Business and community leaders in Tok are trying to revive a plan to cut the area’s high energy costs by generating electricity using biomass. That’s a type of fuel made from grinding timber like black spruce into chips. Backers of the plan want the state to give them a break on timber-sale contract conditions to help attract financing for a biomass-fired powerplant. They say that’s what put the plan on hold last year.
A year ago, Tok was on track to become the first community in Alaska to generate its electricity using biomass. Officials with Alaska Power and Telephone had proposed to harvest scrappy timber like black spruce from nearby state forest land, process it and use that biomass it to generate electricity at less cost than the diesel fuel it now uses.
AP&T spokesman Dave Stancliff says the Tok area is economically distressed and desperately needs cheaper power than the 51 cents-per-kilowatt-hour that businesses are paying now.
“Our little grocery story – y’know, it’s just tiny – it pays $37,000 a month in power bills,” Stancliff said.
The residential rate is 31 cents per kilowatt hour, which goes up to 51 cents after 500 kilowatt hours.
“It’s not unusual for a resident on a high-use winter month here in Tok to have a $500 or $600 power bill,” he said.
Stancliff says high energy costs combined with other factors are plunging the area into “an economic death spiral.”
That’s what motivated AP&T a couple of years ago to propose building a biomass-fueled powerplant that would initially generate 2-megawatts of electricity – enough for about 800 customers. The company asked the state Division of Forestry for a timber-sales contract so they could harvest trees for powerplant fuel. Forestry came up with a 25-year timber-sales contract, and let it out for competitive bid in April. But, says Stancliff, AP&T officials decided against bidding on it, because the contract terms made it hard for the company to get reasonable financing.
“There’s some language and there are some specifics within that contract that – you couldn’t take it to a bank or a financial institution and secure a loan,” he said.
After the contract failed to attract any bids, Forestry shelved the biomass project, until a few weeks ago. Stancliff says that’s when Tok business and community leaders regrouped and came up with a new plan that would enable them to attract financing. But he says they’re having a hard time convincing Forestry to agree to a contract that will help them accomplish that.
Stancliff says much of the standard-boilerplate language of their contracts shouldn’t apply to Tok’s proposal, because it’s based on harvesting timber of little commercial value. He says the timber should instead be considered a hazard, because it’s helped fuel several huge wildfires over the past couple of decades that’ve cost the state some $85 million to put out.
“Y’know,” he said, “one has to wonder, if this is hazardous fuel – and it is, it’s been identified as such; no one questions it – why people are having to pay anything. The state should actually see it as a benefit, in terms of fire mitigation (and) public safety.”
Forestry officials say it’s not that simple. Mike Curran is a senior agency official appointed to head up a biomass team to come up with ways to promote use of the resource. Curran says they’re trying to accommodate Tok’s proposal and may be able to give help by allowing more time and waiving or reducing some bonds and deposits.
“I think they may be a few things we can modify,” he said.
Curran says Forestry is not, however, able to give them all the breaks they’re asking for. He says that’s because the contract must comply with state law and regulations that among other things require the agency to represent the state’s interest in getting a fair return on the sale of state resources.
“This is a contract,” he said. “And it’s a competitive-bid sale, so when they sign the contract, there are contract stipulations, like there is in any contract, that have to be followed.”
Curran says Forestry is being cautious because it’s never dealt with biomass as a resource, so the agency is learning as it goes along in the process.
“It very much is a learn as we go, because this was the first of its kind within the state – the first potential project and contract,” he said.
Curran says if the Tok group agrees with the new contract he’s working on, it’s possible the agency will let it out for bid in early April.
Stancliff says he and the other biomass project backers will wait and see what Forestry can come up with.