House Energy, 4/23/26, 1pm

ទ្ទ្ទ ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រ ទ្ទ្ទ្ ប្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រ ទ្ទ្ទ្ April 23rd,.

The time is 1.04 p.m. Members present are Co-Chair Mears, myself, Co-Chair Holland, and Representative Nellie Jimmy. I appreciate those of you who are here. I know Representative Costello is excused and not going to be here. I expect to see others as they show up, and I'd like to recognize that Representative Kopp has now joined us.

Thank you. A couple notes about the meetings. Please silence your cell phones as a reminder. Staff and members of the audience may not approach the table. If you need to pass a note to members, please get the attention of my committee aide, Tim Truer, up here.

I'd like to thank Recording Secretary Cheryl Cole and June Augustine from the Juneau LIO for their assistance today. I'd like to recognize Representative Edgman has joined us today also, and at this point we now also have quorum to conduct business.

Today we'll be hearing from a number of presenters on the issue of fuel supply chain concerns in Alaska in light of the context of the current global oil price shocks and supply disruptions. We're fortunate to have five speakers lined up that each bring a unique perspective to this issue. That also means we'll be tight on our schedule today. So I'll be keeping an eye on the clock. We may need to limit questions just to single question and follow up as necessary to try and stay on time and provide an opportunity for everyone to have time to speak.

First off, we'll be hearing from Nils Andreassen, Executive Director of the Alaska Municipal League, who's in the room today and works with dozens of communities across Alaska. He'll set the stage for us and how this issue is having rippling effects and impacts across the state. Next, we'll hear from Mike from Vitus, one of the key industry players providing fuel deliveries, particularly in western parts of the state. Then we'll hear from Gwen Holdman, Chief Scientist for the Alaska Center for Energy and Power, who just today published an for her article on the Alaska Beacon on this issue. Thank you, Co-chair Mears, for circulating the article to community members.

We'll hear from Tom Atkinson, CEO of Kotzebue Electric, offering some on-the-ground perspective from a utility operator. Finally, we'll have the Division Director, Sandra Moller, from the Division of Community and Regional Affairs at DCCED, which among its many important duties provides the home for the Bulk Fuel Revolving Loan Program. Given our busy schedule, we will get started. I do just want to add a note to our preparation for these presentations. We are less than 30 days before the end of the session, and one of the things I will be hoping to ask all of our presenters to do is to bring some clarity to actions that we perhaps need to be taking given the limited time we have left at this point.

This issue is urgent, and if there are items that need our attention, I would like to be clear on that because there will be little time for us to act if acting can be done in a way that will be beneficial.

So let's go ahead and begin. Mr. Andreasen, if you would like to put yourself on the record and begin your presentation, I am looking forward to it. Thank you. Yeah, thank you. For the record, Nils Andreasen, I'm the Executive Director of the Alaska Municipal League.

You do have a number of experts, technical subject matter experts, following me, so I don't want to spend too much time on the problem, but it's worth kicking things off by making sure that you understand that there is, there is one. The— this slide is really meant to describe the risk environment that local governments and communities around the state are experiencing. Suffice it to say that they see limited fuel availability, higher costs, and potential for service disruptions. One of the things that I want to hone in on is that it's, it's easy to think about this in, in terms of bulk fuel or, and who's purchasing at the wholesale side of things. It's easy to think about this in terms of an individual Alaskan and the price that they increase or, or disruption that they might experience.

I think it's worth noting just how much of a ripple effect this will have across Alaska. This isn't a Western Alaska issue or a Northwest or an Interior. This is an Alaska-wide issue at varying scales and where an individual Alaskan might experience a price increase based on availability and higher prices overall. We're going to see it in transit in urban communities. We're going to see it in higher food prices.

We're going to see it for construction costs, whether it's a port improvement project or a road transportation project. It's, it's going to be widespread, and I, I think it's worth noting that just because that will mean that solutions or mitigation measures have to be thought of in terms of kind of broadly applicable. When— if we're just focused on lowering costs for wholesale or individual Alaskans, we're probably missing quite a bit of some of that trickle-down effect of higher costs. So there will be others who speak to this. This slide tries to capture some of the high-level impacts that are out there.

That Alaskans might experience. A lot of that does translate into a financial threat.

And one of the things that I hope becomes clear throughout this hearing, I think there are other speakers who will address this, but price is a big issue. If costs go up, everybody will be paying more in some way. The larger issue, I think, and that we really want to get to the bottom of is is whether fuel will be available at all. So is there a supply issue or a threat? And, and attacking that and mitigating that is a very different issue and proposition, I think, to, to be paying attention to.

Cost will strain both communities and households, businesses, project developers, and availability and price will be at play here. And I, I think one of the comments I've heard in recent weeks is, is that this is unprecedented. And higher prices aren't unprecedented. We've seen that before. And this dashboard from DCRA— and I think Director Mohler will speak more directly to the, the resources they provide— but you can see there have been jumps in price before.

One of the things that I think is interesting about this is that when there are jumps in price across Alaska. They're fairly sticky, meaning they, they don't just land for one year. It could be multiple years that actually rural communities experience that. And at least the last couple disruptions in 2010 and 2022 have stuck around for a few years and contributed to a longer-term price environment. That might be something to think about, that we're not just talking about this year's prices or this coming year's prices, but something into the future.

I want to spend most of my time today talking about what could we do about that, and, and then I hope that other speakers will, speakers will add their own contributions or dive deeper into the problem statement. One of the primary tools that the state has to address cost or access to funding for bulk fuel is the Bulk Fuel Revolving Loan Fund. I think Director Muller will Speaker:JASON] speak more to the mechanics of this fund, but there's a few areas where this committee and legislature can, can maybe think about utilizing this as a tool to mitigate some of the cost or availability that communities might experience. So first, making sure that the fund has sufficient resources and capitalization, making sure that there's enough in it if local governments or utilities or eligible applicants were to access it to a greater extent than they have. So that's one.

The second area to consider is increasing the cap from $750,000 to something more. And I could say $1.5 million, but that's simply doubling the current cap. I will say that for one of the communities we reached out to in preparing for these— this presentation, They'll have to find $1.2 million more than they had last year to find, and they're already accessing the bulk fuel fund at the cap. So that's even $1.5 million would be insufficient to meet their current needs. You could think about expanding eligibility of the fund, which would be a lot more challenging, but could address some of those trickle-down effects that others might be experiencing.

It would put greater pressure on the fund, and you'd have to think differently about further increasing the capitalization of the fund. Finally, just to note that there are many potential— potentially eligible applicants who haven't utilized the Bulk Fuel Revolving Loan Fund, and thinking about how to soften the blow for them, soften the blow for those who are utilizing this at a greater rate. And whether that's addressing the interest rate that's included in there right now, including for first-time homebuyers, those might be kinds of considerations that this body could include in their deliberations. And again, I think any of these would be— Director Moller could address further in kind of what the impact would be on the fund itself and how DCRA would manage some of those options. And I have a longer list of potentially bad ideas, so this isn't necessarily the right process, but I want to give you as many tools as I can for you to consider, and you can weigh their value.

So other states are pausing the collection of their motor fuel tax or other types of taxes that they apply on fuel-type products. In Alaska, the lowest motor fuel tax in the nation for so many decades. But we're talking about $0.08. It's not going to break the bank, but it's an effort that other states are utilizing to soften the blow for residents. You could additionally pause collection on the refined fuel surcharge of, again, not, not a lot at less than a penny, but is something.

So those are— that's a tool that you have available. You could borrow against— and again, all kinds of— there's no bad ideas in this presentation, but you can weigh their merit. You could borrow against PCE, the Power Cost Equalization Fund, for public sector loans to local governments.

School districts to be paid out over some number of years. If you were struggling to recapitalize or additionally capitalize the bulk fuel revolving fund, you could do something like that and kind of borrow against PCE and try to ensure some— a net benefit in the short term and its long-term sustainability. I mentioned public transit earlier. One of the impacts might be felt by transit users and transit operators. You could You could pause ICAP collection by DOT on all FTA transfers.

So ICAP is like an indirect rate that the state keeps for the transfer of FTA dollars. Instead of going directly to local governments or nonprofits who operate those transit systems, the state collects some percentage. You could pause collection of ICAP and let the full funding flow from FTA to those operators. And that could help them manage fuel costs for their transit systems. I believe this— the legislature has already talked about increasing student transportation funding for school districts.

That's another area where this will be felt keenly. And the way I think about it is anything that can go to districts for transportation that they hadn't budgeted for already will mean that more can go to student education attainment. So we don't want to play one off against the other and making sure that student transportation is fully funded means that educational attainment is also fully funded. The state could plus up its LIHEAP program, the heating assistance program that is administered, that it administers. That's one option and that addresses, I think, something different than PCE, or the Bulk Fuel Revolving Fund, and heating assistance in, in particular.

You could also look at further investments in AHFC's Home Weatherization Program. Not a short-term fix, but it's also a pretty easy fix to— if you can lower energy costs during this high-price environment, or lower energy use during this high-price environment, you can you can help with price or ultimate costs. It could be— there's been a number of pieces of legislation focused on emergency disasters or emergencies and disaster mitigation. We could prepare Division of Homeland Security Emergency Management for a bulk purchase of fuel if access to fuel is an issue and the potential need for air freight of that fuel. To communities who end up not able to receive it.

I don't know if that's a use of disaster funds or otherwise, but those are things that we could start preparing to— if we're not thinking about them already, those would be things that you could consider. Longer term, evaluating the feasibility of— and I get out of my depth a little bit— but a pooling effect for, you know, at the regional level or across different communities Could you do bulk fuel purchasing at a larger level so that individual communities aren't going alone when it comes to trying to access— make decisions about when and how much to purchase? Finally, the state has a ton of expertise in this area. Alaska Energy Authority, DCRA, through their local government specialists at AHFC. Making sure there's somebody in charge of at any, any point they can offer support to help communities and other purchasers navigate the price or supply crunch.

Right now those calls are coming to AML, they're coming to the— they could come to any number of different organizations around the state, but having somebody at the state level that we can point to would make it more navigable for us. I'm not going to tell the community when to buy fuel and at what price point, but what we're saying right now, if there's not going to be fuel at some future date, then the sooner you make your purchase, the better. And that's based on what we've seen and communicated from some of the providers that are out there.

I focused on state action because I'm in front of the legislature who manages state action. Uh, it's not to say that local governments and others, uh, don't also have a role to play. Um, and we're certainly doing what we can to get information out, uh, to communities. Um, that includes, uh, encouraging them to act early, not to wait, um, uh, for a better price or something to change globally or in the market. If the priority is having fuel in place prior to not having, not having it, then, then focus on that.

And price will have to be addressed in some other way. But acting early is what we're saying right now, building that escalation into budgets that are being drafted right now and working on identifying funds to support that. Is something that communities can consider. Doing what you can to conserve energy. So communities can be educating residents, can be working with their transit operators, can be managing their fleets in different ways and conserving what they can to avoid what could become a more dramatic crunch later.

Planning out and doing some scenario planning for if If fuel doesn't come, what happens? Who do we turn to? Who could we cooperate with? Who do we work with if there's a severe shortage or if we have to ration? So that kind of planning can be conducted right now in a budget environment too, so that we— communities know what they can— what they have to work with.

It feels late for regional coordination, but you also have good regional bodies out there, regional health nonprofits, tribal nonprofits, boroughs, and others. You've got good systems in a utility cooperative like AVEC. You've got folks out there who are doing some level of regional cooperation, but where that's not in place, to facilitate it, encourage it, could be helpful, or otherwise support those efforts. Those are things that, that we're encouraging. And finally, communities can go through a review and prioritize critical services.

So that's part of a scenario planning process. If this, then here's kind of an order of operations for how we make sure fuel is available at what price and for whom. I'm going to wrap up again, just state leadership now is pretty crucial. I know you've just got 30 days or so, but this is the window for action. It will be too late, probably post— 30 days, but you have the ability to help with coordination, with communication, with capacity building, making sure that there's technical expertise available to communities trying to do this on their own.

You have tools either in legislation or regulation that you can apply to facilitate state action. You can work with communities through AML, through other partners to make sure they have the information that they need. And think about how do we work towards some longer-term solutions. If high prices can be sticky post-dramatic surges, then it's not just this year that we're focused on. We're probably thinking about the next 3 for managing risk effectively.

I'll leave it at that and just note that in terms of local action, we did provide some additional slides as an appendix that spells that out a little bit further. Procurement— and I'll just run through the slide titles really quickly— but procurement and supply security, things to focus on, financial and budget strategies, fuel conservation, demand management, fleet and equipment management, infrastructure and storage, delivery and logistics contingency planning. Finally, the regional coordination that I mentioned earlier. So all in all, there's a lot that could be done right now. There's a lot going on within communities trying to assess risk and financial threat.

As I brought up in my early slides, there are some few things that at the very least the state could do. And I appreciate all the work that's already gone into this issue, especially within a budget discussion. To the extent that you can do more, I know that communities would appreciate it. And when I say communities, it's not just local governments. It's all facets of community because high prices or unavailability of fuel will impact everybody.

Thank you. Great. Thank you, Mr. Andreasen. First off, I just want to acknowledge that Representative Johnson had joined us, I think, about 1:10 or so. For the record on that, I'm curious if there's any clarifying comments anybody would like to make from the presentation we've had so far.

Representative Edgeman. Mr. Co-chair, I'd just like to thank you this hearing. I think it's probably one of the more important legislative committee hearings I'm going to attend. I think Representative Jimmie might agree with that as well. This entire session, this issue of rising costs in all of Alaska, but more accentuated in rural Alaska, is easily finding us on the precipice of really.

Beyond just sort of uncertain outcomes at this point to a situation where we may not even have fuel to be delivered to outlying communities. And given the prospect of what could happen if another cold winter in '26-'27 descends upon the rail belt area, the Matsu Valley could be on diesel. You know, we've heard that from some of the natural gas providers in the Anchorage area. But I would just like to thank Mr. Adriessen for the great work at AML. And also to anyone listening and maybe even touch upon this time and again as we go through the hearing today, the legislature is doing what it can do.

We have seen both the House and the Senate provide operating budgets and provide programs for sort of residential use. Making sure the PCE program is fully funded. The Finance Committee, which Rep. Jimmy is a part of, put $17.5 million into the Alaska Heating Assistance Program, which hasn't been capitalized for some time now. Unfortunately, we don't have its counterpart, the federal LIHEAP program, at play. And maybe we can, as time goes on, be able to plus that up.

The Bulk Fuel Loan Program, I know there's consideration to, as was recommended, maybe doubling that. Doing a lot more of that. And not to mention sort of the longer-term picture, picture of the gas line, you know, the— are we going to take significant steps this session and beyond it in terms of getting a gas line put into place? But I'll just close by saying this, that no matter how much we can do, the levers we could pull, the programs we can fund, we're not going to be able to meet this thing head-on if the worst outcome materializes. And that really keeps me awake at night because I just feel like, you know, I use the word catastrophic in an earlier publication, but it could be worse than that.

If we don't get fuel and it's another cold winter, it could be apocalyptic. And I'm just— I lose sleep over it. I know it's still early days relative to the upcoming summer and then in the fall, and, you know, we really don't know what's going to happen in the Middle East, but right now it doesn't While it looks good for the state treasury on one hand, on the other hand for those of us out in the bush of Alaska, the entire supply curve, everything involved, the cost chain is raised and in some instances on the heels of a 9.4% increase in bypass mail exponentially. So again, thank you for holding this hearing. I hope to learn some new things today and to take that as Mr. Andreesen pointed out into the last 30 days of session and do everything we possibly can to prepare our communities.

And again, not just for rural Alaska, but for the communities statewide. Great, thank you, Representative. Representative Jimmy, did you have anything you wanted to raise at this point? Um, yes, thank you, Co-Chair Holland. Um, I'll just basically piggyback off of what, um, Representative Edgeman said.

And I, with this cold snap that we did have in Alaska, I don't think our constituents will understand the, um, what fuel crisis we are facing on even right now, and that's gonna come ahead until we get our fuel delivered by spring and in the fall. And what does that even look like for us down the road? Are we going to be paying way more, 2.5 times more than we are? And it's just such an un— it's like walking in a fog. You can't see what's gonna happen, so Thank you for the comment.

Very good. Thank you. Representative Johnson, did you wish to speak? I did, if I might. Thank you.

Please. Thank you, Mr. Chair. So I do also appreciate having this hearing, and I'm not nearly as articulate as the speaker on all of these pieces, of course, but I had actually talked about this and requested having a hearing like this in another committee, but because about, I guess it would be about a month ago or so, I was talking with my son and he does barge, big barge fuel up between Cherry Point, which is the Alaska refinery in Washington, to Los Angeles and San Francisco. And he was saying, when I talked to him, whenever this was, it was right before the conflict started, and he was saying that they were like number 40 in line to unload their barge.

I mean, there's that many big ships sitting out in the bay there in Los Angeles waiting to unload. And when I talked to him about 2 weeks ago, there was 2. They were one of 2 ships sitting there.

And so then after some discussion with figuring out where those other ships are, even though those are West Coast— even though that's a West Coast destination and California produces a lot of oil, they still— those were Middle East ships that were there waiting to unload. And so that's how much the Middle East oil, not having that oil, is impacting the West Coast very, very much. So I do too, I have a lot of concerns about what our supply chain looks like. And I guess there's a couple pieces that I would— maybe we'll be talking about it, but perhaps— I mean, we we can look at it. I guess we all have an intuitive understanding that there's a problem and that we need to deal— do something.

But, um, and it's hard because we have, um, you know, this is kind of coming at us fairly quickly or very quickly. I guess what I would, would like to know, and I think it would be good information if at all possible to get as we, as we finish up this year and going into the summer and as we're preparing to look what we're going to do this winter is really how much do different communities have on hand, you know, if that would be an important piece as well as kind of getting a sense of what our supply chain really does look like and what maybe it's not looking forward and being able to project it because we don't know. I mean, that's probably a big piece of this is the absolute uncertainty. I mean, from week to week we don't know We don't know if the street is open. We don't know if it's closed.

We don't know if it's projected to be closed for a long, long time, or wow, we're going to be open right away. So much uncertainty out there. But I guess what I'm wondering is kind of getting a sense, especially going into this fall, if there's any— just kind of trying to get some kind of statistics. So hard to do. But otherwise, we're going to be just trying to be on our hind foot the whole time just trying to come up with something from almost from week to week, especially if we have downturn in the weather and it's cold.

I mean, we could be— like you said, we could be in a catastrophic situation. But if there's a way of— I don't even know how much storage is available. Is there storage available that we could store here in South Central so it's available? I've actually been talking to some folks that fly fuel out mining and road operations in various places. And they said that there isn't fuel available, that they've been— I don't know if rationing would be the right word, but they're having— it's getting metered out of the tanks in Anchorage.

So it's having an effect all across Alaska already. And I don't think this is too soon to be talking about it. Thank you for that. I think I'd like to keep—. If I might follow up, I'd like to—.

It could be very brief, please. Thank you. Thank you, Mr. Chair. We're running late.

Appreciate you keeping us on track. If you— if there's— I guess my question is, and I don't know If you have— I don't know where we'd even go to get some of that information. Maybe Gwen can tell us a little bit more about it. But how can we get a good picture of what's available in Alaska, what storage is available in Alaska, what our supply chain looks like, but especially how can we keep this from getting to a crisis point, make sure we're working ahead as much as we can so that doesn't happen? If you have any information like that, it'd be really valuable.

Briefly, Mr. Andrews. Just, uh, yeah, through the chair, Representative Johnson, I, I would commend to this group the Denali Commission's, uh, bulk fuel working group. Um, I don't know that they have the answer, but they would be a good resource, um, for this body. Um, and I do think some of the other speakers— Vitus could probably talk about the supply chain and West Coast side of things and, and what supply might look like in Alaska. And Gwen might be able to shed some further light.

But I think it's a great question, and I wish I had the answer. Thanks for this opportunity. Well, thank you for joining us today and the resources that you've shared with us. We may have some more questions or comments later, but I appreciate you being here today. Um, so continuing on, and we are going to have to move, um, to stay on schedule for the additional speakers.

We're going to go next to Vitas and Mr. Pawson. Who will be sharing a little bit about the status they have with their fuel supply resources. Mr. Poston, do we have you online now?

Yes, and thanks for inviting us in. So yeah, if you could put yourself on the record and share what you can with us. Yeah, so on a normal year, we would start taking orders for village deliveries in January, and those would accumulate And we would, in discussions with customers, develop a, a profile for the.

The year, and about February or so we'd start discussions with refiners, and we would select a refinery that's going to have the amount of product that we need in the timeframe that we need, and the specifications that we need. Because buying fuel in the summer that's going to work in the winter for Alaska, I mean, that's— we're already an oddballer in the marketplace. So typically we find that over the last few years that it's kind of— that's been South Korean refineries that have the combination of the product we need and the amount, the specifications and the timeline. But because they normally are supplied with crude from Middle Eastern suppliers, the crude supply is cut off and those countries are implementing rations or prohibiting or limiting exports. So, so that's— so the most economical supply of product is no longer available.

On top of that, transportation resources have been dispersed and repurposed, and the rates have gone up significantly. So what we're finding is that we're having to pay more for transportation because the, the unit itself is less available and there's more demand, and, and it's not in the place that we would normally need it. So there's a deadhead cost to put it wherever, wherever the future procurement is going to be. So instead of coming from, you know, 20 days away, it might have to come from 40 days away to the Alaskan market.

One of the other things that we're seeing is that, that the industry works off of published price information where there are data services that, that provide information on what the price of fuel is in different markets throughout the world. And we're finding that product is not trading at the listed wholesale price or spot prices, that premiums above the spot price kind of like when you go to a car dealer and you see the sticker and they say, "Oh no, the manufacturer listed price, that's not what you pay. You pay this much more." Well, we're finding that there's a noticeable creep in that. So everywhere we turn, the prices are going up. We're finding that at the same time, there are a couple of refineries in California that have ceased operations since last year.

So there are more people going after the global— after spot refined barrels than there used to be.

We do. We do. We do. I mean, it's in the trade magazines, and intuitively, there's demand destruction at these prices. But that's a wild card.

It's hard to grasp what that's really going to mean.

So what we're finding is that we're going to have to pay more for transportation. We're going to have to go more— we're going to have to go farther away to get the product. It is available. We've done some bids unsuccessfully on some product, but— and, you know, just as a side note, between Crowley and Vitus, there is a little bit of overcapacity in the marketplace. And so the marketplace can normally tolerate some inefficiency.

And that's what we're— that's what we're finding here at the beginning of this year is that there are refineries in Alaska. There is product that can be— that is available. But it's kind of like turning on a hose with a trickle coming out. You know, it's enough to put out fires and take care of folks that are— that have run out or about to run out because of the cold winter that we just had, but it's really not enough to go through the entire countryside and efficiently get the work done. So we believe that we will have to continue bidding higher until we're successful and that, you know, the heavy-hitting supply push will come probably sometime in June or late June or early July when we see that that were in basically in the groove to get the work done.

Now, if you overlay the Alaskan environment, solstice is June 21st. By the time July hits, we're already losing daylight and we're going to be into fall storms and darkness, things that limit productivity very soon. On top of that, We— I mean, one of the other challenges we're seeing is that currently there is a Jones Act waiver or exemption that will let, that will let us lift U.S. Product with a foreign-flagged vessel and go to a U.S. Port.

That waiver expires at the end of May. So in a disaster scenario, We could get the product we need, put it on a ship we can find, get it to Alaska, the Jones Act waiver would expire, and we'd have to turn around and sail to a foreign country and export it. Now, that would, that would be a shame. So, in the what can you do, please lobby for an extension of the Jones Act waiver. And we need that to go to the end of November.

So, back in the story. So we are going to be— we anticipate being delivering large amounts of fuel to all of the places that are needing to stock up in the second half of summer, July, August, September. What will complicate matters is if we go to make these deliveries and the purchasers don't have the funds available to make it happen. At the dollar value of fuel these days, we just won't have the working capital to extend credit. Our role in this system is to buy the product, bring it to Alaska, and deliver it to consumers' tanks.

We can't be the bank. And, you know, there are not— unlimited resources out in these communities that they can just write a check. So we're sending more and more people to the Bulk Fuel Loan Program, ones that could have financed it from their— out of working capital, out of operating funds last year, and some that just are going to be ordering more dollars and and just the demands we expect on that program to be larger. And it's an essential element in ensuring the delivery of product to Western Alaska. There's been some talk about, you know, if it's in a hub, then it can be flown out.

There was one year where Vitus was not able to complete some deliveries, and we wound up flying some fuel in. And we added approximately 100,000 gallons to the demand for flying in fuel in western Alaska, and it was nip and tuck all winter. If there's more than a couple of villages that are going to be asking to have fuel flown in, the infrastructure to do that, to fly to a gravel strip or a in a village, it does not exist in Alaska. So that's thinking that a large number of villages can have fuel flown in. It doesn't take much to overwhelm the capacity of the limited number of people that fly to villages with fuel.

So, Håne, what can the government do? The government can query stakeholders in village communities to basically check their homework on how much fuel have they ordered and do that ahead of time rather than September or October when it's too late to get an order in. From a critical thinking perspective, It might be beneficial if, if we provided deadlines for ordering, but, but we really don't know what they are. We, we kind of have a concept, but we do— but it's, it's all a work in progress, and there's a lot of things that are unknown. And so, I mean, we don't— we're not at this point ready to give artificial deadlines to folks to help try and motivate them.

[FOREIGN LANGUAGE] So from the what can be done to assist, it's help get the Jones Act extended, the Jones Act extension extended, help communities review their math to see if they are ordering more, enough product to get through the winter, We are weather watchers, and all indications are.

Super El Niño is coming, so warm winter, which will be beneficial, but it doesn't take a cold, a very cold winter to freeze pipes and cause extensive amounts of damage. So cold winter or not, I mean, if the heat's not on, there's going to be damage. So that's the goal is to, prevent folks from being able to turn their, you know, prevent folks from having to turn their heat off because there's no fuel in the community.

And then obviously the loan funding, that's an essential element that's controllable to avoid some of those other dangers.

Great. Thank you, Mr. Paulson. A couple quick items. First off, I just want to recognize Representative Costello joined us at 1:40. And Mr. Paulson, I wonder if you could just— I don't think we got your title and position.

I just wonder if you could put yourself on the record in terms of your role with Vitus Energy, just so we have it on the record, please. Director of Sales here at Vitus Energy. Great, thank you. Are there any clarifying or follow-up questions at this point? Representative Jimmy?

Yes, thank you, Co-Chair Hall. I'm sorry, sir, could you state your name again? Mike Poston. Mike Poston. Mike Poston, thank you for being here today and doing— being part of this conversation.

You work for a private company, is that correct?

Yeah, I've been in this industry serving Western Alaska for about 40 years. Thank you. I just had a question. So from the storm Halong, Kipnuk has lost all their fuel and they did not— they do not fall in within the FEMA requirements to help pay for their fuel that they ordered. They lost it all.

They're defaulting on that loan as we speak today. Would you have any suggestions on how to seek help in that area, if I make sense, on how to find—. Okay, so is the fuel— is— so when I spoke to some of the folks at Kipnuk, they had described their dispensers as being offline, but I did not hear any comments about the tank, or I mean the bulk tanks, or the status there. So as an assessment, I would suggest finding out if the— how much fuel is still in the tanks, and perhaps a quality assessment. And, you know, if fuel is short, Sell it to another village.

Great, thank you for that. Follow-up? Thank you, that's a very great suggestion, but still it wouldn't help them cover what they lost. They're still defaulting on their loan, and yeah. Okay, well, I mean, you know, coincidentally, if they bought fuel a year ago and current year price is $3 a gallon higher, it's very possible— I mean, obviously the devil's in the details— it's possible they could recover enough from selling that fuel to pay off the loan.

Okay, great. Thank you. Did you want to follow up on that, or—. Yeah, I just— it doesn't sound right when you're telling to charge people more to pay back on a loan. Especially with the fuel prices being almost $10 out in rural, it's not fair to extend the pay, to make it more expensive.

And then if another— if you sell to another village, you have to raise the profit even more, and that's just going to be even more of a financial burden in rural coming from Tuksook. Yeah, but thank you for your opinion. Great, thank you. Yeah, if I, if I follow up, if I, if I may, um, my, uh, no, what, uh, what I would be looking at would be that, uh, another village that would potentially buy that fuel, they would have, uh, for instance, for comparison, a fuel supply quote from Vitus and a fuel supply quote from Crowley, and if they could buy fuel from Kipnuck for less than that, and it was still a dollar more than Kipnuck paid for it in the first place, that's the, that's the situation I'm talking about. Thank you.

Fair enough. Thank you. This was two quick things I wanted to follow up on, and then we're going to need to continue on. First off, in your early remarks, you mentioned getting fuel from South Korea as your source. Can you just clarify for us where Vitus gets its fuel that it's been supplying into rural Alaska communities.

Sounds like South Korea, and given the current situation with South Korea perhaps having a limited availability, are there other sources that you've identified so that you'll be able to have the fuel that you need for the orders that you get? So, uh, over, over, over the years, we've, uh, we've purchased fuel from Russia, and then that became illegal. We purchased fuel from China, and then import tariffs from China made that uneconomical. We purchased fuel from South Korea, but right now that's not available. We have purchased fuel from Canada, but now the Californians, if I may, are bidding the price of that fuel up, and it's harder to come by.

So we're just having to go farther away. And, you know, one of the scenarios is buying fuel from the Gulf Coast and going through the Panama Canal.

Great. Thank you for that. And just following up on that briefly, do you currently have essentially line of sight on sufficient fuel for the season, assuming that the villages and communities get their orders in, in a timely manner, do you feel comfortable that you're going to be able to get adequate supply, or is that still uncertain? So, I mean, it's hard to provide, you know, a concise answer. I mean, we have specific amounts under contract that will start the season.

We have opportunities to purchase fuel that will come in later that will finish the season, but it is not under contract. Great, thank you. Representative Jimmy. Yes, thank you, Co-Chair Holland. Um, I forgot to put on record, I mean, to also include in the conversation that it would be hard for essentially Kipnuk to sell their fuel elsewhere because we have contractors coming out that are doing the work.

We are very grateful that they are coming out there to do the work and repair as much as they can in the village. But that would really complicate the issues too of trying to sell it off to someone else and still in the end you would still have to add— make it more expensive still in the end, which wouldn't be fair. Thank you. Great. Thank you, Representative Jimmy.

Mr. Co-chair, can I slip in a quick question? Yes, of course. Representative Hedgeman, please. Yes, to Mr. Poston, thank you for testifying today. Mike, what's your confidence level that in the end, despite the obstacles, there will be fuel for western Alaska?

And when I say the end, the fall and the incoming winter. [Speaker:JAMES] I mean, there are a lot of risks, and there's operational risks and so forth. I mean, so Halong was the storm last year. And 2 years before that it was Murbach. That storm came through and basically it shut us down for a month.

And if we have a month subtracted from the back half of our operating season, it's going to be hard to get the job done. So is there a real risk? Yes, there is. But at this point, there are enough resources at play on a commercial level to get the job done. I mean, we— I mean, VITAS was one of the ones that put together that Renda trip into Nome that the Coast Guard takes credit for getting done.

But So there are, there are ways to solve these problems, but, um, it's, it's— we, we don't believe it's going to be easy, and, uh, any of the obstacles that can be removed along the way, uh, would be beneficial. Okay, thank you. Great, thank you. Last question I want to try and touch on is I'm trying to make sense, Mr. Poston, of the timing of what's going to be happening here with these new prices that I think you're anticipating for the fuel and for the logistics to go with it. I.

Assuming the communities purchasing this are going to have challenges coming up with the money to pay for this, and if we have community assistance funding that maybe shows up later in the fall, that money might show up after folks have to be placing orders with you. How does this timing come together? And I guess where I'm getting at, and maybe you can share this, maybe you can't, what's the timing that you expect in terms of payment for the fuel? Are you requiring payment before the order is being accepted and placed, or do you have some terms that allow deliveries that are made later in the summer to be paid for, you know, a little bit later in the fall depending upon the timing of community assistance funding that we may have? What's the cash flow situation for communities that are trying to get fuel?

So first, just a little bit of background. Our equipment can deliver fuel faster than we can get paid for it. So if we don't stay ahead of the game, we're going to get to the point where we have to shut down operations because we can't keep the bank satisfied. So for that reason, we ask for our customers to pay prior to us loading from our supply vessel. So in most cases, that's going to be You know, we're going to need orders funded, you know, 1st of May, and then our June stuff, we're going to be— will need to be funded 1st of June, and then our July deliveries will be needed to be funded 1st of July.

And so it's a rolling forward scenario. So an entity that's got an approved bulk fuel loan that goes in the mix. So those funds are known. There's a mechanism for turning the fuel that's delivered into an invoice and turning into the state, and they're very good about a quick turnaround and getting that paid. That's helpful context.

Thank you for that. So I really appreciate the time that you've taken to join us today and the information you've shared. And I hope perhaps you might stick around in case there are questions later, but I appreciate you spending a few minutes with us today. So to continue on then with the presentations, I'd like to turn now to Dr. Holdman with the Alaska Center for Energy and Power. I'm hoping we still have you online.

And if you could unmute yourself and put yourself on the record, we'd look forward to your presentation. Yes, thank you. This is Gwen Holden with the Alaska Center for Energy and Power at the University of Alaska Fairbanks. Can you hear me okay? Yep, you're good.

Thank you. Excellent. I want to first just put in a plug for Vitus and Mike. Vitus Marine, I think, is one of the most innovative fuel distribution companies. We're very lucky to have them serving western Alaska.

Folks like Mike, as he mentioned, have many decades of experience, and I'm confident that if anyone can solve some of these issues that they're facing, I think VITAS is very, very, very capable and competent. So I just want to put in a plug for that. I have a few slides. I don't know if you're able to pull those up or how that works. Yeah, thank you.

Fantastic. Tim is pulling them up right now, so if you just give him a second to get to the right Deck, and then let him know when you want to advance the slides. We've got them displayed now. Wonderful, perfect. And Tim, do you want to just go ahead to the second slide?

I can see them up there. I do, just to give you a little bit of a general overview of what I'd like to present, I'm going to try to keep my remarks as short as possible, but what I sort of view is myself as somebody maybe from, there's a tsunami coming and I'm from the Tsunami Warning Center. My goal is to kind of give you a little bit of an idea of how big the wave is going to be, how hard it's going to hit. So that's sort of what my hope here is with this presentation. So just to kind of put a little bit of context here, if you have up the slide with the PCE residential customer rates, I just want to just make this point.

Just looking at the rates as they have been historical— historically, you can kind of see here the very top line there, that green line. Those are for small rural communities. So we talked about Kipnuk, for example. And you can see these are before the PCE PCE subsidy is applied to these rates. But you can see how high those rates are today compared to the rail belt rates and also compared to larger PCE eligible communities.

For example, Kotzebue, we're going to be hearing from Tom next. But I really do want to highlight the fact that I personally have a lot of concern for our smaller communities across rural Alaska. So next slide. And I just do want to mention too, one point on that slide is that only about 25 to 30% of kilowatt-hour sales are eligible for power cost equalization in rural Alaska. So you have a lot of users.

So the idea is that we're trying to bring those costs down to basically what winds up being something close to Anchorage and to Matsu is sort of what it means for residential customers. But there's still about two-thirds or more of the sales in rural Alaska are not eligible for PCE. So whatever increase we're going to see there, they're going to— they're not eligible for subsidy related to that. The next slide here shows a little bit of a pie chart in terms of how much fuel, how much liquid fuel the average rural Alaskan uses. Despite the fact that these numbers look like they're pretty precise, I want to just be clear that these are very much estimates.

They are based on actual surveys that ISER did back over a decade ago out in western Alaska. But it can kind of give a pretty good idea that— what you can see here is that electricity is about a quarter of the total fuel that's used. So you're really burning that in a diesel generator, but that's sort of the amount that's consumed on a per capita basis. The amount that's used for local transportation, so we're not talking about airplane trips in and out of hub communities or anything like that, just local transportation. And then space heating, which is the larger component.

Spend a little bit of time talking about that today. So the average resident in rural Alaska, especially out in western rural Alaska, uses about 1,200 gallons per person per year equivalent of various kinds of liquid fuel. So if you go down to the next slide, you can kind of see here we're going to be hearing again from Tom. And what we have in this chart, the blue kind of line with the, with the standard deviation in the middle, that's what utilities are paying for wholesale fuel. So you can kind of see that the retail average that's above that is sort of that retail cost.

And this is all historic data, and note that this is only going up to 2021. I don't have more. I could easily put together a more current slide, but I don't have one, or didn't have one in time for this presentation. But you can see that that average retail price is a couple dollars a gallon higher than, for example, what utilities have been historically paying. So I just really want to flag that the heating oil component is a pretty big concern.

Slide 5. This is basically— when we look at the fact that it's about 1,200 gallons per person of some sort of liquid fuel and about 80,000 residents that are covered by the Power Cost Equalization Program, we're talking —around between 90 and 100 million gallons a year. And so this is sort of the same sort of data that you saw previously, but sort of showing where you've got some communities and some places that have higher cost, and then kind of going to some of the lower cost— the lower cost places way out on the right there. And I want to sort of point out that community that you see there with the $14 per gallon fuel. So this is a place— this is an example as Mike was talking about, where fuel needed to be flown in.

And so that's for heating oil in a community where the fuel was flown in. And so you can see that there's a very big, you know, gap between if we're able to deliver it by barge during the traditional season for delivering fuel versus, like, having to fly that fuel in later. And so that's really one of the things that we certainly want to try to avoid. Going on to the next slide, and this was just an example that we actually put together earlier on the Denali Commission Fuel Working Group was mentioned, and they, they have been working very hard on these questions. And so this was something that we actually did an analysis for them, and they asked us to look at what a $5 per gallon increase in the cost of fuel across— and this is fuel across all those different categories— for, for it would include liquid fuel for transportation, so maybe gasoline.

It would include heating oil, which is the biggest component, and then for power generation as well. They asked us to look at if there was a $5 increase, which may be sort of an extreme case, but just to give an example, across those 90 million or so, 100 million gallons that are consumed in rural Alaska, we're talking about an increase in cost of about half a billion dollars potentially. Again, I'm just trying to give a little bit of that order of magnitude of what the problem is. Hopefully it's not a $5.

A gallon increase, but this just kind of— you can— the math is pretty easy to scale in terms of, you know, something less than that. A dollar increase is about $100 million, right? So that's just kind of to give you guys a little bit of an idea of the scale of the challenge. Next slide, slide 7. This just sort of shows existing and, again, historic household energy burden.

You can see that there's some regions here, and I really want to call out the Kusilvik census area that has extremely high energy costs, in part because they don't have any larger hub communities in that region. So their median household income compared to the amount of money that they're spending per household on their energy costs is already quite high. And so, so kind of taking a look at that, this actually shows how much the PCE program helps pay down some of that cost for electric power, but I just want to kind of acknowledge that there are a lot of places that are already really struggling with high energy burden, and this situation could be very much exacerbating that. Next slide. I think that Neil did a really excellent job of laying out a lot of things that can be done, and I really appreciate Mike's point about the Jones Act extension.

I guess I'll just again, throw out some of these same things here. The LIHEAP program, protecting that at the national level. The Alaska sort of companion program, the Alaska Heating Assistance Program. I think it's fantastic that the legislature did capitalize that program with $17.5 million. I think that that is something that is a very good start, I believe.

Bulk fuel revolving loan program, we've already talked about that extensively. I think there's several, steps that could be taken. And I know that Sandra is going to be speaking later, so I'll let her speak about that. The PCE program, you know, if right now there's about 27 million gallons of fuel that are used for power generation, so about 9 million gallons of that— and again, this is very back-of-the-envelope— are for PCE-eligible kilowatt-hour sales. So you could easily see a dollar increase.

That's another $9 million demand on the program. Last year, the program was $47 million. So you can see very quickly that that could go up quite a lot. And so that's all I've got. That's my last slide.

And I'm happy to answer any questions. Great. Thank you for joining us. I understand that you're traveling and that you've kind of interrupted your schedule in order to be able to join us. I appreciate that.

Representative Jimmy.

Yes, thank you, Co-Chair Holland. Thank you, Ms. Holland, for being here and your presentation. [Speaker:WOMAN] I noticed on your presentation the average of the pie chart is that it's from 2011, and since 2011, our population has been growing in Southwest.

Is there a way you could show the effects of the household that has changed per use per person? Because some of these homes have—. Are overcrowded and—. The use for the person usages while the houses are bigger in size. And as for the numbers, up to 2021, um, with the Ukraine war, the fuel prices have spiked and hasn't come down in rural, and it doesn't seem to anytime soon.

Yes, thank you, Representative Jimmy. Through the chair, um, I actually did address some of that in the article that was mentioned earlier that was published in the Beacon today. There are some real reasons for why that is the case that I'm sure Mike could have expanded on a little bit more than I would be able to. But what I'll say is that that particular pie chart is per person, so it's not per household. And so I do think that we can still be looking at that scaling as the population is increasing.

And so although this is quite old data, it's '15, years old. I believe that there's been a fair amount of stability in terms of the per-person consumption of fuel. The cost has gone up, the number of people per household has gone up, and we could certainly be looking at the per-household— looking at this on a per-household basis, certainly. Thank you. Great.

I just want to note that the article that was referred to, America Doesn't Depend on the Strait of Hormuz, but Rural Alaska Does, is posted on BASIS for anybody who's listening to this or wants to follow up and read that article. It just came out, looks like today, and is available if you go to the committee page there.

I wanted to follow up on the projection of the $100 to potentially $450 million increase in energy prices. I guess two aspects of that. One is, would you expect the increase to be evenly distributed, or would communities with high costs face even higher increases? Increases proportionally? How does this get spread out?

And then with that, I'm also curious if you've done any work or have any perspective on how will this get paid for? What does this come out of? This is a massive amount of money, and it's unclear to me what the economic impact will be to communities that are facing this increase, because I don't think they can pass this on in many cases to other folks downstream of having to come up with the funds required to make this payment. So kind of two questions, you know, how will this be distributed evenly or unevenly? And economically, any insight on how this is going to affect our communities that are faced with this increased bill?

Yeah, Representative Holland, I appreciate those questions. I mean, one thing that Neil said right off the beginning, and I do definitely want to reiterate, is that I've been focusing just on the immediate impacts on the cost of energy in communities. But there's obviously a trickle-down effect. This is going to impact the cost of food, healthcare, everything else across rural Alaska. And so the dollar numbers that I presented are purely looking at direct energy costs.

I don't expect that that would be distributed equally across communities. I think that communities such as Kotzebue, and we will hear from Tom, are probably in pretty good shape. The problem is the price, not the actual— actually the ability to deliver fuel there. I'm very concerned about some of our small communities, and I think that that's where we'll both be seeing some of the highest costs, and I don't know how those will be covered, right? Because these are places that have very low median household income, And these costs are going to be a tsunami that's gonna be, you know, pretty potentially devastating.

So I don't know how to handle that. Thank you for that. Any other questions for Dr. Holdren? Great, well, thank you for joining us. Thank you for taking a break in your travels to be able to spend a few minutes with us today.

We are now going to move on to the next presentation. We have Mr. Atkinson here from the Consubio Electric. And Mr. Atkinson, if you're online, could you unmute yourself, put yourself on the record, and begin your presentation? Thank you for joining us today. Thank you, Co-Chairs Hollins and Mears, the rest of the people on the Energy Committee.

And I'm especially glad to see Representative Jimmy there. I think probably more than anyone else sitting around the table, she understands the impacts of this at the level that her constituents are on. This is not about, you know, this is going to be a price increase and issues with availability that will be an inconvenience. It's a matter of survival for some of these villages. We are in a little better shape, as Gwen mentioned, than some other villages in our region.

But we look at the other villages in our region as family members, and we want to make sure that we're doing what we can here to help and get the message out that rural Alaska is very much on the edge of sustainability right now, and life may become unsustainable up here if we don't get a handle on this issue. So, I'm going ahead and looking at my presentation here. Let's see if I can— Morgan, I can share it. Hang on just a moment.

Just for clarification, I think we have your slides up already, and I think we can control them from here. Great. Okay.

All right. We'll go ahead and go with the first slide there. It's already up. Hopefully you guys can see it. I entitled this Fuel Crisis in Rural Alaska, and to me, the word crisis is not too strong of a word.

I believe it is a crisis. I believe there will be a crisis. It's just a matter of how bad will it be and what we can do to mitigate it. The things I want to touch on here is fuel available and where does our fuel come from.

Rural Alaska? How was it transported? And what are the price effects going to be? What is the price going to be this year? What is the fuel used for?

And what are the impacts of large increases for fuel in rural Alaska?

The first question, is fuel available? The short answer is yes. We're being told by our suppliers that diesel will be available.

However, no one knows how much overall availability, availability will be affected by the military actions in the Middle East. Fuel suppliers say they have enough fuel now to supply urban areas in Alaska, but availability for the later deliveries for the off-road system communities is uncertain. Some fuel suppliers, even in our community, in our community are already out of fuel. So this is an issue that's already impacting our community here. There is a fuel shortage here in our community now and, you know, not much less, even more so if we do not get the deliveries that we need to get in the late summer and fall.

The next slide just shows where did the fuel for rural Alaska come from. It depends on which fuel supplier you talk to and where they're pulling from. But, you know, obviously there are refineries in Alaska, but to a large degree for fuel, refined fuel coming out of Alaska, we are basically the Calvert's children who have no shoes. A lot of fuel comes from Canada, North America, and a lot of suppliers are sourcing it from Asian sources. That are now cut off due to the current military actions in the Middle East.

So how do we get fuel here? And it's a very long process, very tenuous process, and it has a lot of things that could go wrong even in normal years, much less years like we have now where there's a great deal of uncertainty. Fuel from Northwest Rural Alaska is transported by barge lifts. Fuel transfer is transferred from a large barge to smaller barges in multiple trips to communities like Kotzebue, adding additional cost to already expensive fuel. It can only be done once a year during the summer months when the water is ice-free.

The price is fixed until the fuel delivery the following year, and I think that's maybe one of the most important points to Communities as far north as we are, we've got one shot at getting fuel at one price. And if we buy in or are forced to buy in at the highest price, then we're stuck with that price until fuel barge comes again next year. So that's a very difficult situation for us to return events.

For the other villages that are in upper river systems, They get broken down onto smaller barges. These river systems are becoming less navigable and are more frequently requiring fuel delivery by the most expensive way, by air. Case in point, Noatak, which is not that far away from Kotzebue, but their river is not navigable. To get fuel up there, it has to be flown in. Their fuel cost or their fuel price right now is $17 a gallon.

That's before anticipated increases that will happen with this next fuel delivery. So that's very concerning.

Regarding the cost, rural communities are already living on the edge of sustainability. Home heating costs can exceed the monthly costs of residents' rental or mortgages. Retail prices for diesel in Kotzebue are currently $8 per gallon and as high as $17 a gallon, as I just mentioned, elsewhere in the region. Just to give you some perspective on the cost of goods beyond that, which just adds more fuel to the fire here, milk is north of $13 or $14 a gallon now here. So, you know, add more expensive fuel on top of that and everything else being in increased by these fuel prices.

Again, we put this much closer to the edge. The projections for this year's fuel price are 30 to 50% higher than last year. Last year, the Kotzebue Electric Association paid $3.10 a gallon for diesel fuel, and KEA is part of a buying group of 6 other electrical cooperatives along the west coast of Alaska. We are much more fortunate than a lot of other entities or smaller villages. We're able to leverage better prices.

But as of today, we are looking at fuel being quoted to us at $4.76 per gallon, which translates to a 53% price increase. And there's a lot of people who say saying, well, maybe you better go ahead and purchase fuel now. Things aren't going to get better. There may be no availability if you don't. That's what we're hearing from the suppliers.

But it's really hard to look at a 53% increase and, you know, go ahead and purchase fuel at that price. So it puts all of us in a very hard position in making these decisions. And it's causing a lot of us to lose sleep at night. The cost of fuel is a direct pass-through to our members and it puts them at even greater risk for financial stability. We are fortunate to be able to have, you know, fairly strong, you know, relationships with our financial institutions and we should be able to finance our fuel We are fortunate that our fuel supplier gives us a 30-day net from the time we receive the fuel, and we don't have to go ahead and wind up paying in advance.

So that is very helpful as well. But looking at the price that we paid last year, $3.10 a gallon, on about 1. 3 Million gallons translates to $4 million the last year that we paid for fuel. The current price of $4.76 a gallon will put us at $6 million for our annual fuel price. And we go ahead and retrieve that cost back from the cost of power adjustment in our members' bill.

And as I said, it's a direct pass-through to them. But we have to finance it up front and we have to carry that cost until we collect that money back from our members who are going to be very hard-pressed to pay higher electricity bills and all the other cost increases that will go up because of the cost of fuel. Other communities, as has been mentioned, may not be able to obtain loans large enough to cover these increases, and that is a concern as well.

In terms of the impacts for what's going to happen because of these, and folks like Representative Gimme can tell you firsthand, but we are going to have fuel shortages and some unavailability of fuel in rural communities. And that is a great concern. There will be loss of heating capacity in communities. There may be loss of the ability to be able to produce electricity because you don't have diesel. Again, price increases in the cost of goods.

Transportation costs are also going to increase. In a community like ours, the 11 other villages, they have to fly from the 11 other villages to Kotzebue. To go down to Anchorage, whether it be for medical appointments or for other reasons. People just may not be able to afford to do that if the fuel increases causes the ticket prices to go up substantially. So that's a great concern for people who live in rural Alaska and need to get out of rural Alaska for medical reasons or other reasons.

So that's going to impact them greatly.

I probably have just scratched the surface of what the impacts are going to be to rural communities if we can't find a way to mitigate or soften some of these impacts. But I am concerned, and the last picture I have on here is just a picture I took of our community as I was flying back in. From Anchorage toward the end of the day and it was getting dark and I saw the lights on in our community and took that picture. And now I'm concerned about, okay, well, how much longer will these lights be on at those prices? We're not connected anywhere else by transmission lines.

We're a microgrid. We have resources to generate 30% of our electricity.

With renewables, but we're still largely dependent on our core source of generation from diesel. So again, great concern about how we're going to continue to keep those lights on, not only in Kotzebue, but in the rest of our region and rural Alaska. So thank you so much for giving me the time to speak about this, and I hope we can get some support and solutions from some of the things that we talked about today. Great. Thank you, Mr. Atkinson.

I appreciate your time today joining us. Are there any questions to begin with for Mr. Atkinson following up? Representative Edgeman. Yes, thank you, Mr. Atkinson, for being on part of this hearing today. Gwen Haldeman earlier had a slide that talked about the approximate fuel price distribution assuming a $5 increase in a gallon.

Times $90 million a gallon. And the net number was darn near $500 million increase. But I live in Dillingham where costs are reasonably more affordable than up north in the Kotzebue area, certainly out in Toksook Bay and places that are one step further than the regional hubs. But if you had to hazard a guess what that would do in terms of the overall price structure, even in the Kotzebue region, the borough, what, you know, if it's $500 million more in additional fuel costs, the, you know, the milk and everything else that you were talking about, a bag, you know, a 20-pound bag of rice easily is gonna be $100, something like that. But that $500 million could over time be doubled.

I mean, that would be my assessment, even in my area of the state, which is a little bit south of where you're at and, you know, less extreme Arctic winter conditions. So it's, it's not just the fuel, it's the other costs involved as well too. Mr. Atkinson? Yeah, I did. I just talked to, uh, Will Cheney, the general manager of Neshoggoch Electric in Bellingham yesterday.

He's very concerned, uh, and there are some availability problems with fuel in Bellingham right now. Uh, so, uh, you know, the concerns are great. For all of Alaska. And, uh, he's wondering about will they be able to get spring deliveries. I mean, some communities further south are able to get fuel deliveries earlier than communities in the north, uh, but even that is in question right now.

Uh, so I appreciate that, and I wish the best for not only Kotzebue but for Dillingham as well. Thank you. Thank you. Great. Thank you, Mr. Atkinson.

I wanted to follow up on a couple items here. First off, in terms of the current sourcing of fuel, Do you know where the fuel that you've been able to identify is actually sourced from? Is it U.S. domestic, or is this coming out of perhaps Canada? From your slide here we've got back up again, do you know where the fuel is being sourced from? Yeah, I— sorry, I neglected to mention that when we were talking about where the fuel came from.

Our fuel from our supplier does come from Canada. And that's why they're telling me that they are reasonably sure that they can, you know, go ahead and have that fuel available to us. The fuel from Canada, we purchase it from there because it has the best properties for cold weather and we get the more BTUs out of it. But that's where we get our fuel. Great, thank you.

And just for clarification, you mentioned the expression about how the cobbler's kids are the ones that typically don't have the shoes. What's your perspective on the availability of fuel to meet your needs available from Alaskan producers? Why are we in a position as an oil state exporting as much oil as we have, and with the royalty oil that we should— we have available to choose how we want to use it, why are we in a position of having to import oil into our state, or fuel into our state? Is it not the right quality, or do we have a production capacity constraint, or is there something about the logistics that's getting in the way of sourcing more refined fuel products from our own oil?

Obviously, our fuel has to come over the water, so that may be some of it. But in terms of what Mike Poston had to say earlier, I don't think there's enough of it to spread around to make the difference we need it to make. I know here in Kotzebue our push towards renewables has always been to create more energy independence by displacing diesel, but there are other forms of energy independence as well. Like creating more refineries in Alaska that could refine the oil that we have here and make it more available to our state. That's a lot longer-term problem and solution, but that's— I think when we get to a crisis like this, those are things that we do need to highlight.

We do need to have discussions about how we can make better use of the resources that are closer to us. Great. Thank you for that. Representative Cobb. Yes, Chair Holland, thank you.

My, um, testifier has, I think, well explained that we do have a supply shortage in Alaska, capacity shortage. When Marathon was here earlier this session, my memory is they were saying their refinery, um, is almost at capacity just producing the jet fuel for Anchorage International and Jay Bear. And then there's other fuels they do produce. But, and then the North Pole refinery, I think similarly, most of the aviation industry is buying that up. So when it gets to all these other fuels that we need throughout Alaska, if you're not using Grade A jet fuel, you're way secondary on the list.

So it is a capacity issue. I'm certain of that based on previous testimony we've had. Great. Thank you for that. I just would observe that the need for fuel in our communities is not new, transitory, or not going to go away.

So from an investment business standpoint, it's a little perplexing to me that somebody has not seen the need to figure out how to invest in that. And particularly when the North Pole refinery was shut down, Flint Hills one, that we left ourselves with a bigger gap and have committed ourselves to increasing the amount of imports. So I just, I wonder how we get from where we're at to something that is a more reliable opportunity in the future leveraging what we have already. Representative Mears. Thank you.

Comment, then I'll follow up with a question for Mr. Atkinson. So I just kind of wanted to tie this conversation into some of the larger work that we've been doing in the committee for the last couple of years. So we are in this position about imported fuel and, um, those supply chains getting our energy from someplace else. Uh, so when we're talking about the importance of the Sustainable Energy Corporation that we had, uh, uh, last week and the Renewable Energy Fund and weatherization and some of these other things, this gets to it. So the more resilient we are with, with alternative energy and things that are local, the better off we are.

So, um, Mr. Atkinson, I'll, I'll bring this to an example for Kotzebue. So a year ago, a little over a year ago, you were on, on track for getting, uh, an upgrade to your battery system so that you'd be able to shut off some of your diesel generation when you were working on your renewables. We are now approaching a new construction season. Is that happening this summer? Yes, it is.

Uh, I do have some good news about that. Uh, we are working, uh, with SAF, uh, to get a new 4-megawatt battery for our community. They are constructing it as we speak, and we'll have it over to Seattle to come up here on the last barge. And it will arrive in Kotzebue late August, early September, and we will work on commissioning and installing it over the fall and into the early winter and hope to have it commissioned by next— excuse me— next early 2027. So that's where we're at with that.

Great. Follow-up? Follow-up. So, Mr. Atkinson, so my recollection is that a very small gap in funding uncertainty more than a year ago, since the delivery window is so small in northern Alaska, it puts you behind a year. Is that recollection correct?

It is, and we were able to overcome that. The manufacturer was able to go ahead and step up their production, and at this point we do believe they are going to make the deadline for it to be up here on the barge. So that's what we're hearing at this point in time. That sounds good. Nothing is guaranteed until it's at the right time that it needs to be, but we are.

Forward on that project, and we do hope to have it up here by the end of this summer. Great, thank you. And follow-up? Just one final follow-up. Do you have an estimate of how much diesel a year having that battery backup system is going to be able to save you?

Our current 1-megawatt battery displaces about 80,000 to 90,000 gallons of fuel annually. So this battery, if we multiply that by 4, That's how much more, uh, fuel will be able to displace. That's a lot. Thank you. Great.

Thank you for that. Uh, one— I hope— just quick follow-up question, Mr. Atkinson. You, I believe, mentioned that NOAA TAC is looking at about $17 a gallon for fuel. Given the increases that you're seeing and you've described, would you have some sort of estimate on what the have any idea what the fuel cost is going to be for a NOAA TAC in the future given the current situation? I assume a combination of a higher cost for fuel as well as a higher cost for the logistics to fly the airplanes that deliver the fuel.

Any guesstimate on what that price is going to be in the future? No, there's just a lot of uncertainty on the pricing right now. That's why so many units are— have been locked in pricing where it's at right now. And, you know, No, I mean, earlier I said estimates are 30-50% higher than last year, and we're already at the high end of that with current folks that we're getting on fuel. So I don't think anyone knows where this may end.

Hopefully it moderates. But, you know, our perspective is we want to do whatever we can. But so much of this is beyond our control. And I think we need to follow the adage You know, hope for the best, but prepare for the worst. Very good.

Well, thank you for joining us today and sharing the perspective and the information that you've been able to bring to us today. It's valuable for our discussion here. We're going to continue then to our last presentation with the Division of Community and Regional Affairs and Director Sandra Mohler. Director Mohler, if you're online, could you unmute yourself and put yourself on the record? And we're looking forward to your presentation and the slides.

We've got the first one up already.

Great. Good afternoon. Can you hear me okay? We can. It's coming through great.

Thank you. Awesome. Well, thank you. For the record, Sandra Moller. I am the Director of the Division of Community Regional Affairs within the Department of Commerce, and thank you for inviting me to provide some materials for the committee's consideration.

I would like to commend the chairs on assembling the who's who of fuel and delivery in Alaska. You had some very good presentations And I do commend you on that. And I think the folks on this call are a large subset of the ones that can help solve the problems that we're going to be facing. So if we can— that's the first slide. And if I can go to the second slide, slide 2, it's basically my agenda.

And again, as you've heard, it's— our concerns are both the price of fuel and access. And I will also talk about the Bulk Fuel Revolving Loan Fund and other resources DCRA has, as well as options and opportunities. So if we can go to slide 2— excuse me, slide 3.

Again, this is a— again, the concern that you've heard about and very good presentation on other— by other folks on what we're facing here. We are all aware of the fuel prices that are going up. But it's also going to be added pressure for many reasons on, uh, to rural Alaska as well as all Alaskans. So, again, uh, if we could slip to the next slide. This is a slide that I believe Gwen had in her presentation as well.

It was from her office, and what we wanted to, uh, highlight here, um, when we put this together, we weren't sure who was all going to present, but again, this is a slide that shows what a worst-case scenario could look like for funding. So this is on the price side, and we are very concerned. Thankfully, I think we're hearing the, the actual increase is only in the $3 to $4 range, not $5. So there might be some relief there, although it still is quite high. And as you could see from the numbers, it's a large dollar situation and issue.

Next slide, we see the— slide 5, we see that Obviously there's global markets that affect it, affect the prices. Also mentioned was the cold winter that Alaska's had and that resulted in many communities using up their fuel so they have less in their tanks in general over that they usually do this time of year. And then we have access with weather and thick ice and access by what Mr. Poston mentioned. It's a combination of many different different factors that are affecting us. And I think the, you know, there's lots of things to consider.

If we go to the next slide, I really wanted to jump right into slide 6 and look at the resources and the items that DCRA provides. One of them is the fuel price survey. We've done this for the last 15 years. We do it twice a year. And it really— we call 100 communities, and it's been pretty consistent which communities.

We purposely leave the larger road system communities out of that survey, so this really reflects more of the off-road system, although it does include road system and Southeast. It is a point-in-time survey. We finished this survey, I believe, in January this year, so this winter, so it does not reflect necessarily the prices that we are likely going to see for this delivery season. But as you can see from these results, the price averages for both gas and heating fuel around the $6.63 for gas and $6.32 for heating fuel. Also, there is a QR code if you'd like to see that fuel price.

It does go through all the communities we contact and gives you the specifics of what the prices are. It's also It's also on our internet, our community database online, but there's a QR code to get you right to it. The big takeaway on that is one of the prices we've seen a huge increase from the last survey. Let's see, last winter of 2026, we've seen prices between $3.65 a gallon up to $11.50 in the Northern Interior. And we've seen those prices in this last survey jump up.

Instead of $3.65, it's $6.63. So it's a $3 increase on both ends. And as Mr. Atkinson mentioned, we are yet to know exactly what the costs are going to be as we go for this delivery. It's also important to note that the type of delivery mechanism will also impact these fuel prices, whether it's barge or tanker or flown in. Will have a big impact on what the fuel prices are.

This is one of our surveys. We also have, of course, the bulk fuel loan we will talk about here in a minute, but I also wanted to share that we have through the Denali Commission some finite funding to do what we call the RAPA, which is the Rural Alaska Fuel Administration, and that's a training. And some of the slides that Mr. Andreassen presented could be topics for for that training as we do several trainings throughout the year under that funding from the Denali Commission. So I wanted to share that that is another resource and a touchpoint that DCRA has with communities is getting the fuel, but also when you get it, how can you conserve it and some best practices that possibly could be implemented as we use the fuel in the most beneficial way for communities. Next slide, 7.

Maps are always hard because it doesn't always show the scale of Alaska on a slide. But the intent here is to give you a sense of the participants in our bulk fuel loan program. And in 2025, so last year, we had 51 communities. And that included 76 different loans. So a— one community can have more than one loan with different providers.

But that gives you a sense of where our loans are. We believe our bulk fuel loan has been very successful in how it's being administered, administered, and we work well with the vendors and the communities to get those fuel loans out there. If you go to the next slide, I can go into more detail on what the— the bulk fuel loan program was set up in statute by the legislature, and it was intended for communities less than 2,000 people. It was for communities for the power.

Systems and their fuel retailers, which are basically for home heating. And we do have a cap of $750,000 for a loan. And we believe that there are options to look at those metrics. They would require statute changes, and I'll get into that later.

And the primary reason for it when it was created was to ensure that rural communities could get their deliveries for the next season. So we administered this loan program to— it is a 12-month program. We request repayment within 9 months. That gives a little bit of flexibility to the borrower to pay that back. For example, in Kwedilngak, we were able to provide them a little relief because of the disaster by deferring their payments until later.

Important to note that we still are required to charge interest, but we were able to give them a little relief on not paying for that loan, just letting interest accrue. Let's see. So a big part of what we do with this is really working with the community. We check in with them. We ask what their plan is for refueling, and as we work with the communities, they typically will buy one purchase a year.

Our borrowers primarily, not everybody in coastal Alaska, but our borrowers seem to buy just once a year. So that spot price that they're paying is very important because that's what they are dealing with for the entire year. The next slide on page 9 also illustrates the process that we've used. And I'm not going to go into too much detail, but it's Essentially working with the community, they do have to fill out an application and we do require them to show what their payback methods are. In other words, collection and what price— cost they will be charging their customers.

We partner with our sister agency, the Division of Investments, who actually administers the loan. So we do the front end of working with the borrower and getting the terms and location, getting them through it, letting them know what the price would be and what the loan amounts would be, etc., and then hand it to our sister agency who actually does the disbursements and the tracking of the loan and applicable interest rates. On the next slide, 10, I wanted to highlight the red boxes and the criticalness of it is that we see communities that struggle in this area and for a variety of reasons it's We try to work with them to help them through these situations so that they can have a successful utility that's able to really be able to be successful in paying back their loan, which is what we want everybody to do. The next slide shows how we have— this is a revolving loan and it's critical that payments are made back to keep this fund available to the next year's borrowing. We do have some loans, as we've mentioned, the disasters that have come.

We will lose some principal because of payment of any disasters. That, that could be a factor. And then we have a small amount of non-paying customers, which I think on slide 12 We have a summary of our bulk fuel loan program from 2022 to 2025, and our average loans have been around 67 individual loans. And we had a very high increase in 2025 of those borrowers. You know, it's often to think about the $750 cap, but our average borrower, our loan is around $360,000, although we do have 5 borrowers that took out the entire amount of the $750,000 at this point.

Let's see, if we look at slide 13— I think these are really small fonts, so I'll make sure— Bulk Fuel Revolving Loan Fund is very successful. We've looked at some other comparable collection rates on loans and we're at the nearly 100% collection, whereas the national or conventional loans are at about 97%. So a little better than that. Again, very good success rate and are able to keep that loan revolving. On the next slide, slide 14, what we've looked at is with the situation of the fuel, both pricing and logistics, we said, well, what does the loan look like?

Are we going to need more funding Are we going to need to do anything different? So we looked at it with a $3 a gallon projection of this one. Say we have our current number of applicants around the, the 60 to 65, and if the blue line shows what the loan would be, and then you add $17 million if that extra 3 gallons is added. If we expanded that to more borrowers, as of this morning we had one, what we call a new borrower, reach out to us to look at seeing if they can get a loan. We're in the process of evaluating that.

And so we aren't sure what this yellow box on the right is going to be because we don't know how many others are going to look to this fund to use it for, for their fuel purchases. And particularly if they just can't fund it 100% with their cash reserves or their ability to purchase the fuel, as mentioned before.

So that gives you a little bit of a— we did a stress test, what it looks like with our fund. And then we did another analysis on the next slide, 15, where we look at how many gallons and how many millions we would need at the highest interval of getting additional borrowers into the fund. So Tried to look at various scenarios. Worst case, I think we showed, which was the $5 that ACEP put forward. We're hearing if it's $3, this is what it could look like for additional need in the capital.

And the next slide on 16 is really what we— believe are affecting fuel prices are our borrowers may need to borrow more than past years. So even if we keep the same number of borrowers, their price per gallon is likely to go up. So we'll be seeing them ask for more money. And then there may be more providers, fuel or electric providers, that will need to borrow when they haven't in years past. So looking at slide 17 and 18, Really looking at the levers that was mentioned, we're looking at— wanted to give you a sense of if there was a change in the loan program.

I'm sorry, that Bulk Fuel Loan Program having additional funds, then that of course would take legislative action to fund that. If we raise the loan amount, $750, our loan amount is in statute, so we'd have to change that statute. And would have to also be able to have an infusion into the bulk fuel loan program as well because there'd be more requests.

Let's see, and then disaster relief. I know there's some in the budget, thanks to Representative Jimmy, I believe, on funding communities or entities that had problems with the disaster and don't have access to the regular source of disaster funding. That, of course, would require legislative action with both funding and ability, authority for DCRA to set up a program if that's the wish of it. The last thought I wanted to share was all this is very Staggering. It's, it's, it is a crisis, as Mr. Atkinson mentioned.

And at the end of the day, it still is a loan program, and we still need to make collections and pay those loans off. My probably biggest concern is we can deal with the, with money, of course, to pay for the prices. My concern is the individual in any community being you know, being able to pay for that additional cost and the collection. And that's just going to be increased all the way across the board. So while our program with the Bulk Fuel Loan Program is a tool to help purchase the fuel, and we use our training for in bulk fuel to address user fees and help communities set those.

Fees structures. It really is reliant on the collection of those fees and being able to use and restore those funds to the borrower so that they can make their loan payments and stay in good standing and be able to apply and receive a loan for the next, the next purchasing cycle. The last slide is a listing, not a finite list, but some examples of how we've partnered with different different entities. On the right-hand side, you've heard from some of them—Municipal League, Denali Commission, the fuel providers, some consulting companies. Of course, ACEP and the university, we work with them as many as others, but we've also worked in regional partners on various initiatives to try to work at helping with the administration of the bulk fuel program.

I did want to mention, as I think Nils mentioned is the aggregation study that is currently in the— with a consultant for the aggregation of bulk fuel in certain parts of Alaska, Western Alaska. And that is underway. We don't know what the outcome is going to be from that study at this point. So obviously lots of things I can still cover, but I wanted to leave some time for questions even though it's just a few minutes. So that's my presentation.

Thank you again for the opportunity to share some of the work that DCRA is doing. Great. Thank you. Director Mueller, this has been valuable information, and I appreciate all the work that has obviously gone into preparing for this. Representative Mears.

Thank you. Through the Chair, thank you for being here, Director Mueller. On slide 17, we have already been talking about a requirement to statute, but since you are here and can help us with some numbers, an infusion into the bulk fuel fund. What is available now and how much do you anticipate might be an additional need? Let's see, we currently— thank you through the chair, Representative Mears— we currently have our— we basically have two accounts.

One is the bulk fuel account and the bridge loan. Bridge loan is often referred to as like the bridge loan of last resort if you can't get any, and it has a higher interest rate. So between the two of them, we have about $20 million, $20 to $22 million. And if the question is how much more do we need, the answer is it depends in that what— if we're going to raise the $750,000, we'll obviously need to accommodate. We can get you numbers on what that would need to be.

If we're going to do things like add additional borrowers, in other words, open it up to more than communities that are less than 2,000 population, then that obviously would increase that. And some of the suggestions that AML provided, you know, we can look at that and to let you know what that would entail. But I am thinking right now we would probably need double what we have. If we're going with the $750,000, if that answers your question. Thank you for that.

Follow-up? Follow-up. So two things then, because that just brought that up. So if we do raise the maximum loan amount, I imagine that doubling it would go even higher potentially. But also, we're, we're already switching budgets back and forth with the Senate.

Is that a capital— do you know if that's a capital funding that would need to be, or operating funds? Yeah, through the chair, uh, this is Sandra Mohler with DCRA, to Representative Mears. I believe it would be a capital. Thank you. We've got a little bit more control of that right now.

Wonderful, thank you. Well, Director Mohler, again, thank you very much. If any of you have additional questions, please send them in. I've got some notes here on some follow-up actions that I think I'd like to make sure we come back to in terms of some recommendations we have that maybe we can pick up on Tuesday or we'll pick up offline afterwards. But thank you all for the preparation that went into these presentations we've had today and to the committee for your time here.

That's going to conclude our business for today. On Tuesday, we have rescheduled our presentations from Department of Natural Resources on geothermal energy and from Mark Myers of the U.S. Arctic Research Commission on geologic hydrogen. Seeing no further business before the committee, this meeting is adjourned at 3 o'clock. Thank you.