Special Subcommittee on Energy


Minutes of the<MeetNo1> 3rd Meeting

of the 2012 Interim


<MeetMDY1> September 21, 2012


Call to Order and Roll Call

The<MeetNo2> 3rd meeting of the Special Subcommittee on Energy was held on<Day> Friday,<MeetMDY2> September 21, 2012, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Senator Brandon Smith, 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 Ernie Harris, Ray S. Jones II, Dorsey Ridley, Katie Stine, Robert Stivers II, and Johnny Ray Turner; 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, Sannie Overly, Tanya Pullin, Tom Riner, Fitz Steele, and Brent Yonts.


Guests: Secretary Len Peters, Energy and Environment Cabinet; John Davies, Deputy Commissioner, Department for Energy Development and Independence; Lee Colten, Assistant Director of Efficiency and Conservation, Department for Energy Development and Independence and Stacey Paradis, Deputy Director, Midwest Energy Efficiency Alliance; and Brandon Nuttall, Kentucky Geological Survey, University of Kentucky.


LRC Staff: D. Todd Littlefield, Tanya Monsanto, and Susan Spoonamore, Committee Assistant.


The July 20, 2012 minutes were approved, without objection, by voice vote upon motion made by Representative Hall and second by Representative Gooch.


Carbon Capture and HB 259 (2011) (KRS 353.804,812)

Secretary Len Peters, Energy and Environment Cabinet, explained that HB 259 directed the Energy and Environment Cabinet (EEC) to seek carbon capture and storage projects, coordinate with surrounding states on issues related to underground migration of stored carbon dioxide (CO2), and report to the legislature on the status of projects. Secretary Peters stated that the drivers for carbon capture storage had changed, and instead of CCS the federal emphasis has shifted to carbon capture, utilization and storage (CCUS). The focus is on enhanced resources recovery such as oil and gas. New storage projects are not being initiated because utility companies are looking at natural gas to meet regulatory requirements.


Secretary Peters stated that there are agreements with LG&E and KU for a potential carbon capture storage project. The E.W. Brown plant has been selected as the best site for storage capacity, but to proceed, the project would require sufficient third party funding.


Secretary Peters said that discussions have taken place with surrounding states for carbon capture and storage, but the focus has shifted because natural gas dominance has diminished the urgency for addressing CO2 from coal-fired power plants. Kentucky will continue to be a part of Midwest and Southeast Carbon Sequestration Partnerships through the Kentucky Geological Survey and the Southern States Energy Board. The focus of the partnerships will be to continue characterization of regional geology and testing of how large volumes of CO2, will behave.


In other carbon capture sequestration activities, Secretary Peters said that the Energy and Environment Cabinet had provided the Center for Applied Energy Research (CAER) funding for the algae pilot project. The pilot project would involve growing algae using the captured CO2 from a power plant. It is hoped that biofuels or bioproducts can be produced from algae. The Carter County carbon injection test well, which was a component of House Bill 1, is just underway.


In response to Representative Gooch, Secretary Peters said that there were several reasons for shifting to natural gas such as environmental regulations, the low cost of natural gas, and the slow economy. There is a lot of natural gas in reserve, but the price may remain volatile.


In response to Senator Stivers, Secretary Peters said he did not know the status of the Danbury pipeline. Senator Stivers noted that the federal regulatory process had driven up of the price of coal, and the same would eventually happen for natural gas.


Kentucky Action Plan for Energy Efficiency, Stimulating Energy Efficiency in Kentucky

Mr. John Davies, Deputy Commissioner, Department for Energy Development and Independence, stated that Stimulating Energy Efficiency in Kentucky (SEE KY) was established in 2010 and is designed to develop a Kentucky Action Plan for Energy Efficiency. At its August 2012 meeting, SEE KY stakeholders discussed recommendations to improve energy efficiency by creating an exchange for electric utilities to share information and experiences, to include all regulated and non-regulated utilities in Kentucky. The stakeholders also recommended increased educational and training programs on energy efficiency for residential, commercial, and industrial applications. One proposed short term action regarding residential efficiency would be to expand and enhance the Kentucky Home Performance Program by working to coordinate KHP with existing utility programs and rebates. Mr. Davies stated that potential legislation for commercial efficiency would amend existing tax incentive structure for commercial users, encouraging energy efficiency upgrades and performance, extend HB 2 efficiency bond mechanism to commercial entities, and create incentives for landlords of commercial rental property, invest in energy efficiency building upgrades (Green Lease model). Mr. Davies said that potential legislation would increase financial incentives for industrial energy users by amending existing tax incentive structure, linked to energy efficiency upgrades and performance.


Mr. Davies said that the stakeholders recommend that (1) FEMA funds provided for home rebuilding or replacement should require that new structures be built to higher efficiency standards, and (2) states should have more flexibility in how to direct LIHEAP funds to weatherization.


Representative Hall stated that Kentucky should make it a priority, by a resolution, to use LIHEAP funds for weatherizing homes.


In response to Representative Combs, Mr. Davies said that information from utility companies regarding energy efficiency can be found on SEE KY’s web site.


In response to Representative Martha Jane King, Mr. Lee Colten, Assistant Director of Efficiency and Conservation, Department for Energy Development and Independence, said that some co-ops are tracking high energy users.


Why Not an Ethane Cracker for Kentucky?

Mr. Brandon Nuttall, Kentucky Geological Survey, University of Kentucky stated that Shell’s announcement of its plan to build an ethane cracking facility in Pennsylvania had created interest in attracting such a facility to Kentucky. An ethane cracker removes natural gas liquids such as ethane, propane, butanes, and pentanes. When gas liquids are present in high amounts, the gas is considered wet, and considerable profit can be made from selling the separated liquids to industries such as the plastics industry. Although 35 Kentucky counties produce natural gas, Kentucky does not have vast reserves of shale gas, and Kentucky’s gas is relatively dry. Additionally, the predominant flow of natural gas resources through Kentucky pipelines is from the southwest to large markets in the northeast. This would limit the feasibility of importing gas from shale gas states (West Virginia, Pennsylvania, New York) to a cracker in Kentucky. All these factors make Kentucky unattractive as a potential location for an ethane cracking facility.


There being no further business, the meeting was adjourned.