CIRI venture backs out of Kenai Hydro — Company refocusing on several other energy projects

By Jenny Neyman

Redoubt Reporter

Wind Energy Alaska, partly owned by Cook Inlet Region Inc., a Southcentral Alaska Native-owned corporation, has announced it is pulling its support from Kenai Hydro, a joint venture with Homer Electric Association to investigate the feasibility of installing hydroelectric projects on streams in the Kenai Mountains near Moose Pass.

“What we’ve determined is, looking at this project, it’s not the best use of our time right now, because we have a number of things going on,” said Jim Jager, director of corporate communications for CIRI, also speaking on behalf of Wind Energy Alaska. “… We have quite a few different projects in the hopper right now, and given what we’ve been learning about the Kenai Hydro projects, and given everything else, we’ve determined that Kenai Hydro doesn’t make sense for CIRI or Wind Energy Alaska to be participating in.

“We’re handing the project over to Homer Electric, and Homer Electric will decide whatever it decides in terms of pursuing the project. But we’re just saying it’s not the right project for CIRI or for Wind Energy Alaska at this time.”

Joe Gallagher, HEA spokesman, said in an e-mail Monday that “HEA believes that the project(s) could be feasible.”

“Kenai Hydro has not made a decision to terminate the licensing process. The next step is a public meeting, tentatively scheduled for early November,” Gallagher wrote.

CIRI is a 50-50 partner in Wind Energy Alaska with enXco Inc., which seeks to develop renewable energy projects. Wind Energy Alaska joined with Homer Electric Association to form Kenai Hydro LLC. Kenai Hydro was granted preliminary permits by the Federal Energy Regulatory Commission in October 2008 to study the feasibility of installing small-scale hydro projects on four waterways in the Moose Pass area — Crescent Lake, Ptarmigan Lake, Grant Lake and Falls Creek.

On Aug. 6, Kenai Hydro submitted a Pre-Application Document and Notice of Intent for a combined project involving Grant Lake and Falls Creek, which would generate an estimated 4.5 megawatts of electricity.

On Sept. 25, Kenai Hydro submitted notice to FERC that it wished to relinquish its preliminary permits on Ptarmigan Lake and Crescent Lake, saying that, after initial investigation and meeting with stakeholders, the projects appeared to be unfeasible.

Work still is progressing on the Grant Lake/Falls Creek project, with a joint meeting between involved agencies, organizations and the public tentatively scheduled for Nov. 12 in Kenai, where Kenai Hydro will review and discuss study plans and summarize the project description and potentially affected resources outlined in the Pre-Application Document. The meeting initiates a 60-day comment period on the study plans and information from the Pre-Application Document, according to Long View Associates, a Kenai Hydro contractor. Project scoping meetings also are tentatively being scheduled for the range of Dec. 8 to 10 in Kenai.

Jager said the decision for Wind Energy Alaska to withdraw support from Kenai Hydro was not made suddenly.

“It’s not something that they’re (Kenai Hydro’s other partners) just finding out about. We have talked with them (Homer Electric) as recently as this morning. We’ve also talked with them or sent letters and had communications leading up to this. And I don’t know what the formal date is, I’m not sure that’s important so much as they’ve been apprised of our position that we’re giving them the project and letting them make their decision,” Jager said Monday.

Cooper Landing and Moose Pass residents have opposed the projects, fearing the impacts that dams, water diversion, power generation and associated construction could have on salmon-spawning streams which feed the headwaters of the Kenai River. Bob Baldwin, president of Friends of Cooper Landing, said he was heartened to hear of that Wind Energy Alaska would be pulling out of Kenai Hydro.

“It’s very welcome. We applaud CIRI’s judgment and good common sense,” Baldwin said.

“We would only be speculating about how this might affect Homer Electric and enXco,” he said. “CIRI basically has been the only partner in the projects with deep pockets, so we’ve been very aware of that and we don’t know how this would affect the ongoing effort to apply for licenses. … It would be a very practical decision, from our viewpoint, if they decide, just like CIRI, that the Kenai Hydro projects are just not commercially viable, regardless of local opposition, which they seem to be indifferent about. So I’m sure CIRI’s withdrawal is going to be very significant. We’re heartened by it.”

Jager said that CIRI, through Wind Energy Alaska, has contributed financially to Kenai Hydro, but would not be contributing further.

“Indirectly, yes, CIRI money has supported this, but I guess the fact of the matter is the participants of Wind Energy Alaska have determined the project is just not making sense from our point of view, given everything else that we have going on, so we’re not going to spend any more resources on it,” Jager said.

Jager would not say how much CIRI money has been spent through Kenai Hydro, or release any cost estimates for the feasibility study or licensing process, saying it was proprietary information. Neither would HEA disclose financial information about how much HEA money has been spent on the Kenai Hydro projects, how much the feasibility study work and licensing process are expected to cost, and how much HEA expects to pay in the future. HEA is bound by a confidentiality agreement with Wind Energy Alaska and is not at liberty to disclose such financial information, Gallagher wrote.

Public funding for the feasibility study work has come from the Legislature through the Renewable Energy Fund, which is administered by the Alaska Energy Authority. According to AEA documents, in 2008, Kenai Hydro was awarded $200,000 through the AEA for feasibility study work. In 2009, Kenai Hydro was awarded $816,000 from the AEA for a Grant Lake/Falls Creek hydro feasibility study, with a $204,000 match required. The grant application listed the project cost at just under $27 million.

In 2009, Kenai Hydro also applied for $88,320 from AEA with a $22,080 match offered for feasibility work on Victor Creek, another stream in the Moose Pass area. That project is listed as having a cost of $19,860,400. That project did not receive funding.

CIRI recently announced plans to move ahead with an underground, coal-fired electricity plant across Cook Inlet. And Wind Energy Alaska is moving forward with plans to build a wind farm on Fire Island in Cook Inlet just offshore from Anchorage. As of last week, crews were on Fire Island clearing for civil construction — roads, pads for buildings, etc. — and are working with the Federal Aviation Administration to move the VOR radio locator system off the island to Ted Stevens International Airport so wind turbine towers can be installed. Power generation may come by fall or early winter 2011.

CIRI also is interested in other energy projects in the region, Jager said, including looking at possible wind projects throughout the Railbelt, geothermal, tidal and even utilizing gas that’s produced from trash decomposing in landfills. CIRI also continues to search for new sources of natural gas on its lands.

“The whole Southcentral Alaska energy problem — the shortage of gas — from our perspective, part of the problem is we are overdependent on a single resource, and that would be Cook Inlet natural gas,” Jager said. “And now that that natural gas is running out, we need to diversify the region’s energy portfolio. CIRI as a company has decided that one of our business strategies is to expand our involvement in the energy business, and part of the way we’re going to do that is we want to develop a broad portfolio of energy sources for Southcentral Alaska.”

That push to diversify energy resources is what led CIRI, through Wind Energy Alaska, to become interested in Kenai Hydro.

“We’re still interested in hydro. We still think it’s a viable technology and it’s something we’re interested in. Part of the problem is there are a lot of projects out there right now,” Jager said, adding that CIRI may still get involved in other hydro projects in the future.

“It’s not so much that we’re saying this is a bad project. We’re saying this is a project that, given everything that CIRI and Wind Energy Alaska are doing right now, we don’t feel that it’s the best use of our time to be working on this project,” Jager said.

He made clear that Wind Energy Alaska and CIRI don’t speak for HEA, however.

“That’s not a decision for Homer Electric. Homer Electric is going to look at it and make its decision,” Jager said. “Keep in mind that Homer Electric has a different set of criteria that it’s working on than CIRI, so a project that doesn’t make sense for CIRI or Wind Energy Alaska may make perfect sense for Homer Electric, because they have a different agenda that they’re working on.”

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