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Susitna Watana Dam


It’s possible that in just 11 years, a $4.3-billion hydroelectric plant will be operating in a steep-sided valley of the Susitna River below Watana Creek, according to the Alaska Energy Authority (AEA).

The Susitna-Watana dam, when built, will rise 700 feet high, hold a reservoir 39 miles long and 2 miles wide, and is expected to generate an average of 2,600 gigawatt hours annually.

The project—a revival of a project first studied in the 1980s—carries with it many questions that for now can’t be definitively answered: Will it provide enough affordable electricity to the Railbelt consumers who need it? Will it be possible for the dam to go online as quickly as AEA claims, in light of the thousands of studies that will need to be either performed or updated, and possible court challenges? Most importantly, how will the dam affect fish and water quality in the region?

AEA’s Wayne Dyok, who began working as project manager in November, says the plant will meet about half of the Railbelt energy consumers’ electrical power needs.

“This is a Level 4 engineering estimate that includes a margin of error of 30 percent below and 50 percent above—meaning a low estimate places the project at $3 billion and a high estimate places the project at a little more than $6 billion,” Dyok says.

Dyok says the number will continue to be refined as the project is further defined. “Factors like methods of construction, design and materials all drive project costs,” he says. “As more is understood about the project, the cost estimates become more refined. Previous estimates were based on modeling from the 1980s’ project information.”

Dyok says the AEA is working with world-class experts on the design, engineering and construction of the Susitna-Watana hydroelectric project.

Project Analysis

MWH Global will conduct an analysis of the project and AEA will solicit an independent cost estimate and work with a board of consultants to ensure the project is designed and built responsibly and on budget.

“The state will need to make an investment in the Susitna-Watana hydroelectric project and come to an agreement with Railbelt utilities for the project to be successful,” Dyok says.

Future funding for the project is subject to legislative appropriation. Similar to the Bradley Lake project, AEA expects to issue debt payable by project service agreements with utilities or other power purchasers.

Dyok says when it’s built, the hydroelectric facility will provide long-term and stable rates to the Railbelt.

“There are many variables and unknowns that need to be determined, making it difficult to define a rate structure at this time,” he said. “AEA is working on defining the final project size and design, state investment and financing, all factors to determining wholesale utility rates.”

On Dec. 29, the AEA filed a 500-page pre-application document with the Federal Energy Regulatory Commission.

Now AEA is focusing on taking steps laid out in the FERC’s integrated licensing process.

Land Acquisitions

The first thing AEA did, in January and early February, was convene initial meetings with Alaska Native groups that either own or use land in the area near the proposed dam site.

The estimated $4.3 billion project cost includes money for acquiring land.

Ethan Schutt, Cook Inlet Region Inc.’s senior vice president for land and energy development, in a previous published account, said the road could bring potential trespass problems from recreational users crowding into land that is now remote and relatively inaccessible.

“It is an important relationship to work out. That’s very clear,” Schutt said in the published account. “I think the AEA understands that. We certainly hold that view.”

CIRI has not yet taken a position on the hydro project, Schutt said.

CIRI owns subsurface rights to land in the project area. CIRI also serves as de facto trustee for its village corporations’ surface entitlements there until those corporations finalize their Alaska Native Claims Settlement Act entitlement land selections in the area.

Tyonek Native Corp. already holds title to some land at the proposed dam site—but title is clouded for other acreage: to land that would be flooded once the dam goes online, land where construction crews will be gathering gravel, rock and sand for the project, and land where a route is planned for an access road and power lines.

Title for those lands can’t legally be resolved and conveyed because of a pending U.S. District Court lawsuit between CIRI and Ninilchik Natives Association Inc. over ANCSA land selections that have not yet been made. Judge John Sedwick is hearing that case, which NNA filed in 2010 and is now in arbitration.

Bruce Oskolkoff, NNA’s director of land and resources, said Ninilchik, Tyonek, Chickaloon, Seldovia, Salamatof and Knikatnu had to make so-called 12(a) land selections on the west side of Cook Inlet before being allowed to make their 12(b) selections from land in the Talkeetna Mountains.

All the villages except Ninilchik were able to fulfill their 12(a) selections—in rounds similar to a players’ draft in professional sports—before the Dec. 18, 1974, cutoff date.

CIRI was not able to fulfill Ninilchik’s initial 12(a) selections in the 1970s because the U.S. Department of the Interior—contrary to CIRI’s expectation—did not convey lands known as “Appendix C” lands to CIRI. It had only conveyed “Appendix A” lands.

“The fact that Interior did not convey Appendix C land to CIRI had a material adverse effect on CIRI’s ability to fulfill Ninilchik’s 12(a) entitlement,” court documents stated.

Interior later notified CIRI that CIRI was not entitled to conveyance of Appendix C lands because some Appendix A land remained available.

“Ninilchik had made extensive selections of lands early in the process that were later designated as Appendix C lands,” the document stated.

The other villages were able to fulfill their 12(a) selections because they had made sufficient selections from Appendix A lands.

CIRI protested Interior’s decision not to convey the Appendix C land. Interior’s position was upheld by a 1994 Solicitor opinion. CIRI and the villages sued, but the district court rejected their claims.

The Ninth Circuit Court of Appeals upheld the district court’s decision and addressed Ninilchik’s dilemma, requiring it to fulfill its 12(a) entitlement from Appendix A land not subject to other villages’ 12(a) selections.

Pebble Conflict

The conflict originated in 2008, when Ninilchik selected a 20-acre peninsula near Iniskin Bay, on the west side of Cook Inlet, to satisfy its 12(a) entitlement.

“In its § 12(a) selections, Ninilchik requested lands that have been identified as potential sites for a port and road for the Pebble Mine, which Ninilchik acknowledges might be financially advantageous for the village, depending on future development,” the lawsuit stated.

The other villages opposed Ninilchik’s move to acquire those lands outside the original “rounds” process and CIRI notified Ninilchik it would not convey those lands without a release of liability from the other villages.

The five village corporations came up with a plan: CIRI would convey certain 12(a) lands to each village until their 12(a) deficiency entitlements were satisfied. Then, all the villages would engage in a rounds-like process to fulfill their 12(b) entitlements and Ninilchik’s outstanding 12(a) deficiency entitlement.

“The tracts of land requested by Ninilchik are among the same lands that under the five village corporations’ proposal envision would be available for selection by all village corporations in the new rounds-like process,” the court document stated.

Action on the villages’ 12(b) land selections—involving that land near the proposed dam—can’t take place until Ninilchik concludes its 12(a) land selection.

“(Ninilchik’s) 12(a) (selection) has to come first,” Oskolkoff said. “Until that happens, the federal government isn’t allowed to start the 12(b) process. People ask why don’t we just let it go,” Oskolkoff said. “We can’t. We’re kind of stuck. We can’t move without having that taken care of.”

Oskolkoff says the other villages received their 12(a) entitlement land long ago, with Ninilchik being the only village without its entitlement settled.

“It’s not like everyone’s on an equal footing,” he said. “The whole crux of the issue is there wouldn’t even be a case if Ninilchik had its original ANCSA 12(a) entitlement fulfilled. We’d be on to 12(b) and everyone would be happy. They’re saying Ninilchik didn’t get all of theirs and now we want the right to say what they’re going to get.”

Land in that Iniskin Bay area wasn’t at issue until 2008. “Pebble didn’t exist in those days,” Oskolkoff said, referring to the earlier 12(a) selection rounds. “Everyone thought the port access would be on the Bristol Bay side. When (the Iniskin Bay land) had value, that’s when the whole thing changed. We don’t even get to have a choice. It’s become an issue of what do CIRI and the other villages think is right for Ninilchik. If their theory is upheld, we’re going to be in this forever.”

CIRI spokesman Jim Jager declined to discuss the lawsuit, saying the judge would decide the fate of the Iniskin Bay land.

“Our position as it exists is part of the public record,” Jager said. “We know we’re going to have to give away the surface (rights). We’re basically waiting for the six villages to decide how it’s going to be divvied up.”

CIRI, in one of its court filings, emphasized that it has no claims to the disputed Iniskin Bay land Ninilchik wants.

“If Ninilchik prevails here, the lands in question will go to Ninilchik,” the court pleading stated. “If CIRI prevails, the lands will be equally available for selection by all six village corporations, in accordance with their Section 12(b) Agreement. … As was the case when section 12(a) selections were made in 1974, all six villages will have a fair opportunity to select some of these potentially valuable lands, at the same time, with equal information available to judge their desirability.”

Compiling Data

In the meantime, AEA convened public meetings in February and early March, covering topics like socioeconomics, transportation, recreation, aesthetics, cultural resources, subsistence, terrestrial resources, fisheries and aquatics and instream flow, geomorphology, water quality and ice processes.

Dyok says a wealth of information from the 1980s effort to get a Susitna River dam built provides a baseline of data.

“In fact, more than 3,000 individual reports were compiled at that time. This past year has been spent identifying data gaps and developing study plans to determine what additional information is needed.”

Various state agencies, like the Alaska Department of Fish and Game, have continued studies and the AEA is forming agreements to use that information.

“In addition, AEA is committed to gathering three more years of data to be able to build models to predict future trends and potential impacts” from the facility and develop necessary protection, mitigation and enhancement measures, Dyok says.

FERC scoping meetings held in late March in Anchorage, Wasilla, Sunshine, Fairbanks and Glennallen also explored those issues.

“The [AEA] is committed to an open, honest and transparent process and is working with all stakeholders to provide them with the information needed to keep involved, address their concerns and incorporate their comments during the planning process,” Dyok says.

Comments on the pre-application document and requests for studies are due April 27. A proposed study plan will be filed June 11, with study plan meetings scheduled July 9-11.

Once study plans are determined at the end of November, studies will take place in 2013-2014. A preliminary licensing proposal and comments on the proposal are tentatively scheduled for submission in 2015.

“Our goal anticipates receiving the license at the end of 2016 or in 2017,” Dyok says, “and have construction starting in 2017, completing it by the end of 2023.”

Revisiting Former Plans

The history of events leading to the recent revival of interest in a Susitna River dam extends back to the early 1950s, when the U.S. Bureau of Reclamation first studied the Susitna River’s hydroelectric potential. The U.S. Army Corps of Engineers conducted a subsequent review in the 1970s and then in 1980, the Alaska Power Authority—the AEA’s predecessor agency—commissioned a comprehensive analysis to determine whether hydroelectric development on the Susitna River was viable.

Based on those studies, the APA submitted a license application to FERC in 1983 for the Watana/Devil Canyon project on the Susitna River (commonly known as the Susitna Hydroelectric Project). The license application was amended in 1985 for construction at an estimated cost of $5.4 billion, in 1985 dollars.

From 1978 to 1986, the State of Alaska spent $145 million of $227 million appropriated on extensive fieldwork, biological studies and activities to support the FERC license application.

Financing difficulties, along with the relatively low cost of gas-fired electricity in the Railbelt region, the declining price of oil throughout the 1980s, and the financial burden on the state budget, prompted the APA to terminate the project.

Though the APA concluded that project impacts were manageable, the license application was withdrawn in March 1986.

In 2008, the Alaska State Legislature, in its FY2009 capital budget, authorized the AEA to re-evaluate the Susitna Hydroelectric Project as it was conceived in 1985. The authorization also included funding a Railbelt Integrated Resource Plan to evaluate various sources of electrical power to satisfy the area’s long-term energy needs.

“Future demand predictions, and options to meet the demand, such as from renewables, demand-side management, and energy efficiency, were evaluated,” the AEA website stated. “The latter two options were recommended regardless of the new electrical generation option selected.”

In 2010, legislation directed the state to receive 50 percent of its electrical power from renewable and alternative energy sources by 2025.

Hydropower currently provides approximately 24 percent of the electrical energy used in Alaska. The RIRP concluded that the only way to supply 50 percent of Alaska’s electricity from renewable and alternative sources was from a large hydroelectric project in the Railbelt region.

“The Susitna-Watana Hydroelectric Project is one piece of Alaska’s energy portfolio, and a diverse mix of energy sources is essential to the state’s energy future,” Dyok says. “This includes a mix of renewable sources like wind, hydroelectric and geothermal, as well as fossil fuels like natural gas and coal.” 

This story originally appeared in the April 2012 print edition of Alaska Business Monthly magazine.
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