Legislature(2007 - 2008)HOUSE FINANCE 519
04/24/2007 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB90 | |
| HB238 | |
| HB164 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 90 | TELECONFERENCED | |
| *+ | HB 238 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 164 | TELECONFERENCED | |
HOUSE BILL NO. 238
"An Act relating to the response account of the oil and
hazardous substance release prevention and response
fund; and providing for an effective date."
MICHAEL PAWLOWSKI, STAFF, CO-CHAIR MEYER, referred to a
spreadsheet in the members' packets (copy on file.) He
explained that the legislation would create a subaccount
within the Response Account and direct the Department of
Revenue to invest that money to generate a higher rate of
return similar to the way the subaccount in the CBR is
managed.
Mr. Pawlowski reported that Section 1 deals with the
Department of Administration's calculations of the balance
of the fund and relates to the imposition of the 1 cent tax.
Section 2 would add realized income of the subaccount
created in Section 3 to the Prevention Account. Section 3
creates a subaccount in the Response Account and directs the
Commissioner of Revenue to manage the subaccount based on a
five-year basis. Section 4 transfers $40 million from the
Response Account to the subaccount created in Section 3.
Section 5 is an effective date.
Co-Chair Meyer observed that the intent is to increase the
470 Account by investing it like a similar subaccount in the
CBR.
3:07:07 PM
Representative Gara noted that the fund can be used for a
catastrophic spill and questioned what would happen if a
spill occurred after the $40 million was invested.
Co-Chair Meyer thought that the cost would be paid out of
the general fund and replenished from collection for
damages.
BRIAN ANDREWS, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, pointed out that the subaccount could
be liquidated in a day. The anticipated return of the
subaccount will be somewhere between 7 and 9 percent and the
longer it is invested, the higher the probability of a
higher return.
Representative Gara asked where the interest would go.
Mr. Pawlowski explained that the interest would go through
several other accounts within the fund and is then credited
to the Prevention Account. Representative Gara asked if it
would alter the amount of money of the 4 cents or 1 cent per
barrel tax. Mr. Pawlowski replied that it would not alter
the amount of money other than what could happen in terms of
a different market valuation. Representative Gara asked if
additional interest earned would have an effect on the
barrel tax. Mr. Pawlowski responded that those taxes are
charged regardless of the interest earned. The 1 cent tax
is charged based on the balance of the $50 million. He
explained that added in Section 1 is a provision that if
there is an investment loss, net loss is added back to the
balance. If an expenditure is made out of the account, the
1 cent tax would accumulate normally. Representative Gara
thought that made sense.
Mr. Pawlowski observed that on page 2, line 28 "Revenue"
needed to be changed to "Administration" for collection
purposes.
Co-Chair Meyer MOVED to ADOPT Amendment #1:
On page 2, line 28
Delete "Revenue"
Add "Administration"
There being NO OBJECTION, it was so ordered.
In response to a question by Co-Chair Meyer, Mr. Pawlowski
noted that the balance in the fourth quarter of FY 06
dropped below $50 million. There has not been a drop below
$40 million.
At ease: 3:12:17 PM
Reconvened: 3:16:09 PM
Representative Hawker referred to a chart provided by the
Department of Environmental Conservation demonstrating
expenditures from the Response Account (copy on file.) He
asked why there is a large ($8.5 million) encumbrance
outstanding from a Department of Law review.
BRECK TOSTEVIN, SENIOR ASSISTANT ATTORNEY GENERAL,
ENVIRONMENTAL SECTION, CIVIL DIVISION, DEPARTMENT OF LAW,
explained that the funds were set aside for outside legal
counsel for a state damages claim against BP and others
arising out of the North Slope oil spill. Representative
Hawker did not believe that the statutory intent of the oil
spill response account was for investigating litigation.
Mr. Tostevin referred to the Response Fund, AS 46.08.040
(a)(1)(A):
(a) In addition to money in the response account of
the fund that is transferred to the commissioner of
commerce, community, and economic development to make
grants under AS 29.60.510 and to pay for impact
assessments under AS 29.60.560, the commissioner of
environmental conservation may use money
(1) from the response account in the fund
(A) when authorized by AS 46.08.045, to investigate
and evaluate the release or threatened release of oil
or a hazardous substance, and contain, clean up, and
take other necessary action, such as monitoring and
assessing, to address a release or threatened release
of oil or a hazardous substance that poses an imminent
and substantial threat to the public health or
welfare, or to the environment;
Representative Hawker argued that the funds are being spent
on litigation without legislative appropriation.
In response to a question by Representative Gara, Mr.
Tostevin explained that $8.5 million was from the Response
Account, which is the 1 cent per barrel tax.
Representative Gara summarized that the Response Account
applies to responses to releases or threatened release.
Mr. Tostevin agreed and noted that it applies to imminent
or substantial threats.
Representative Gara felt that the costs were justified by
the shut down of the pipeline due to a threat of a release.
3:23:14 PM
Co-Chair Meyer acknowledged the arguments for the use, but
noted that it was not the original intent of the fund.
Representative Hawker characterized it as an "absurd
stretch".
Representative Kelly requested an explanation.
Mr. Tostevin explained that the basis for using the fund is
both for (a)(1)(A) and (a)(1)(C). When the Response Fund
was split in 1994, there was discussion of using the fund
to recover costs incurred in spills where you tapped the
Response Account. He opined that there is a clear legal
basis to use the Fund as it is currently being used.
Co-Chair Meyer redirected attention to the purpose of HB
238, which is to redirect $40 million of the $50 million
into a subaccount.
3:25:42 PM
Representative Gara suggested that the intent of the 4
cents and 1 cent tax was for spill prevention and spill
response work. He maintained that the 4 cents tax does not
cover the cost of spill prevention and should be closer to
6 cents. Co-Chair Meyer thought this bill would provide
more money toward that purpose.
LARRY DIETRICK, DIRECTOR, SPILL PREVENTION AND RESPONSE,
DEPARTMENT OF ENVIRONMENTAL CONSERVATION, acknowledged that
the projections are good until 2010.
3:28:14 PM
Representative Foster MOVED to REPORT CSHB 238 (FIN) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it
was so ordered.
CSHB 238(FIN) was REPORTED out of Committee with a "do pass"
recommendation and with a new fiscal note by the Department
of Revenue, a new indeterminate fiscal note by the
Department of Environmental Conservation, and with a new
zero fiscal note by the Department of Administration.
3:29:50 PM
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