Special Subcommittee on Energy


Minutes of the<MeetNo1> 3rd Meeting

of the 2011 Interim


<MeetMDY1> August 19, 2011


Call to Order and Roll Call

The<MeetNo2> 3rd meeting of the Special Subcommittee on Energy was held on<Day> Friday,<MeetMDY2> August 19, 2011, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Representative Keith Hall, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Representative Keith Hall, Co-Chair; Senators Joe Bowen, Ernie Harris, Ray S. Jones II, Bob Leeper, Robert Stivers II, Johnny Ray Turner, and Robin L. Webb; Representatives Royce W. Adams, Rocky Adkins, Dwight D. Butler, Leslie Combs, Tim Couch, Will Coursey, Jim Gooch Jr., Wade Hurt, Thomas Kerr, Martha Jane King, Lonnie Napier, Fred Nesler, Sannie Overly, Tom Riner, Kevin Sinnette, John Will Stacy, Fitz Steele, and Brent Yonts.


Legislative Guest: Representative Teddy Edmonds.


Guests: Dr. Rodney Andrews, University of Kentucky Center for Applied Energy Research; Mr. Robbie Englert, Crounse Corporation; Mr. Steve Alley, Ingram Barge Company; Mr. Martin Hettel, American Electric Power River Operations.


LRC Staff: D. Todd Littlefield, Stefan Kasacavage, and Kelly Blevins.


Chairman Hall noted a quorum being present and requested a motion for approval of the July meeting minutes. Representative Steele moved that the minutes be approved with a second by Representative Napier, the motion carried by voice vote. Representative Steele expressed concern with a recent Environmental Protection Agency (EPA) visit to eastern Kentucky counties that was unannounced to state officials. Several committee members expressed their dissatisfaction with the EPA and their lack of notification.


Progress Report on the University of Kentucky Center for Applied Energy Research

Dr. Andrews highlighted for the committee recent achievements of the University of Kentucky Center for Applied Energy Research (CAER) which included a grant for $600,000 from the intelligence community and $1.5 million awarded from the NASA Subsonic Fixed Wing program using Fischer-Tropsch liquefaction of coal to make aviation fuels. Dr. Andrews noted substantial growth of CAER sponsored project awards which had increased from $5 million in 2008 to $23 million in 2010. He then updated the committee on CAER Laboratory Building #2. The building will house the Kentucky Argonne Battery Manufacturing Research and Development Center, and it will include a biofuels laboratory. It will free up significant space in CAER #1, and CAER is aiming for LEED Gold status. Dr. Andrews updated the committee on work that CAER is doing in the development of an algae system for mitigation of CO2 from coal-fired power plants. This fall the project will roll out at Dale Station, after it runs through the winter it will be scaled up producing 5,000 kg of dry algae. Dr. Andrews explained the role of the Early Lead Mini Fischer-Tropsch Project Development Unit (PDU) that will research quantities of FT liquids and finish fuels to be produced. The PDU will develop technologies to implement coal-to-liquids, gas-to-liquids, biomass-to-liquids, and coal/biomass-to-liquids with lower CO2 footprints.


Dr. Andrews explained the CAER proposal regarding the application of a heat integrated post-combustion CO2 capture system with Hitachi advanced solvent into an existing coal-fired power plant by Drs. Liu and Neathery. He stated that the proposal is built on outputs from state-supported CMRG, an innovative systematic approach for heat integration, and advance solvent systems. Finally, Dr. Andrews updated the committee on CAER’s combined flue gas extraction project which should provide necessary information and data on mass and energy balance, solvent degradation, and corrosion to provide a full techno-economic and environmental, health and safety analysis at a commercial scale level.


Dr. Andrews responded to a question regarding algae and carbon sequestration, stating that CAER’s hope is to be able to use natural sunlight and photosynthesis and the algae will use all the NOx produced, and hope to learn more about the algae’s use of sulphur and CO2.


Representative Adkins pointed out the increase in awards for research and development from 2008 with the passage of House Bill 1. Dr. Andrews agreed that what was provided in House Bill 1 put CAER in a position to be a national leader. Representative Adkins noted the historical perspective from 1970 to 2007: the population grew by 45 percent, the demand for energy increased approximately 145 percent, and the demand for coal went up 225 percent to provide the energy for that population, but the regulated emissions over that period of time decreased 79 percent.


A copy of Dr. Andrews’ presentation is on file with the LRC Library.


Transportation of Kentucky Coal by Barge: Emerging Export Markets

            Mr. Robbie Englert, Vice President of Sales for Crounse Corporation explained headquarters in Paducah and division office is located in Mason County. He stated that a ton of product can be moved 576 miles with a gallon of fuel via barge. In response to a question by Representative Adkins, Mr. Englert stated Crounse Corporation employs 350 people.


            Mr. Steve Alley, Director of Sales for Ingram Barge Company testified that Ingram Barge is the largest barge company in the industry operating over 130 tow boats and more than 4,000 barges. Ingram Barge is the largest dry cargo carrier and third largest liquid carrier. Ingram Barge employs 1,655 associates at Kentucky locations, those wages and benefits exceeds $100 million a year. Mr. Alley stated that Ingram Barge Company has used its size to build a dense operating pattern over their entire network from Minnesota to Louisiana. He pointed out the advantages of barge transportation: one 15 barge tow equals 216 rail cars or 1,050 semi tractor trailers. Another advantage of barge transportation is its energy efficiency when compared to other modes of transport. Mr. Alley pointed out that inland barges produce less CO2 while moving North American cargo. Barges produce 19.3 tons of CO2 per million ton-miles compared to 71.6 by semi tractor trailer. Mr. Alley explained the Capital Development Plan (CDP) developed by the Inland Waterways Users Board and the United States Army Corps of Engineers (USACE). The 20 year plan includes completion of all projects currently underway, a priority listing of new project starts over the next 20 years, improved business practices to improve project delivery, an increase of six to nine cents per gallon on the $0.20 per gallon user fee that is paid exclusively by barge companies, and a cap on barge users’ exposure to project cost over-runs. The Capital Development Plan would ensure completion of twenty five projects necessary by 2030, as opposed to just six projects completed under the existing system. A copy of Mr. Alley’s presentation is on file with the LRC Library.


            Mr. Martin Hettel, Manager of Captive Services for American Electric Power (AEP) River Operations testified that AEP River Operations operates 3,275 barges and 95 towboats making it one of the largest inland barge companies in the United States moving 77 million tons in 2011. Mr. Hettel stated that AEP’s river-served plants can generate 18,320 megawatts of electricity daily, enough to power 10,000,000 households daily. AEP River Operations moves 35 million tons of coal and consumables to produce the 18,320 megawatts at AEP’s river-served facilities. AEP River Operations also moves 18 million tons of other cargo for their commercial customers. Mr. Hettel stated that AEP employs 715 Kentucky residents. AEP’s River Operations transports raw materials for steel mills, fertilizers for crops, cement for construction, and project cargos for plant builds into the state of Kentucky. AEP River Operations transport export coal, aggregates, grain, grain by-products, and finished steel to other states and transport limestone, grain, grain by-products, coal, cement and lime within the state of Kentucky.


Mr. Hettel explained that center gulf coal exports have been on the rise since 2008 and that 2011 exports could reach 15 million tons. AEP River Operations project 2012-2014 exports could reach 18-20 million tons. Mr. Hettel discussed the impact of lock closures on the industry noting that the Markland Lock in Warsaw, Kentucky currently has the main chamber closed for new miter gate installation. This closure will result in a loss estimated at $12,840,000 to industry as well as making export commodities less competitive to other world markets. Mr. Hettel added that locks and dams create pools that benefit many groups other than navigation. He added that Olmsted Lock and Dam was authorized for construction through the Water Resources Development Act (WRDA) that was passed in 1988 is still not completed. The U.S. Army Corps of Engineers says that it will not be completed until 2016 and the cost will increase over the projected $2,100,000,000 price. A copy of Mr. Hettel’s presentation is on file with the LRC Library.


            Representative Sinnette voiced concern about the poverty level of eastern Kentucky and the number of low paying jobs in the area. He noted that his constituents need low cost energy; he requested that American Electric Power (AEP) not arbitrarily increase rates.


            Jimmy Keeton, Governmental and Environmental Affairs manager for AEP and Kentucky Power Company, responded to Representative Sinnette’s comments, requested that members continue to call Kentucky’s congressional delegation. He assured the committee members that AEP will continue to fight and do what is possible to keep low energy rates in Kentucky.


            There being no further business the meeting was adjourned at 12:30.