State Energy Resources Coordination Council

October 15, 2003

KCC, Topeka, Kansas

SERCC Chair Lee Allison called the meeting to order at 10:10 a.m.

Present: Lee Allison, Colin Hansen, Alex Silver, Donna Johnson, Michael Volker, Shari Wilson, Dave Phelps, Larry Holloway (Moline), Lee Gerhard, Liz Brosius, David Springe, Spencer Depew, Galen Menard, Dave Holthaus, Barry Hart, Richard Nelson, Kyle Wetzel, Jesse McCurry, Patty Clark, M. L. Korphage, Greg Krissek, Jim Ploger, Ron Gaches, Susan Duffy

Kansas Wind and Biomass Energy ’03
Donna Johnson gave an update on the Wind and Biomass conference held Sept. 29 and 30 in Wichita.
Johnson: It was a very successful conference with over 300 attendees, and had better sponsorship than before, with the number of exhibitors up. Next year it will be the Kansas Renewable Energy conference and will be held in Topeka.

Natural Gas Summit
Allison: About half of the council was in attendance. The Summit was put together at the request of the Governor. Liz will report on the Summit.

Brosius: It was a very successful day, with 150 attendees. The morning session gave background information on natural gas both nationally and in the state. We were asked to put on the Summit by the Governor because of concern of a shortage of natural gas and also high prices, coming into winter. The morning sessions laid the groundwork for the afternoon. The reports being distributed today summarize the recommendations that came out of the summit. The second step is for SERCC to produce a report of recommendations. The moderators did a great job of capturing the information. In your breakout sessions today, I would like for you to go through the list of recommendations and if you see anything that we can be acting on in the short term. It could be communication to legislators, before the energy plan is out, we want to include that in the Natural Gas Summit report. We have promised to do that, identify what the council feels are important enough or timely enough. The third item that we need help with is how best to distribute the report. We need some feedback on what the report would look like – a summary of the natural gas situation, both at the national and state levels. The reports would focus in on the recommendations from the breakout groups. We should highlight what the council would want to go forward with. We are thinking of doing a report similar to the energy plan. The report would be print on demand, with a PDF on the website. We’ll communicate to the public that the report is available online.

Allison: Look at what are the recommendations, how timely are they, who do they go to, how many are specific enough, need to do this in your breakout sessions. Longer term they may be part of the plan. We could do a cover letter to targeted groups.

Hansen: Our group did a lot of brainstorming, but never got to the recommendations. There is a lot of things in there that the council can filter out.

Allison: Liz has done a great job of putting this together, hasn’t had a lot of time. We had great sponsorships for the Summit and a lot of participation on the organizing committee. We received great compliments from Patty Morrison from the Dept. of Interior, and Paul Wilkinson from the American Gas Association on how the meeting was run and organized. They are eager to hear what comes out of this meeting.

Brosius: We also had tremendous support from KCC staff.

Silver: [comment on one of the listed recommendations] Is there any way to come up with a different acronym for Kansas Renewable Resources Action Plan (KRRAP)?

Allison: We have copies here of some of the news articles on the wind conference and the gas summit recognizing SERCC.

Blackout Roundtable
Allison: A Blackout Roundtable was held October 3 here at KCC and was called by Rep. Carl Holmes.

Alison gave information on what SERCC is doing related to the recent blackout, and the Transmission Task Force.

Allison: Earnie Lehman, COO of Midwest Energy serves as chair of the Transmission Task Force; there are seven other members, and they have had one meeting. The Transmission Task Force has the charge, and timetable. They will report to us on November 19 to inform us of how large the issues are. They will have short-term recommendations. We will post the timetable and charge on the SERCC website.

Holloway: The upcoming meetings of the Transmission Task Force are Oct. 23, Nov. 4, and Dec. 14, all here at KCC.

Ad hoc Committee on System Benefit Charges
Allison: Michael Volker will give us an update on the ad hoc committee (on systems benefit charge).

Volker distributed a brief report. He said the group agreed on a definition of a system benefit charge as “a volumetric charge assessed on the end-use customer’s bill to fund energy-related activities in a manner beneficial to Kansas.” The report also summarized fuel types and criteria to be considered and outlined some next steps.

Nelson: Dollars add up pretty quick.

Brosius: I am curious about the consensus of your group.

Volker: There were some good concerns brought up; no one was completely against the idea. Kansas has some areas that it has competitive advantages.

Hart: Is there any talk on issues that other states have found like granting users over a certain age group or income level exemption?

Volker: Yes, we haven’t gotten that far, but yes, that would be included in criteria.

Holloway: It may apply to one utility service, but maybe not to another.

Concern: If we have half an idea out there, we don’t want to have it grabbed and put in legislation. Do you think you will have ready by the time the energy plan comes out?

Volker: We don’t know that.

Springe: I am very leery of how we go through this process. It will take some time to get it nailed down, will need coordination, we won’t have it done by the legislative session.

Silver: An alternative to that is to delay it another year. That would delay funding of valid programs.

Holloway: I would like to hear how you are going to tie it down by the legislative session.

Springe: If we come to a consensus on the idea, and the Council supports it, it could then get expanded by the legislature.

Phelps: Have you developed a vision? Do you have a sense of social criteria?

Volker: That is next. We only met for one hour.

Phelps: The Council will have to have consensus on this.

Allison: Difference between a systems benefit charge, public benefit charge? Is there a distinction?
Springe: May end up with both, hits consumers pretty hard, not saying it’s a bad thing, but there has to be some awareness of the impact on consumers.

Ploger: I have copies of report - energy programs consortium; did white paper on this issue. Summarizes the 13-15 states that have this system. Dozen ways of doing it, lists potential menu of items that could cover.

Allison: I applaud you for getting that report done. Good reference material.

Volker: We had a conversation on green tags – renewable energy credits – instead of having renewable portfolio standards, gives credits for purchasing green power or in the case of a utility can sell. Could be revenue for state, offset high cost of generation. Can market renewable generations even if not being delivered to KS consumers.

Holloway: Who buys and for what purpose?

Volker: For a green credit program.

Holloway: Being purchased anywhere where retail competition?

Volker: Don’t know that.

Volker: Had some things handed to me yesterday, a report from Stanford University – EMF – Energy Modeling Forum, Natural Gas, North American Energy Markets. Have not yet looked at them yet. It seems that these reports are counter to the doom and gloom we have been hearing.

Allison: Maybe we will put on our website.

Bio-Energy Working Group

Allison: I have asked Patty Clark from Commerce to give us an update on the Bio-Energy Working Group.

Clark: This was talked about at the Prosperity Summit – Since coming to this position April 1st we have had 7 ethanol proposals, but couldn’t fund them all. This is the trend. We had a question on how to make renewables a part of the economic development for KS. The group has had one meeting, wind energy is a classic example of energy policy. Flint Hills wind development, need to get to what we incentivize. Prosperity summit – had 7 across the state – kept hearing that there needs to be a state energy policy. Troy [Findley] has been asked to head up and Patty to assist in putting together state energy policy. Thought is as that a group we need a list of all energy producers in state and do side by side comparison. Dept of Commerce is working with groups to develop state energy policy.

Allison: Who are the members?

Clark: Ever growing – have been other renewable energy groups at work on similar issues. Haven’t ever been pulled together in one place. Bruce Snead, Richard Nelson, corn growers, Troy Findley . . .

Holloway: Comparison needed is jobs?

Clark: No, issues impact factors needed to do comparisons, jobs is just one of the issues. Economic standpoint, economic overlay.

Allison: I’m intrigued about how we can work with your group. We don’t want to duplicate energy efforts as we both have limited resources.

Allison asked the renewables committee to look at and report back this afternoon.

Comments from Troy Findley, Governor’s Office
Findley: As you may know, I work for Gov. Sebelius as a legislative liaison. Want to thank each of you for serving on council, incredible what you have done in short time. Give credit to Lee and Liz. Summit was successful day and good event.

Will talk about governor’s plan for new executive order and some other big picture plans. Governor’s message was to use SERCC. Currently, there’s no single entity that crafts energy policy in the state. We hope to change that, use this council, which has expertise and wide representation of stake holders, to craft energy policy, move forward to legislature, or through KCC. How do we accomplish this?

The executive order needs to be looked at and retooled. Do we have appropriate members? Right stakeholders? I invite your input. Another question: what is the mission and charge of the energy council? Do we need to redefine? Make it more of an ongoing process to develop policy?

Minor point: Some in the office want to change the name of the Council. Invite ideas to simplify the name. Have met a number of you over course of the year. Will use SERCC as think tank, use as a body to make recommendations, view, review other ideas. Pass your way with topics that we need feedback on. I want everyone to understand that this body should be instrumental in developing policy.

One question is about the executive order – we will wait until first of year to redo order and will look at who the members will be. The state geologist and director of the survey will continue to be involved as well as the chair of KCC. Gov. has great deal of interest in council. No decisions made yet on members.

How do we expect council to operate without a budget? We’re very well aware of that issue. Will have more support. Invite questions.

Springe: Every week I learn of a new task force or working group, amazed that we keep having new groups. Who is coordinating the different groups that seem to be looking at the same issues?

Findley: No, there is no coordination, part of problem we see. Hope is that with re-issuance of executive order, we might be able to fold other organizations into energy council. Our office worked very hard first part of year to break down barriers between agencies. Hope to build coordination.

Nelson: Regarding the makeup of members—some of us spent a lot of time marking up the current order, what happened to those?

Findley: They are being considered. Looking for best people to make recommendations on energy policy.

Holloway: Think about the impacts on agencies when these recommendations come in.

Allison: Success we have is because of this tight group—formal members and the renewables. Team efforts, Liz, KCC staff, key reason for success.

Allison: We have one other item under reports on the agenda, FutureGen, something I came across just recently. See what some of you know about it. The Dept. of Energy wants to build $1B zero-emission power plant. DOE willing to put up 80% of cost of putting up coal-fired plant. Soliciting coal producers and electrical companies to propose location. Looking for site. KS as a state has not done anything to pursue this. See what role we might want to play, put together something from the state, be involved.

Allison distributed the notice from the Federal Register.

Allison: KS has certain aspects that could be very competitive. The Survey is just getting ready to start a CO2 flooding project in western KS. Oil industry may buy CO2 from plant. Would be a 1M tons of CO2 a year. We may have technical advantages.

Hart: This is the first time I’ve heard about this. Maybe this group should send a letter to Governor, see if KS can do. Have a lot of people in state involved in this issue, Brownback, Roberts, etc.

Gerhard: As background, I might mention that the State of Kansas competed for the superconducting supercollider.

Nelson: Carr led proposal, not funded, going to meet with someone.

Allison mentioned communication with Moran’s office. Said DOE was going to give him a briefing on where this stands. They want one consortium. We may contact KS utilities about joining consortium.

Holloway: Best way might be get support from public power folks; other thing is to get rid of CO2, where needed in state.

Allison: We (KGS) have been doing those studies; we are going to start pumping within a month. I ask the committees to talk about this in your meetings this afternoon. See how the council wants to proceed. It appears we don’t have anyone in the state involved with this.

Hart: Other issue – you view as large ongoing development project, resources should be put on as priority basis.

Johnson: Having worked for DOE for a time, looking at some of this stuff, it needs to be industry driven.

Silver: Criteria?

Allison: Trying to get a sense is if there is someone already so far out in front. So far I’m not getting a good answer from anyone. What are the three states you see?

Silver: Pennsylvania, Wyoming, and N. Dakota, from fuel point of view. Electric energy from coal would be the Northeast, ours from coal. Would expect to be in high-density population areas. Can make some phone calls.

Hart: Bush announced this program, Roberts and Brownback should be able to see where this process is.

Allison: When I talked with their offices, they were not aware. I’m trying to get information from DOE. Big question is: is there already a consortium, and what is happening, worthwhile to put effort into this?

Allison: We were to talk about what the sector committees are to do this afternoon. The November 19 meeting is to prioritize our recommendations. Today I’d like you to determine which items in your sector are your priorities, key issues, so that the other committees will have a month to consider. Next month we will vote on the recommendations.

Brosius: We have had multiple discussions on how the report should look. Will look to Volker and Holloway for forecasts. Will also ask Tim Carr for info.

Lunch break at 11:50
Sector committees will meet at 12:30

Full council reconvened at 2:25 p.m.

Allison: Next meeting – November 19 at McPherson, short tour of refinery.

Allison asked for the reports from the sector committees; said that their proposed recommendations will be sent out as a list for prioritization and vote at next meeting.

Silver [Renewables Committee]: Our primary action item to present to legislature is for a System Benefit Charge , completely undefined. We need to find way to finance SERCC activities, do in January for time for legislature to act.

Suggest we make effort to coordinate interests so we’re not duplicating efforts in state.

  • Conservation issue, endorsement
  • Education issue
  • Transmission, important for state for energy in general, continue to support task force
  • RPS – define RPS, green tags, or renewable energy credits, warrants further study
  • Roadmap for renewables in the state and as a committee develop renewables towards less dependence on important resources.

Allison: Ploger is working on a chart that shows different energy programs and agencies in state.

Depew [Petroleum committee]: We had 6 recommendations:
  1. Help with addressing national issues. Get state help, active participation.
  2. Raise exemption levels.
  3. Tax exempt for technology across energy spectrum. “Advance technology tax exemption.” Be independent of product price.
  4. Recommend modification of oil unitization statute for multiple reservoirs.
  5. Amend Article 9 of the Uniform Commercial Code to restore a preferred creditor position for sellers of oil and gas upon bankruptcy of the purchaser.
  6. Move the coal bed methane tax exemption beyond the 2 year exemption. “Favorable tax treatment.”

Menard said he would like to write a paragraph on addressing the national issues. Has to do with jobs and refineries.

Depew: Exemption levels – the prices are far above those exempt levels. The current exemption levels are now at $2.50, could make higher than that since prices are higher now, but if they go down, would be some exemptions. We do not have a number. As the system is now there really isn’t any exemption.

Tax exemption for money spent on new technology to increase production, get more reserves out of the ground. This would be across the energy spectrum, not just oil and gas.

The KCC has allowed unitization of 2 reservoirs because they were interconnected, co-mingling because of the well bore. Current litigation in western KS. Want KCC to be allowed.

Hart [for Utilities Committee]: We also were dealing with consolidation of energy related programs. Did not say we need cabinet-level energy secretary, but believe energy policy needs to come through one entity. Everyone in agreement that if change name it needs to have Kansas in it.

We felt it was important to study issue of renewable energy credits and certificates, where is country, where markets, use of credits, how to get plugged into markets, need to study. How Kansas can use that, maximize.

Needs to be funding source through SBC or other means of funding. Strongly believe that to be effective need funding.

Talked about FutureGen project. We should contact Lt. Gov. Moore, tell him that we think is priority project, criteria for project in KS, sequestration show up in notice. Lt. Gov. should contact Brownback and Moore and investigate Kansas chances for project, what is our potential. Take action.

When renewable energy committee talked about reminded us that important issue to support TTF, important.

Allison: What I’m hearing with respect to the gas report is that we have nothing to take forward. We’re stuck with the situation short term, long term we have some recommendations, some study items.

Springe: Printed out the futures contract info – gave this info at gas summit. Substantial increase since 9/29, have popped up since 2 weeks ago.

Silver: Keeping public informed about prices is important, helpful, so you don’t shock them.

Allison: Liz worked with K-State Energy Extension and KCC to develop and print the brochure on how to be more energy efficient.

We had Shari Wilson from KACEE last meeting to talk about partnering with SERCC on educating the public on energy. We now want to talk with Mark Shreve with the KIOGA foundation on partnering. See a lot of opportunities.

Follow-up on a couple of recommendations: coordination of our energy policy statewide. Heard from Troy this morning, heard last week at gas summit. Have some examples to look at to see how to set priorities. What should the state organization and direction be for energy policy? Also, the Renewable Energy Credits, but we have a lot on our plate, like the idea, depends on SBC.

Holloway: May be good arguments for doing both, this year will be the end of the 2-year legislative cycle.

Brosius: Regarding the structure of next report, I think it would be good to have a unifying theme. Last year our theme was that instead of being a net exporter, we are now a net importer. I envision the report will have a smaller background summary section; we have already done that last year, we left out the loss of refineries in the state, there is some updating to do, will be a smaller document.

Allison: If we could get Commerce’s report on the economic impact in the state, we have Jim’s materials to use, everything is so uncoordinated and spread out, industry community wants to see brought together, potential, will have forecasts, recommendations – legislation, study items.

Brosius: Nothing written yet.

Silver: With smaller number of issues, the committees may want to have rather than a bullet more of a paragraph.

Brosius: Between now and Nov. 19, there is room for comment, adding recommendations, wanted on the table by today.

Allison: We may have something from TTF by then.

Brosius: The report will also include what we have done this year. I welcome your input, suggestions, comments, concerns; send to Lee or me. Need people helping with production and consumption forecasts.

Allison: I want your input on how to do the voting. Last year we did a show of hands on 40 some items. We saw some items that were ready for legislation, some the Council would adopt, some were study items. This year, we have about 20 recommendations or priorities. Do you want them brought forward with brief discussion? How to go forward with adopting?

Menard: Any objections to how we did it last year?

Allison: No.

Brosius: Maybe not objections, but there was concern that the renewable committee not having vote doesn’t have same level of participation. We did hear that.

Allison: Do we add the renewables committee to vote?

Hart: With the recommendations we have on the table today, don’t see any conflicts. Think hammer out, and walk out of this room unanimous.

Phelps: I think we are trying to present a balanced position.

Allison: We will use the system we used last year.

Allison: Any new business?

Brosius: Publishing reports?

Allison: We will work on internally. We have a number of reports coming out – natural gas summit report, blackout roundtable, Jim Ploger’s report.
Liz’s thoughts is that we would serve as a clearing house for reports, and make them available.

Adjourned 3:30 p.m.