UAF plant estimate $50M over budget

Photo/Todd Paris/University of Alaska Fairbanks

The University of Alaska Fairbanks will likely have to wait a year longer to get its new heat and power plant up and running.

Cost estimates available in February came in more than $50 million over budget for the coal-fired combined heat and power, or CHP, plant, according to university spokeswoman Marmian Grimes.

University of Alaska President Pat Gamble told Senate Finance Committee members March 17 that the school “put the brakes on the project” and is now looking for ways to value-engineer the cost down.

“We made the decision we could not come back to the Legislature and as for more money,” Gamble said to the committee.

Revamping the design of the plant will push its completion date back from late fall 2018 to the last quarter of 2019, Grimes said.

Last year, the Legislature approved a financing package to cover the cost of a new $245 million UAF plant, but the preliminary estimate for the new plant was around $300 million.

The 2015 fiscal year financing included a $24.5 million direct general fund appropriation and significant bonding authority together totaling $182 million. University officials have said they could afford to bond debt up to about $50 million to help pay for the more efficient CHP plant on the back of annual fuel savings projected in the $4 million to $5 million range compared to current costs.

The Atkinson Heat and Power Plant began service in 1964, meaning its two coal-fired boilers are already beyond expected 50-year operational life. Its two auxiliary boilers — one oil-fired and one compatible with both oil and natural gas — will be kept as backup for the new coal CHP plant.

UAF demands a plant capable of producing about 17 megawatts of power and enough steam to heat the more than 3.1 million square feet of facilities that make up its main campus.

Grimes said the plant design and construction team is focusing its efforts on cost savings derived from going from two circulating fluidized bed boilers to one large unit. The global engineering firm Stanley Consultants is leading design work and a joint team of Haskell Corp. and Davis Construction will handle construction duties.

UAF chose the construction manager at risk, or CMAR, project management method for the plant as opposed to the more traditional design-bid-build, Grimes said.

The university paid for a preliminary design upfront, where the $245 million estimate came from. Then the construction team was brought on for the detailed design phase so specific costs could be itemized as opposed to having one large bid and potential cost overruns.

“It actually worked the way it was supposed to,” Grimes said.

While the firms are fairly confident the needed savings can be realized, she said, going from two to one boiler has operational drawbacks.

The university would have to completely switch to oil or gas when maintenance is done to the coal boiler, rather than being able to keep one coal boiler running, which would add somewhat to fuel costs.

The boilers dictate the design of the rest of the plant; everything else is built up around them, Grimes has said.

This year will probably be spent prepping the site for construction, when original plans called for pouring concrete, she said.

UAF hopes to request approval for site work at the April UA Board of Regents meeting and have a new design ready by June, according to Grimes.

The immediate delay is only a few months, but that will almost certainly result in a year delay for the overall project because of Alaska’s short construction season.

Grimes added that the university is taking another look at adding natural gas-fired capacity as part of the redesign. However, early indications are that the availability and fuel cost issues that forced the idea to be nixed when UAF first looked at new CHP plant options are still there, despite a gas plant being cheaper to build, she said.

Engineering building

UAF’s capital request for construction of its piecemealed engineering building would allow the school to open about 25 percent of the facility, UA President Gamble told Senate Finance.

“We could put part of the building to use if the total amount was $8 million applied to the building,” he said.

Gamble said the $10 million the Legislature appropriated last year would last through about mid-August. Another $8 million would keep work going through mid-January and let the school open two classrooms, a lab and required associated amenities, such as restrooms at that time.

The 119,000 square-foot facility is enclosed and warm, which allowed interior construction to continue during the winter, according to a UAF project update dated March 11.

As it stands without that $8 million, UAF needs $31.3 million to finish the $108.6 million project, Gamble said.

Gov. Bill Walker included an $8 million appropriation for the building in his capital budget, one of the few projects statewide that got a line item in the slim $150 million proposal.

The Legislature fully-funded Anchorage’s $123.2 million engineering facility and parking garage with a $45.6 million appropriation last year.

When asked about bonding for construction funds, he said the university bonded last year and is at capacity to repay the debt service.

University capital fund

Senator Pete Kelly, R-Fairbanks, introduced a bill March 20 that would allow the UA System to pay for capital projects by skimming from future state resource royalties in lieu of getting land the state schools are owed.

Established as a land grant university, attempts in 1959 and 2009 to transfer up to 1 million acres of state land to the University of Alaska have been shot down by the Alaska Supreme Court as violations of the state Constitution.

Kelly’s Senate Bill 81 would allow the state system to take 0.5 percent of state proceeds from land and mineral leases, royalties and federal mineral revenue sharing on leases, sales and contracts entered into after Jan. 1 2016.

The University of Alaska currently owns approximately 147,000 acres across the state.

Elwood Brehmer can be reached at [email protected].

Updated: 
11/19/2016 - 6:50pm

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