Interim Joint Committee on

Economic Development and Tourism


Minutes of the<MeetNo1> 2nd Meeting

of the 2008 Interim


<MeetMDY1> July 17, 2008


The<MeetNo2> second meeting of the Interim Joint Committee on Economic Development and Tourism was held on<Day> Thursday,<MeetMDY2> July 17, 2008, at<MeetTime> 1:00 PM, in<Room> Room 154 of the Capitol Annex. Senator Alice Forgy Kerr, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Alice Forgy Kerr, Co-Chair; Representative Eddie Ballard, Co-Chair; Senators Julian M. Carroll, Brett Guthrie, Denise Harper Angel, Katie Stine, Gary Tapp, Jack Westwood, and Ken Winters; Representatives Royce W. Adams, Larry Belcher, Larry Clark, Leslie Combs, Will Coursey, Jesse Crenshaw, Mike Denham, Bob M. DeWeese, Myron Dossett, Ted Edmonds, Jim Gooch Jr., Mike Harmon, Melvin B. Henley, Joni L. Jenkins, Dennis Keene, Thomas Kerr, Adam Koenig, Tom McKee, Brad Montell, David Osborne, Ruth Ann Palumbo, Don Pasley, Dottie Sims, Ancel Smith, John Will Stacy, Tommy Thompson, Robin L. Webb, Ron Weston, and Addia Wuchner.


Guests:  Jim Fugitte, Chief Executive Officer, Wind Energy Corporation; Tabitha Crawford, Co-Founder, Rayan Solutions; Larry Cottingham, General Manager, ZAP Electric Autos; and Dr. Rodney Andrews, Director, Center for Applied Energy Research, University of Kentucky.


LRC Staff:  John Buckner, Committee Staff Administrator; Karen Armstrong-Cummings; Louis Pierce; and Dawn Johnson.


A motion was made by Senator Guthrie and seconded by Senator Winters to approve the minutes of the June 26, 2008 meeting.  The motion carried by voice vote.


Mr. Jim Fugitte, Chief Executive Officer of Wind Energy Corporation and Tabitha Crawford, Co-Founder of Rayan Solutions spoke on alternative wind energy. Mr. Fugitte said Wind Energy Corporation, headquartered in Elizabethtown, Kentucky, collaborates with Western Kentucky University and the University of Kansas Aeronautical Engineering Department. The production plant is in Morgantown, Kentucky. The company has been in business for 18 months and has secured $1.5 million in private capital.  In August 2007, the state granted Wind Energy a $10 million economic incentive package.  The company has its production facility in Morgantown, which was previously owned by the city and occupied by Sumitomo Electric. Mr. Fugitte said that the climate-controlled facility, one of a few in the Midwest, is ideal for this type manufacturing. Mr. Fugitte explained that not only are the financial incentives important but the recognition and credibility of a Kentucky company by its association with the state is important in early entrepreneurial development. He said it sends a message to potential investors that a due diligence process is in place. Mr. Fugitte said Wind Energy Solutions has been selected as one of 20 finalists by the Department of Defense in alternative energy systems. He said most of the 20 have already been funded—another validation to customers and investors of their validity.


Mr. Fugitte explained that another $4 million in private capital has been developed and Wind Energy’s first partner has been selected -- HEB Supermarkets, a $14 billion grocery company with 60,000 employees and 300 locations in Texas. Wind Energy has a five year forward contract with HEB. He said that the installation of 600 wind turbines will result in $60 million in revenue for the company. Mr. Fugitte said a second partner has been developed, a large hospital in the Cleveland, Ohio area. Wind Energy is also in discussions with the National Botanical Tropical Gardens in Hawaii. Wind Energy is projecting approximately 1,500 jobs in Morgantown by 2013. Additionally, there will be at least 100 high tech jobs, primarily in wind research. He said, currently, there is little wind research being done in the United States for this type of distributed solution. Wind Energy is a thought leader in the distributive wind energy business—a solution used at the point of use, not a solution that drives the grid.  Mr. Fugitte said the number of Kentucky partners was unexpected. A year ago he thought the support functions would be done primarily in Ohio and Minnesota. However, Wind Energy is partnering with Lexel in Lexington for generator production, creating approximately 100 manufacturing jobs. They are also working with Ingram and Final Finish in Morgantown for the finishing, Gates Rubber in Elizabethtown for the belts and gearing, Stamler Machine of Louisville and Clark Machine of Nicholasville for the steel structure of the turbine. Mr. Fugitte said there are 8.5 million jobs today in renewable energy and the energy efficiency industry with a projection of 40 million by 2030. In 2007, there was a 40 percent increase in revenue for companies in the solar, wind, biofuels, and fuel cells industry. Federal statistics show the industry at $77 billion in revenue in 2007.


Responding to a question from Senator Carroll’s concerning the cost efficiency of the wind turbine, Mr. Fugitte said an alternative energy source needs to produce at least 20 percent of a company’s electricity to be beneficial. Wind Energy has targeted 35 to 40 percent of their power in a system to induce the customer to participate.


Responding to Representative Clark’s question about Kentucky’s suitability for wind energy generation, Mr. Fugitte said that because of the low wind speed and low cost of electricity in the state, Kentucky is not the ideal user the product. Most customers are in the Great Lakes region, Texas, California, and Hawaii. He said target payback after installation of a system is six to seven years. Ms. Tabitha Crawford added that universities are considering using the turbines as learning opportunities for students through the wind tracking mechanism as well as the symbol of sustainability and innovation of the technology.


The Governor’s July 16 announcement about leveraging low energy costs to attract manufacturing plants for renewable energy is good for Kentucky, Mr. Fugitte said. Low electricity costs make it cheaper to manufacture in the state. He said coal is very important to Kentucky and he encouraged continued research on carbon capturing and other technologies. He predicted that carbon emissions costs will increase substantially with the U.S. paying $30-$40 per ton as global sanctions for carbon emissions take effect. He said Kentucky has an opportunity to be in the forefront in working with coal producers through research and development. With Fort Knox and Fort Campbell in Kentucky, the Defense Department has compelling reasons to find alternative sources of energy.


Mr. Fugitte and Ms. Crawford presented a video of the production plant in Morgantown.


Responding to Representative Harmon’s question about the turbine’s impact on bird populations, Mr. Fugitte explained that the Texas Audubon Society’s director of research said that the design of the turbine does not represent a threat to birds or bats. It emits no noise or vibration.


Senator Stine asked if the turbine units were portable and could be used for camping and other outdoor activities. Mr. Fugitte said as a start-up company the focus is on a single product with dimensions of 12 feet by 20 feet. However, retail customers have challenged Wind Energy to make a smaller turbine for home, business use, and small-scale applications, and this type of research will be considered in the future.


Next, Mr. Larry Cottingham, General Manager of ZAP Electric Autos spoke about ZAP electric vehicles. He explained that he initiated contacted with the California-based corporation to bring the vehicle to Kentucky. With 17 years experience in the automotive industry, he found the concept of the electric car promising. However, after researching Kentucky statutes he found several that prevented the use of this type of electric vehicle on state roadways.  Currently, six states do not allow this type of vehicle. Mr. Cottingham said he has been on a campaign the last several weeks to educate people on the use and safety of the vehicle and what it can do economically for Kentucky residents, both in savings and potential jobs for the Commonwealth.


Mr. Cottingham said each ZAP vehicles produced is federally approved for safety, making them street legal in all 50 states. He said the vehicles are used in other states and abroad by numerous corporations. Surrounding states allow electric vehicles on their roadways, including Ohio which recently amended their motorcycle law to include allowing seats rather than just saddles since the 3-wheeled ZAP automobile is registered as a motorcycle. Kentucky’s statutes state that a motorcycle cannot have an enclosed cabin, which the ZAP vehicles do.  He said ZAP vehicles are zero emission vehicles. They reduce the carbon footprint and fuel dependency, and they reduce maintenance costs as there are no other moving parts other than the tires and a motor axle. He said ZAP vehicles are in production and are now available. Mr. Cottingham noted that these vehicles are designed to be second vehicles for consumers to be used on roads with speed limits of 45 miles per hour or less.


By 2010, ZAP hopes to sell 100,000 electric vehicles per year in the United States, Mr. Cottingham said. This would eliminate 1 billion tons of carbon emissions per year. He also noted that the ZAP Corporation plants 200 trees with the sale of each vehicle.


Mr. Cottingham said that on July 16, the City of Louisville sent a letter showing their willingness to purchase ZAP vehicles if they were allowed on city roadways. He said many municipalities in other states use ZAP vehicles. He noted that the ZAP vehicle weighs 2,100 pounds versus a 3,000 to 4,000 pound vehicle, and thus is less damaging to roadways. He said the manufacturing of ZAP vehicles in Kentucky would create many jobs. ZAP has 13 years of experience and have been public since 1996. They currently have over 100,000 electric vehicles delivered worldwide to over 75 countries. Companies using ZAP vehicles include Dominos, UPS, and the U.S. Postal.  Mr. Cottingham said the ZAP truck has speeds of up to 40 miles per hour and a driving range of 25 to 40 miles; it has a dump bed, and it is the only city class truck federally approved in production in the United States that is all electric. The base price is $12,400 and the estimated cost of ownership is one to three cents per mile. He said insurance is significantly less because it is licensed and insured as a motorcycle. Electricity is approximately $180 per year to charge the vehicle. Users of the ZAP Zebra include the US military, federal fleets, state and local governments, universities, airports, rental fleets, resorts and amusement parks.  He said there is an available solar panel for the sedan and truck.


Mr. Cottingham is an employee of Randy Waldeman, owner of Integrity Manufacturing.  Mr. Waldeman approached the ZAP Corporation to bring a manufacturing facility to Kentucky. ZAP is interested in producing the vehicle in Kentucky and is willing to enter discussions, but they are not willing to build a vehicle in a state where it cannot be driven. Mr. Cottingham stressed that Integrity Manufacturing initiated the production facility, not the ZAP Corporation. He said that once the statutes have been changed, they will proceed with talks to bring a manufacturing facility to the state.


Responding to a question from Senator Carroll about current restrictions on this type of electric vehicle, Mr. Cottingham said the only issue keeping the vehicles off the road is that the vehicle has a motorcycle title and has an enclosed cabin. Regarding taxation, he said a road usage tax may be in order when renewing registration annually or taxes could be paid at the point of sale.


Senator Stine said that when researching the removal of vehicle emissions testing, the Environmental Protection Agency (EPA) allowed for carpooling and other mechanisms as methods of lowering community emissions.  Senator Stine asked if the EPA gives emissions credits for electric vehicles. Mr. Cottingham said he was not familiar with EPA emissions programs, but that California recently appropriated $25 million for consumer rebates for the purchase of products certified as environmentally friendly, and this program included ZAP vehicles.  California taxpayers receive a $1,000 rebate check for purchasing a ZAP vehicle. If a business uses an electric vehicle, the federal government will pay approximately 46 cents per mile for using an alternative fuel vehicle.


Responding to Representative Harmon’s question about what changes are needed in Kentucky statutes, Mr. Cottingham said that a Governor’s executive order would suffice to allow ZAP autos on certain Kentucky roadways and that waiting until March or April may affect the chances of bringing a ZAP manufacturing facility to Kentucky.


Senator Kerr proposed a letter to the Governor from the co-chairs urging him to consider giving support to regulatory changes needed to allow electric vehicles to operate on Kentucky highways, and a motion made by Senator Tapp and seconded by Representative Belcher passed by voice vote.


 Responding to Representative Thompson’s question about electric vehicle production, Mr. Cottingham said that, to his knowledge, ZAP is the largest manufacturer in the U.S. of electric cars and the only manufacturer with an all-electric truck in production. He explained that the life expectancy of the battery is approximately 1,500 charge cycles, or approximately 3.5 years, and that advanced batteries have 1,800 charge cycles, or five years. With the additional solar panel there is a constant stream of energy extending the life of both battery systems by an additional year.


Responding to Senator Winter’s question about how electric vehicles are classified, Mr. Cottingham explained that there are three categories of electric vehicles: low speed vehicles (LSVs), mid-speed vehicles (MSVs), and high speed vehicles (HSVs).  High-speed vehicles are highway ready, mid-speed and low-speed have acquired special attention from states in keeping them off highways. States have to mandate regulations for LSVs and MSVs for use only on certain types of roadways, dependant on speed. Senator Winters asked if there is a major economic advantage to the three-wheel vehicle. Mr. Cottingham said the advantage to the consumer is extended range, lighter weight and lower manufacturing costs. He explained that a three wheel vehicle makes it affordable for consumers.


Representative Sims asked about the vehicle’s safety. Mr. Cottingham said the ZAP vehicles far exceed safety standards for any motorcycle on the road.


Representative Combs asked the price of the car fully loaded. Mr. Cottingham said it was approximately $15,900.


Next, Dr. Rodney Andrews, Director of the Center for Applied Energy Research with the University of Kentucky, spoke on the status of the funding provided to the Center under House Bill 1. HB 1, a $2 million nonrecurring appropriation, was specific in use and designed to expand research capability. He said four projects are now underway. He said one specification of HB 1 was to obtain matching funding. The Center received several congressional appropriations for specific projects in FY 08 of $1.73 million for synthetic fuels from coal and $500,000 earmarked for continued development of the Kentucky Biofuels Lab at the Center in conjunction with UK’s College of Agriculture. He said $500,000 was received from the Governor’s Office of Energy Policy.  The federal monies appropriated required a 20 percent cost match and the Center applied to UK’s matching program to meet this goal. Dr. Andrews said that provided Congress passes the energy and water bills as proposed, there is at least $1.5 million for continuation of the CTL project as well as the Biofuels Lab in FY09.


Dr. Andrews said the four areas of focus in HB 1 are to upgrade Fischer-Tropsch CTL Facilities to allow downstream technologies, install biomass gasifier/gas cleaning for utilization in FT fuels production, development of a biofuels laboratory, and to expand carbon capture/utilization capabilities.


Dr. Andrews explained that the purposes of the federal CDP are to advance the development of a mini Fischer-Tropsch CTL refinery and to support a laboratory at UK.


Dr. Andrews explained the process of the Integrated Fuels Program.


In using HB 1 funding the Center has chosen to invest in long-term capital assets to allow expansion of current research capabilities as well as to capitalize in programs underway.  Phase I will move mineral processing activities to a new mineral processing facility. Under Phase II the new biomass/biofuels lab will be in the space vacated by mineral processing. Phase III consists of improvements to the combustion high bay for carbon capture/utilization and Phase IV is the construction of the CTL mini-refinery. Under the current timeline, construction of these projects will be completed by May 2009. Dr. Andrews reviewed the layout and functions of the planned new facilities. Dr. Andrews explained how the new facilities fit within UK’s overall research portfolio. He said they are emphasizing transportation fuels from coal or natural gas, transportation fuels from biomass and how they work with current coal and electric power generation to create a system that reduces the overall carbon footprint of all those processes.


Responding to Representative Gooch’s concern of the cost of carbon capturing Dr. Andrews said current technologies require 30 percent energy usage for carbon capturing, therefore technologies need to advance.


There being no further business, the meeting adjourned at 2:45 PM.