Gov. Walker’s capital budget proposal cuts all funding for Susitna Dam

Late on Thursday, Governor Bill Walker released his initial budget proposal for next fiscal year.  The cuts included nearly all state departments and a number of megaprojects, including the Susitna-Watana Hydroelectric Project.  KTNA’s Phillip Manning has more:

Whether you call it a crisis, a situation, or something else, the clear consensus both in Juneau and around the state is that Alaska is facing a difficult budget year.  Before the beginning of the legislative session on January 20th, the projected budget shortfall was around $3.5 billion.  Governor Bill Walker, in his State of the Budget address Thursday night, said that significant cuts will be necessary across the board.  As part of those cuts, Governor Walker’s proposed budget has zeroed-out six major projects, including the Knik Arm Bridge and the Susitna-Watana dam.

Earlier on Thursday, representatives of the Alaska Energy Authority testified before a joint meeting of the House and Senate Transportation Committees.  The committee is examining the six projects to try to determine which are the most feasible and might merit inclusion in future budgets.  AEA says that $102 million will be needed before the Susitna-Watana project is ready to file for a federal license to build the 735-foot tall dam.  Project Manager Wayne Dyok says a $102 million appropriation could result in construction beginning in a few years.

“The timeline with the $102 million would be that we would be filing our license application in probably early 2017, with an expected issuance from the Federal Energy Regulatory Commission around the end of 2018, so to be ready to start construction in 2019.”

Sara Fisher-Goad, Executive Director of AEA, says that the total construction cost estimate has increased to $5.65 billion.  She also says those funds would not have to come directly from the state’s coffers.

“There’s never, ever been an assumption that we’d anticipate the state would appropriate the $5 billion to build the project.  It would be a financing process.  It would be financed through power sales agreements and probably a combination of loans and bonds.”

With Governor Walker’s budget proposal removing all funding, the Susitna-Watana Project could be shelved.  AEA does not currently have an estimate for what it would cost to resume the project if it is paused.  The state has spent over $190 million in this round of studies thus far, and spent more than $140 million in the 1980s before the project was set aside.  Wayne Dyok says the cost of resuming the project depends on how long any pause in the project lasts.

“The data would have some shelf-life, three or four years, maybe.  After that, I think there would be a cry to update some of the information.  The answer in cost would depend upon how much the pause.  Is it one year, two years, three years, five years, or beyond that?  If it’s probably beyond five years, I’m sure we would be starting this process over again.”

Representative Wes Keller’s district includes the Upper Valley and the proposed site of Susitna-Watana.  He says cuts to big projects are inevitable when the state is facing a ten-figure budget shortfall.

“The bottom line is, we can’t spend what we don’t have.  Yes, we could draw $3 billion out of savings, and yes, we may in fact skate through if something happens–the price of oil comes back or whatever–but it would be really inappropriate for us to do that.”

The state’s single-resource economy has come under scrutiny since the decline in oil prices.  Representative Keller believes that there are projects out there that could help diversify Alaska’s economy.

“The infrastructure in Alaska, if it’s the right infrastructure…is critical to us getting in a position where we can move beyond ninety percent of our revenue coming from oil.”

Keller says he still favors projects like the Knik Arm Bridge and the Port MacKenzie Rail Spur.  He is less attached to the idea of continuing Susitna-Watana.

“Because of the concerns of people in the Talkeetna area, I did not shed any tears that Watana is part of [Governor Walker’s cuts]…I’ve always said that I really like affordable energy, and I know that people in Talkeetna do too, but it looks like that one will stay dead, I think.”

Representative Keller says it’s still very early in the budget process, and the ultimate outcome is far from certain.  With Governor Walker’s complete budget proposal expected next week, the ball passes to the legislature to decide what to do.

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