Special Subcommittee on Energy


Minutes of the<MeetNo1> 4th Meeting

of the 2011 Interim


<MeetMDY1> September 16, 2011


Call to Order and Roll Call

The<MeetNo2> 4th meeting of the Special Subcommittee on Energy was held on<Day> Friday,<MeetMDY2> September 16, 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> Senator Brandon Smith, Co-Chair; Representative Keith Hall, Co-Chair; Senators Joe Bowen, Ernie Harris, Ray S. Jones II, Bob Leeper, Katie Kratz Stine, and Johnny Ray Turner; Representatives Royce W. Adams, Rocky Adkins, Dwight D. Butler, Leslie Combs, Will Coursey, Jim Gooch Jr., Wade Hurt, Fred Nesler, Sannie Overly, Tom Riner, John Will Stacy, Fitz Steele, and Brent Yonts.


Guests: Representative Ted Edmonds; Jolly Hayden, Vice President, Transmission Development, NextEra Energy Resources; Phillip Elswick and Mark Sanders, Summit Engineering.


LRC Staff: D. Todd Littlefield, Sarah Kidder, and Susan Spoonamore, Committee Assistant.


The August 19, 2011 minutes were approved upon voice vote, without objection, on motion made by Representative Overly and seconded by Representative Adkins.


Diversification and Kentucky’s Energy Future

Jolly Hayden, Vice President, Transmission Development, NextEra Energy Resources, discussed diversifying the state’s energy portfolio and Kentucky’s energy future. He explained that the components of a balanced energy portfolio include gas, hydro, and market access. Mr. Hayden reviewed the goals set out in the governor’s strategy for energy independence, and how they might be achieved. He highlighted the projects that the UK Center for Applied Energy Research is involved in that will result in more and cleaner use of coal as well as their energy efficiency and storage projects. He said that Kentucky was facing several issues:

·        reducing environmental impacts of energy production and use;

·        threatened regulations on coal ash;

·        renewable portfolio standards;

·         cost and reliability of power;

·        energy efficiency, and

·         fuel security and domestic resource utilization, and economic development for Kentucky.


 Kentucky must find a way to use coal cleanly and efficiently in addition to using more gas. Only 4 percent of Kentucky’s power is generated by gas although large quantities of gas are available. The wind power project in Maysville could add real economic benefits for Mason County and the region. The estimated economic benefits over a 25 year period would be $24 million in land lease payments and $19.9 million in property tax payments. Over a two year period, approximately 200 temporary jobs would be available, creating 8 to 10 permanent jobs.


Mr. Hayden said that hydropower is underutilized in Kentucky and that a number of Ohio River dams could produce significant power. A large number of other Kentucky dam sites have the potential to produce electric power. Access to power markets in other states is another important factor in balancing the state’s energy portfolio, according to Mr. Hayden. He profiled two regional transmission organizations that would not only provide access to sell Kentucky power but would also give Kentucky utilities access to green and other power sources that would enhance reliability and diversify the fuel portfolio.


Mr. Hayden talked about the ERCOT (Electric Reliability Council of Texas) CREZ (Competitive Renewable Energy Zone) projects currently underway in Texas. The CREZ proposal requires massive efforts to coordinate transmission plans while integrating renewable generation. The current CREZ project is estimated to cost approximately $6.5 billion, and will construct almost 3,500 miles of line to enable 18,000 megawatts of wind power. The cost to the average rate payer will be approximately $4.00 monthly.


In response to Representative Stacy, Mr. Hayden stated that Texas provides incentives, but nothing significantly different from other states.


In response to Representative Adkins’ questions, Mr. Hayden stated that adding diversification to Kentucky portfolio was a prudent move. Representative Adkins said that if Mr. Hayden were to read Kentucky’s Energy Policy he would see that Kentucky encourages diversification through the most aggressive incentive package offered in the United States.


In response to Representative Gooch’s question, Mr. Hayden stated that new technology is the difference for pursuing natural gas now versus 10 years ago.


In response to Sen. Stine’s question, Mr. Hayden said that Kentucky needs a robust interstate transmission system in order to export coal by wire.


Mine Permitting and EPA Requirements

Phillip Elswick, P.E. and Mark Sanders, Summit Engineering, discussed the Environmental Protection Agency (EPA) and other regulatory agency actions relating to the Clean Water Act and 404 permits that are issued by the U.S. Corp of Engineers for any project that places fill material in waters of the United States.


Mr. Elswick reviewed the regulatory actions most affecting surface mining in the last 3 years. In the summer of 2009, it was announced that Nationwide Permit 21 could no longer be used to authorize discharges of fill material in the Appalachian regions of 6 states. Requirements for enhanced coordination between EPA, the Corps of Engineers and the applicant complicated the permit process. Recently announced stringent standards concerning water turbidity and conductance have wide-ranging impacts on surface mining operations. Additionally, in 2009, EPA began routinely requesting preparation of an environmental impact statement for surface mining operations. Some representatives of EPA have stated that all headwater streams are “aquatic resources of national importance.” Mr. Elswick is concerned that use of this process will delay permit decisions and remove decision-making from local authorities.


Mr. Elswick stated that because mining permits were being denied or being revised, he estimated the loss of coal to be approximately 3 million tons. The application for the Big Branch project, which is a 1,400 acre large surface mine, was prepared and submitted in May of 2005. The EPA and the U.S. Corp of Engineers expressed concerns regarding the size of the project and asked that the applicant look at some actions that would reduce the environmental impacts. The client determined that some of the coal recovery could be lowered and essentially cut the project in half from 13 million tons to 7 million tons. The U.S. Corp of Engineers was notified in November, 2008 that all the concerns had been addressed, but in March of 2009, EPA notified the U.S. Corp of Engineers that there were still significant concerns. The Corp addressed those concerns and presented a permit to the client in April 2009 for signature. Before the client had a chance to sign the permit, the EPA initiated the 404(C) process. Negotiations with the EPA continue.


Mr. Elswick stated that EPA’s permit actions have created time delays, uncertainty, increased costs, and the loss of coal reserves. The adverse economic impacts include job impacts, loss of tax revenue, loss of property for future land development, and could increase the cost of electricity.


In answer to Rep. Gooch’s question, Mr. Elswick said that approximately 90 jobs were lost for a period of time because of objections to the permits.


In response to Representative Hall’s question, Mr. Elswick said that in addition to the Big Branch project, there are two more permits that will be in the 404(C) process shortly. He said that they have not seen any easing of EPA standards.


In response to Senator Jones, Mr. Elswick stated that Summit Engineering deals mostly with the Region 4 staff in Atlanta. The staff in Atlanta is willing to work with Summit, but the Atlanta staff has no decision making authority. When a solution has been reached, and the request sent on to the EPA, the requests are being denied with no explanation. Mr. Elswick said Summit Engineering has two dozen permits and/or applications pending with the EPA. In the last two years, only one permit has been approved.


The meeting was adjourned at 12:00 p.m.