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Enron Mail |
Below is the weekly western issues update sent to Tim earlier. If you have=
any questions, please feel free to contact me (x39510). Executive Summary BC Hydro=20 British Columbia Energy Politics BPA Developments=20 Forestry Issues Smelter Update=20 BC Hydro The crown jewel in BC government's arsenal, BC Hydro is in a holding patter= n until they can name a new Chair to head up the corporation. Brian Smith = was replaced with interim Chairman Robert Fairweather, but we do not expect= Fairweather to have a long tenure - the word is Gordon Campbell and compan= y are seeking a replacement to fill Mr. Smith's shoes as early as mid-Augus= t. We expect key changes to occur in Hydro's executive and board of direct= ors following the appointment of the new Chair. Although senior management= at BC Hydro is relatively comfortable with the company's financial positio= n and competitiveness, they will be pursuing a strategy of expanding genera= tion capability through new dams and oil/gas exploration, pending environme= ntal approvals. As a part of BC Hydro's move to look for additional genera= ting capacity, they are turning to a pair of mega-projects that were scrapp= ed a decade ago. BC Hydro has commissioned new technical review studies of= the 900MW Site C hydroelectric project near Fort St. John and the 2,000 MW= coal-fired Hat Creek project near Kamloops. In terms of a rate hearing, we do not expect BC Hydro to conduct a rate hea= ring until the new Chairman is appointed. It will be difficult to get rate= s raised, although with the government budget deficit looming there will be= considerable pressure to begin looking this direction. Another key revenu= e challenge for BC Hydro will be responding to the recent price caps impose= d by FERC on western power markets and potential power purchase refunds to = California (though their contributions are not immense, they are still sign= ificant).=20 BC Energy Politics Things have really heated up in Victoria now that the new Campbell administ= ration is settling in. Earlier, we reported that the Office of the Premier= had taken control of all the agencies and political staffing decisions. W= ith 77 of the 79 elected members of the BC Legislature, sources close to th= e Premier indicate change will be "fast and furious" to offset any local co= verage from volatile media. The BC Government's primary focus will be to s= timulate the economy while trying to restrain government spending. To that= extent, they have instituted an across the board 25% stimulus tax cut and = will have to deal with the deficit issues that that cut entails. One of th= e ways they are looking to balance things out is to outsource Crown assets = and look for other areas to generate revenue - new sources of government re= venue through oil and gas exploration and energy will be a top priority. Minister of Energy and Mines, Richard Neufeld, will be one of the main driv= ers behind the current fast-tracking of the offshore oil and natural gas ex= ploration. There is a great deal of pressure on the BC Liberals to balance= this budget and they will be looking at ways of delivering revenue sources= through oil and gas exploration permitting as a short-term solution. Neuf= eld has reviewed the Backhouse Report (Northern Development Commission) reg= arding the need for continued local public input and has basically tossed i= t aside - the report had not gone far enough to please the Liberals. Other= things on the Minister of Energy's agenda: ?=09Oppose Sumas 2 power project & phase out Burarrd Thermal (Sumas has bee= n a serious bone of contention between Washington State and Canada) ?=09With Core Review, protect BC Hydro and all of its core assets, includin= g dams, reservoirs, and power lines under public ownership ?=09Restore independent BC Utilities Commission, to re-regulate BC Hydro's = electricity rates ?=09Maintain the longstanding ban on bulk water exports ?=09Encourage mineral exploration ?=09Promote clean and renewable alternative energy sources ?=09Review and make recommendations regarding allocation of funding that ha= s been frozen for the "Power for Jobs" Initiative BPA Senator Patty Murray moved last week to drop the review provision on the Se= nate bill, which would have opened up an additional $2 billion for BPA borr= owing authority. If Senator Murray is successful, the measure could have a= substantial impact on BPA financial solvency. With the exception of the approximately $5 million spill over the Dalles an= d Bonneville dams, BPA has already foregone a major summer spill to protect= endangered salmon species. =20 Representatives of four Northwest governors ventured to Washington DC last = week to express concerns over the new hydro BiOp and how it will be impleme= nted. States were concerned about their lack of input in the implementatio= n process - a plan being developed by action agencies and spearheaded by BP= A. The plan has been put on hold pending a review headed by Interior Depar= tment lawyer Ann Klee. Idaho and Washington representatives showed concern= that the BiOp could be overturned in court - they were concerned that the = NMFS underestimated the risk of extinction of Snake River stocks and that i= t was illegal to rely on off-site mitigation to help satisfy the hydro syst= em's ESA obligations. While the administration has said it plans to double= past expenditures to implement the BiOp, nobody at the meeting could come = up with just what the previous BiOp costs were - for now, the salmon plan i= s pure lip service. Smelter Curtailments Kaiser: Faced with declining aluminum prices, which have decreased 9% from = last year, Kaiser is in a difficult position due to the fact that they are = maintaining a level of infrastructure and personnel-readiness which will al= low them to restart 4-3/4's lines of their operations on the fly. Should t= his curtailment last longer than a year, it would be cost-prohibitive for t= hem to continue incurring that infrastructure expense. Kaiser has gone on = the record to say it is still open to signing load a curtailment agreement = with BPA, but it is unclear at this time whether BPA foresees a benefit in = signing an agreement considering short-term and perceived mid-term electric= ity price decreases. We are continuing to monitor this situation as it dev= elops, although an agreement in the short-term seems doubtful. Alcoa: Recently mentioned in the press, Canada's Newfoundland government an= d U.S. aluminum giant Alcoa Inc. announced Thursday they would conduct a fe= asibility study to possibly revive the stalled Lower Churchill hydroelectri= c project in the remote Labrador region. The generating station on Gull Is= land could produce up to 2,000 MW of electricity. Costs of the project are= estimated at some C$4 billion ($2.6 billion), far below the C$10 billion o= riginally thought. With a 16% drop in net income due to slackening global = aluminum demand and higher energy prices, Alcoa has suffered along with the= rest of the aluminum industry to find cheaper, less volatile sources of el= ectricity. Along with their ongoing negotiations with BC Hydro, it appears= Alcoa is making a determined push to work with the Canadians to play all s= ides of a competitive electricity market. Forestry Issues There are a number of fuel management projects which are going on right now= in the Bitterroot National Forest.=20 Ecosystem Management Burn - Burnt Fork Ecoburn - Completed 7/01 Fuels Reduction - Sheafman Fuel Project - Completed Fuels Reduction - Darby Ranger District * Trapper Overlook - 10/01 expected decision date * Como Restoration - 9/01 expected decision date * Como Campground - 9/01 expected decision date Fuels Reduction - Sula Ranger District * Springer Memorial Fuel Hazard Reduction Project - completed Multi-Forest Ecosystem Management Burn - West Fork Ranger District * Salmon River Canyon Project - Ongoing, Preparing Supplemental Draft Fuels Reduction - Sula Ranger District * Sam Billings Camp Ground Fuel Reduction - Completed Steep Creek Fuel Reduction - 10/01 expected decision date
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