Power company says it needs wilderness site

Posted: Sunday, September 05, 2004

GUSTAVUS - Too far from Southeast Alaska's existing hydroelectric power plants for an affordable link, a Gustavus power company says it needs a slice of federally protected wilderness to build its own.

Some question the precedent of taking 1,050 of Glacier Bay National Park and Preserve's 2.8 million acres of designated wilderness. It would be like trading Yellowstone National Park's geysers for geothermal-powered cities, they said.

"We think you should no more build this project than tap into Old Faithful to power the town of West Yellowstone," said Joan Frankevich, with the Alaska office of the National Parks Conservation Association.

Others question the economics.

"My initial reaction was hydropower is a good idea," said consultant Eric Cutter, who studied the $4.2 million Falls Creek Hydroelectric Project for the Natural Heritage Institute in Berkeley, Calif. But he said the company's financial projections are too risky, assuming 100 percent debt financing and a 4 percent annual demand growth in the town of 450.

"They didn't look at the possibility of flat load growth," Cutter said.

But Gustavus Electric Co. owner Dick Levitt says the project is needed to stabilize the city's already high electricity rates, at 51 cents a kilowatt hour fueled by diesel. Regional economic boosters with the Southeast Conference last year rejected a potential line to Gustavus at least until 2032 because of a $26 million cost, leaving the town to fend for itself with an electric rate five times Juneau's.

The plant would operate at an annual net loss of $127,000 to the company, according to a FERC analysis, but the operation would get loan and grant subsidies.

Levitt said switching from diesel would save $2.5 million or $3 million in future costs, depending on whether the national park connects to the hydroelectric project.

Operating a hydroelectric project in designated wilderness is illegal. But in 1998, after years of negotiation, Levitt, the National Park Service, senior Alaska politicians and the Federal Energy Regulatory Commission struck a compromise so the project would result in "no net loss of wilderness" if approved by FERC.

Members of Alaska's congressional delegation scored 1998 legislation enabling the Falls Creek area to be transferred out of Glacier Bay National Park and to the state.

The Sierra Club fears that the legislation, called the Boundary Act, foreshadows trouble for other national parks. It allows the National Park Service to trade wilderness in Glacier Bay for lands elsewhere currently owned by Alaska. The act bars the agency from evaluating the effect of losing the land. It is only allowed to evaluate what effect the hydroelectric project would have on the park after the land exchange is consummated.

"That was a goof on the part of Bruce Babbitt's Interior Department," said Jack Hession, of the Sierra Club's Alaska chapter, referring to the Clinton administration. "It's a way to raid national parks ... to extract natural resources."

The exchange would transfer state lands near Wrangell-St. Elias National Park to the park and give wilderness designation to two islands near Glacier Bay.

Interior Secretary Gale Norton would have to approve the Glacier Bay land exchange and FERC would have to deem it "economically feasible" before it could happen.

"The economic viability of the project is dependent on a lot of prognostications into the future," said Levitt. "When (FERC) projects a high growth rate, it makes the economics look good. That's where judgment comes in. One person can have a pessimistic view, another could say it's a disaster not to build this."

The Alaska Energy Authority analyzed the project and predicted it would reach a cumulative net benefit of about $2.5 million over 30 years.

The Sierra Club found that FERC left out major capital costs, such as the $500,000 to $4.8 million that it would take to connect the project to Glacier Bay National Park with a nine-mile line, much of it buried in the park.

FERC's analysis predicted the project would show a "positive net annual benefit" over the next 30 years if there is a moderate to high increase in demand for electricity in Gustavus.

The Park Service has recommended that Norton sign the land deal, though it has raised concerns about FERC's economic analysis.

The Falls Creek costs would be reduced if the national park plugged into its distribution system, but FERC did not assess the linkage cost.

FERC is expected to rule on the project in coming months, with construction beginning as early as 2007.

• Elizabeth Bluemink can be reached at elizabeth.bluemink@juneauempire.com.

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