming the Susitna River in the 1970s as the North Slope oil money first started to flow into the state treasury. The state considered a version that involved dams at Devils Canyon north of Talkeetna and at Watana Creek to the east.

The project collapsed under its own weight in 1986 as oil prices and state revenue plummeted, leaving the estimated $5 billion for construction bonds out of the state's reach.

The price would be far higher today. But the governor's office and state legislators said this time around it could be a slimmed down version.

During the 1980s debate over Susitna, environmentalists said it would threaten fish and wildlife habitat. But they've been hugely enthusiastic about Palin's renewable energy goal.

Deborah Williams of Alaska Conservation Solutions said she'd support a Susitna project if it were done right. That would have to include keeping the electricity in state for residential and small commercial customers, she said.

"It could be managed in a way that when you look at tradeoffs, you'd say, how does a smaller hydro project in Susitna compare with coal or other fossil fuel? And you could come to the conclusion that a Susitna hydropower project caused less environmental damage," Williams said.

ACROSS THE INLET

Palin special assistant Balash said that, if Susitna didn't work, it would be possible to meet the 50 percent renewable energy goal with a combination that included Mount Spurr geothermal and a potential hydropower project at Chakachamna Lake about 85 miles west of Anchorage. The estimated price tag on Chakachamna is about $1.75 billion.

The idea is for smaller projects in rural Alaska as well, but to get to 50 percent requires a big Railbelt effort. Balash said the idea is to gradually replace aging energy infrastructure along the Railbelt with renewable sources.

House Speaker Mike Chenault, R-Nikiski, said he's interested in taking a close look at Chakachamna as well as Susitna.

"The governor has proposed we be 50 percent renewable by 2025. We don't get there by putting one windmill in a village someplace or one small hydroelectric project. There's gonna have to be some massive projects" he said.

ONE BIG POWER COMPANY

Many legislators don't seem to know what to make of Palin's talk of bringing the Railbelt utilities under a single corporation.

"I'm anxious to see the governor flesh this out to us and explain what her vision is here," said Senate President Gary Stevens, a Kodiak Republican.

Balash said the idea is to consolidate the power generation and transmission assets of the Railbelt utilities. They'd still separately distribute electricity to customers. So if the power went out a local person would deal with it, for example, he said.

The goal is that in a decade all the Railbelt utility costumers would pay mostly the same rate. So an Anchorage Municipal Light & Power customer, for example, would pay about the same as a Golden Valley Electric Association customer in Fairbanks.

ML&P has the cheapest rates in the state. So, if this were put in place today, its customers would see a rate hike to even out with the rest of the utilities. But the Beluga natural gas field -- where ML&P gets its fuel -- will be depleted before the arrangement starts 10 years from now, Balash said, and ML&P's rates will have gone up.

"We just want to get past the winners and losers part of this. We know that, in the long term, if everybody's working together then everybody benefits," he said.

He said ratepayers would save money as utilities consolidate assets and become more efficient. Just how the plan might work is being hashed out in talks between the governor's office and the six Railbelt utilities. The utilities haven't committed.

ML&P spokesman Gary Fife said the utility's general manager, Jim Posey, "wants to look at it some more before he makes any comments."

Find Sean Cockerham online at adn.com/contact/scockerham or call him in Juneau at 1-907-586-1531.


By SEAN COCKERHAM
scockerham@adn.com