INTERTIE PARTICIPANTS GROUP MEETING 1/2/03
SOUTHERN INTERTIE 
TESTIMONY OF GENE KULAWIK
Vice-President, Argetsinger & Kulawik, Inc. - Construction Consultants

I have been involved in construction of projects such as the building of Air Force Bases, the construction of Minuteman Missile projects, large highway projects, Sections 5 and 6 of the Trans-Alaska Pipeline and several other projects in the lower 48 and Alaska.  I worked as a Construction Consultant in Alaska for eleven years after retiring from the construction business.  For almost five years I was Director of Operations and Maintenance for the State of Alaska DOT/PF highways, airports and building facilities.

I have worked on projects of all sizes from small to large to mega-sized.  I have seen some projects that were handled well and that were successful over the long haul.  Other projects were ill-conceived with short-comings because of faulty economic analysis or faulty market expectations, design mistakes, etc., and subsequently failed.

Projects that have been aided with State funding and subsequently failed follow:

1. The Healy Clean Coal Electrical Generation Plant.
2. The Seafood Processing Plant in Anchorage.
3. The Delta Barley Projects.
4. The various Matanuska agricultural projects.
5. The grain elevator export projects in Valdez and Seward.
6. The Marine Repair Facility in Seward.

Several hundred million dollars have been invested in these projects with little or no return.
This is irresponsible utilization of the State's assets.  This should not continue.

Now is the time to look at the proposed Southern Intertie Project.  The cost of construction based upon a conceptual design is estimated to be in the range of $100 million to $120 million.  Two estimates of Total Benefits to be achieved are $143.5 million or $56.7 million.  The Total Benefits estimates were made by the same company.  Chugach management has elected the higher benefit number.  If the construction cost stays in the stated range the viability of the project hinges on the accuracy of the benefits calculation.  A reasonable step that should be taken would to be to bring the consultant back in to the process to justify the two different benefits numbers and quantify the differences.

It is my understanding that Chugach has performed an in house analysis that supports the higher benefits number.  This does not increase the comfort level of the higher number.  A better plan would be to bring in a disinterested consultant to make an independent analysis.

When one looks at the difference ($86.8 million) in the two studies, we are talking about a significant amount of money.  There should not be any rush to judgment until this matter is resolved.