Legislature(2017 - 2018)ADAMS ROOM 519

04/07/2018 01:00 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Continued from 4/6/18
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 299(FIN) Out of Committee
Moved CSHB 322(FIN) Out of Committee
<Bill Hearing Canceled>
Scheduled but Not Heard
Moved CSSSHB 268(FIN) Out of Committee
HOUSE BILL NO. 322                                                                                                            
     "An  Act relating  to penalties  for discharges  of oil                                                                    
     and  other   pollution  violations;  relating   to  oil                                                                    
     discharge   prevention   and  contingency   plans   for                                                                    
     commercial motor  vehicles transporting crude  oil; and                                                                    
     providing for an effective date."                                                                                          
2:09:06 PM                                                                                                                    
Co-Chair Foster  indicated that the  bill had been  heard on                                                                    
March 29, 2018.  He asked the sponsor of the  bill if he had                                                                    
any comments before taking up amendments.                                                                                       
2:09:41 PM                                                                                                                    
REPRESENTATIVE  ANDY  JOSEPHSON, SPONSOR,  referenced  prior                                                                    
committee  discussion about  the bill's  purpose. He  shared                                                                    
the department's  [Department of  Environmental Conservation                                                                    
(DEC)] belief  it was important to  update penalty authority                                                                    
at present  in case it  was needed;  it was not  possible to                                                                    
"retroactively work  our way  out of that  and look  to 1977                                                                    
and 1989 penalty schedules."  Additionally, it was expensive                                                                    
and time  consuming for  the department  to deal  with small                                                                    
penalties  without going  through  the  legal system  (under                                                                    
current   law).   The   bill  would   allow   administrative                                                                    
penalties. He continued it was  easier for the department to                                                                    
obtain  cost  recovery  if  the  option  was  available.  He                                                                    
elaborated   that  the   department  noted,   and  the   law                                                                    
reflected, that  penalties of an administrative  nature were                                                                    
available  for  food  safety,  public  drinking  water,  and                                                                    
monitoring  of  contaminates. The  Environmental  Protection                                                                    
Agency  required administrative  penalty  authority for  all                                                                    
programs where the  state had taken primacy.  He stated that                                                                    
the idea was not novel. Relative  to the types of spills, he                                                                    
agreed  with the  Alaska Oil  and  Gas Association's  (AOGA)                                                                    
position that it was generally  not the main offender. About                                                                    
90 percent  of the spills requiring  DEC's intervention were                                                                    
not  related  to  the  oil industry,  but  were  related  to                                                                    
fishing boats,  abandoned mines,  and other  incidences. The                                                                    
bill was not designed to come after any one industry.                                                                           
2:12:15 PM                                                                                                                    
Vice-Chair Gara thought  it was an open  question on whether                                                                    
the state could retroactively adopt penalties.                                                                                  
Co-Chair Foster  MOVED to  ADOPT Amendment  1, 30-LS1015\U.2                                                                    
(Nauman,    3/16/18)   (copy    on   file)    sponsored   by                                                                    
Representative Ortiz:                                                                                                           
     Page 2, line 27:                                                                                                           
     Delete "$20"                                                                                                               
     Insert "$40"                                                                                                               
     Page 2, line 30:                                                                                                           
     Delete "$5"                                                                                                                
     Insert "$10"                                                                                                               
     Page 3, line 1:                                                                                                            
     Delete "$2"                                                                                                                
     Insert "$4"                                                                                                                
Representative Wilson OBJECTED.                                                                                                 
Representative  Ortiz explained  that the  amendment aligned                                                                    
with  the spirit  of HB  322 in  the sense  it would  update                                                                    
penalties  last changed  in  1989. He  did  not believe  the                                                                    
increase  fully  accounted  for inflation.  The  amendment's                                                                    
purpose was to update the penalties.                                                                                            
Representative  Wilson  directed  a  question  to  DEC.  She                                                                    
stated the department  had raised the penalties  from $10 to                                                                    
$20 and $2.50 per gallon to  $5.00 per gallon. She asked why                                                                    
the  department had  selected the  numbers  in the  original                                                                    
KRISTIN  RYAN, DIRECTOR,  DIVISION OF  OIL SPILL  PREVENTION                                                                    
AND RESPONSE, DEPARTMENT  OF ENVIRONMENTAL CONSERVATION (via                                                                    
teleconference), explained that the  numbers included in the                                                                    
bill by  Representative Josephson accounted for  the cost of                                                                    
inflation.  She  deferred  to Representative  Josephson  for                                                                    
further detail.                                                                                                                 
Representative  Josephson  replied  that with  exception  to                                                                    
Amendments 1 and  2 the bill contained  an update reflecting                                                                    
inflation. The figures  in Section 2 of  the bill (Amendment                                                                    
1) doubled  the existing out-of-date figures.  The amendment                                                                    
was to  be consistent  with other  parts of  the legislation                                                                    
that increased to inflation.                                                                                                    
Representative  Wilson observed  that the  updated penalties                                                                    
appeared  to  be  four  times the  amount  of  the  existing                                                                    
Representative  Josephson responded  that he  would have  to                                                                    
check to  see if  the proposed numbers  were four  times the                                                                    
existing amounts.  The changes  in Amendments  1 and  2 were                                                                    
designed to be consistent with  the increases in the rest of                                                                    
the legislation.                                                                                                                
2:16:12 PM                                                                                                                    
Representative  Kawasaki referenced  a presentation  [by the                                                                    
sponsor] from  a previous bill  hearing ["HB 322:  The Spill                                                                    
Bill"  provided  on  March  29, 2018  (copy  on  file)].  He                                                                    
pointed to  Section 2, which  specified the  2018 equivalent                                                                    
value would  be closer to  $39.70. He asked why  the sponsor                                                                    
had decided to  set the penalties at half  of what inflation                                                                    
would have been in Sections 2 and 3 of the bill.                                                                                
Representative  Josephson replied  that the  figures in  the                                                                    
bill reflected  the will of  the House  Resources Committee.                                                                    
He elaborated  that the committee  had chosen to  update the                                                                    
figures  for inflation  with the  exception  of the  figures                                                                    
included in  Amendments 1 and  2. The amendments  would give                                                                    
the House Finance Committee an opportunity to weigh in.                                                                         
Representative Wilson  looked at  page 5, lines  8 and  9 of                                                                    
the  bill.  She  noted  the  bill  updated  various  penalty                                                                    
thresholds from  $500 to $1,000,  $100,000 to  $200,000, and                                                                    
$10,000 to $25,000. She turned to  page 6, lines 5 and 6 and                                                                    
observed  the same  thing was  happening.  She believed  the                                                                    
initial numbers in the bill had  to be close to inflation if                                                                    
pages 5 and 6 reflected it.                                                                                                     
Representative Josephson deferred to his staff.                                                                                 
TOM ATKINSON, STAFF, REPRESENTATIVE  ADAM WOOL, replied that                                                                    
the numbers had  been adjusted for inflation in  most of the                                                                    
bill sections. He stated that often  it had worked out to be                                                                    
approximately  double the  current penalty.  In some  cases,                                                                    
the  daily  penalty  had  been  multiplied  by  5.  How  the                                                                    
penalties  had  been  set throughout  the  bill  varied.  He                                                                    
referenced   Section  2   where  the   number  veered   from                                                                    
inflation. He  elaborated that the  Section 2  penalties had                                                                    
been set in December 1977;  if the penalties were changed to                                                                    
reflect  inflation they  would  be four  times the  existing                                                                    
numbers,  which seemed  extreme. The  reasoning had  been it                                                                    
seemed more acceptable to double those penalties.                                                                               
Representative Wilson remarked on  a statement made that all                                                                    
of  the  other  penalties  had  been  increased  to  reflect                                                                    
inflation. She thought  the numbers would be  closer to four                                                                    
times  their  existing  amounts  if the  goal  was  to  keep                                                                    
everything the same [increase levels equally].                                                                                  
Representative  Josephson answered  that  the penalties  had                                                                    
not all  been created at  the same time, meaning  there were                                                                    
different inflation rates.                                                                                                      
2:19:54 PM                                                                                                                    
Representative  Kawasaki pointed  out that  the presentation                                                                    
previously  given  by  the   sponsor  showed  that  original                                                                    
penalties in Section  2 were adopted in  1977, the penalties                                                                    
in Section 4 were adopted  in 1989, the penalties in Section                                                                    
6 were adopted in 1976, and  the penalties in Section 8 were                                                                    
adopted in  1984. He believed  keeping things  consistent by                                                                    
inflation proofing the entire bill was accurate.                                                                                
Vice-Chair Gara requested to be  added as a cosponsor to the                                                                    
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
A roll call vote was taken  on the motion to adopt Amendment                                                                    
IN FAVOR: Gara, Guttenberg, Kawasaki, Ortiz, Foster, Seaton                                                                     
OPPOSED: Wilson, Grenn, Pruitt, Thompson, Tilton                                                                                
The MOTION  PASSED (6/5). There being  NO further OBJECTION,                                                                    
Amendment 1 was ADOPTED.                                                                                                        
Co-Chair Foster  MOVED to  ADOPT Amendment  2, 30-LS1015\U.3                                                                    
(Nauman,    3/16/18)   (copy    on   file)    sponsored   by                                                                    
Representative Ortiz:                                                                                                           
     Page 4, line 7:                                                                                                            
     Delete "$1,000"                                                                                                            
     Insert "$2,000"                                                                                                            
     Delete "$200,000"                                                                                                          
     Insert $400.000"                                                                                                           
Representative Wilson OBJECTED for discussion.                                                                                  
2:21:47 PM                                                                                                                    
Representative Ortiz  explained the  amendment was  the same                                                                    
as Amendment  1 but  applied to a  different section  of the                                                                    
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Guttenberg, Kawasaki, Ortiz, Gara, Seaton, Foster                                                                     
OPPOSED: Grenn, Pruitt, Thompson, Tilton, Wilson                                                                                
The MOTION  PASSED (6/5). There being  NO further OBJECTION,                                                                    
Amendment 2 was ADOPTED.                                                                                                        
Co-Chair Seaton  MOVED to  ADOPT Amendment  3, 30-LS1015\U.5                                                                    
(Nauman, 4/2/18) (copy on file):                                                                                                
     Page 3, line 10:                                                                                                           
     Delete "annually"                                                                                                          
     Insert ", every three years,"                                                                                              
     Page 3, line 28:                                                                                                           
     Delete "annually"                                                                                                          
     Insert", every three years,"                                                                                               
     Page 7, line 17:                                                                                                           
     Delete "annually"                                                                                                          
     Insert", every three years,"                                                                                               
     Page 8, line 24:                                                                                                           
     Delete "annually"                                                                                                          
     Insert ",every three years,"                                                                                               
Representative Wilson OBJECTED for discussion.                                                                                  
Co-Chair Seaton  explained the  amendment aimed  to increase                                                                    
administrative efficiency and would  mean the consumer price                                                                    
index  calculation  would  be  computed  every  three  years                                                                    
instead  of annually.  He elaborated  the change  would mean                                                                    
the  number  would  not  have  to  be  updated  annually  in                                                                    
publications. He believed  a three-year inflation adjustment                                                                    
was adequate.                                                                                                                   
Representative Wilson  asked for verification  the amendment                                                                    
would  still  inflation  proof for  the  years  between  the                                                                    
three-year  period. She  surmised it  would not  necessarily                                                                    
mean inflation proofing once.                                                                                                   
Co-Chair   Seaton   confirmed   the   inflation   would   be                                                                    
cumulative.  The  amendment  merely  removed  administrative                                                                    
Representative Wilson WITHDREW her OBJECTION.                                                                                   
There being NO further OBJECTION, Amendment 3 was ADOPTED.                                                                      
2:22:44 PM                                                                                                                    
Co-Chair Seaton  MOVED to  ADOPT Amendment  4, 30-LS1015\U.6                                                                    
(Nauman, 4/3/18) (copy on file):                                                                                                
     Page 9, following line 2:                                                                                                  
     Insert a new bill section to read:                                                                                         
     "*Sec. 13.  AS 46.03.900 is amended by adding a new                                                                        
     paragraph to read:                                                                                                         
     (38)    "produced  water"  means   water  that  is  the                                                                    
     byproduct of the  exploration, extraction, development,                                                                    
     production,  refining,   processing,  or   disposal  of                                                                    
     energy-related products;"                                                                                                  
     Renumber the following bill sections accordingly.                                                                          
     Page 9, line 29:                                                                                                           
     Delete "Section 15"                                                                                                        
     Insert "Section 16"                                                                                                        
     Page 9, line 30:                                                                                                           
     Delete "sec. 16"                                                                                                           
     insert "sec. 17"                                                                                                           
Representative Wilson OBJECTED for discussion.                                                                                  
Co-Chair Seaton explained the amendment.  He stated that the                                                                    
bill   addressed  penalties.   Produced  water   volume  was                                                                    
included  in the  bill,  but  the term  was  not defined  in                                                                    
statute. He had  worked with DEC, the  Department of Natural                                                                    
Resources (DNR),  and Legislative Legal Services  to craft a                                                                    
definition for  produced water. He  read the  definition the                                                                    
amendment proposed to include:                                                                                                  
     "produced water"  means water that is  the byproduct of                                                                    
     the  exploration, extraction,  development, production,                                                                    
     refining,  processing,  or disposal  of  energy-related                                                                    
Co-Chair Foster asked to hear from DEC.                                                                                         
KRISTIN  RYAN, DIRECTOR,  DIVISION OF  OIL SPILL  PREVENTION                                                                    
AND RESPONSE, DEPARTMENT  OF ENVIRONMENTAL CONSERVATION (via                                                                    
teleconference),  shared that  the  committee had  discussed                                                                    
concerns about  how produced water  would be defined  by the                                                                    
department   if  the   bill  passed.   Produced  water   was                                                                    
associated with  the exploration and production  of oil. The                                                                    
division found cleaning up produced  water spills to be very                                                                    
difficult  and damage  to the  environment was  significant;                                                                    
therefore, DEC requested produced water  to be a factor when                                                                    
calculating penalties associated with spills.                                                                                   
Representative Pruitt  stated they  had discussed  the issue                                                                    
at a previous  bill hearing. He asked  for verification that                                                                    
DEC  had  not  taken   into  account  penalties  related  to                                                                    
produced water.                                                                                                                 
Ms.  Ryan answered  in the  affirmative. The  current statue                                                                    
limited the department's ability  to only calculate oil when                                                                    
it  considered the  volume of  a spill,  for the  sake of  a                                                                    
Representative Pruitt  asked how often Ms.  Ryan anticipated                                                                    
the issue would  come into play. He asked  how many produced                                                                    
water spills the  division knew about, but did  not have the                                                                    
ability to do anything about.  He remarked that DEC made the                                                                    
offender clean up  produced water spills, but  was unable to                                                                    
issue a fine.  He asked how many cases there  would be where                                                                    
the  department missed  out on  being able  to fine  for the                                                                    
Ms. Ryan  answered that it  was not  possible to clean  up a                                                                    
produced water  spill. Typically,  the water was  saline and                                                                    
when it  ran into  tundra, plants  were killed  quickly. She                                                                    
elaborated that the  spills occurred in older  fields on the                                                                    
North Slope  where more and  more water  came up as  the oil                                                                    
was  pumped down.  She  noted when  spills  occurred it  was                                                                    
becoming more  common for the  volume to be more  water than                                                                    
oil. From  DEC's perspective, the damage  was as significant                                                                    
to the  environment. The  fact that the  spill could  not be                                                                    
cleaned up  and that  spills could  occur in  large volumes,                                                                    
was the  reason DEC  proposed to  include produced  water in                                                                    
its volume calculation for penalties.  She added the request                                                                    
was  not  unusual.  She detailed  that  Oklahoma  and  Texas                                                                    
included produced  water in their penalty  calculations. She                                                                    
explained it was difficult for  the spiller to calculate and                                                                    
prove what portion  of the spill was water  and what portion                                                                    
was  oil.  The  amendment  would  simplify  the  calculation                                                                    
2:29:19 PM                                                                                                                    
Representative Pruitt did not  believe there was a unanimous                                                                    
agreement  between the  department  and  partners about  the                                                                    
damage from  produced water. He asked  for verification that                                                                    
DEC's  position was  the water  caused immediate  damage and                                                                    
killed  tundra, while  some  industry  individuals felt  the                                                                    
damage was not at the same level.                                                                                               
Ms.  Ryan  believed  there  were  many  opinions  about  the                                                                    
effects of produced water versus  oil. From the department's                                                                    
perspective, it  was easier to clean  up oil than it  was to                                                                    
clean  up salt  water. She  elaborated that  salt water  was                                                                    
absorbed  and  oil  tended  to   sit  on  the  surface.  The                                                                    
department's view was the water damaged the environment.                                                                        
Representative Pruitt stated there  was a substantial amount                                                                    
of wind  on the  North Slope  and the  wind pushed  the salt                                                                    
onto the tundra. He asked about the difference.                                                                                 
Ms.  Ryan answered  that  salt water  spray  from the  ocean                                                                    
impacted a small  amount of land near the shore.  A spill of                                                                    
produced water  was inland and  in the thousands  of gallons                                                                    
in  an area  of tundra  that was  not typically  impacted by                                                                    
ocean spray.  She added that  produced water  salinity could                                                                    
be much higher than ocean water salinity.                                                                                       
Representative  Pruitt   asked  how  many   spills  happened                                                                    
annually and how many were off-pad.                                                                                             
Ms. Ryan would have to follow up with the information.                                                                          
Representative  Pruitt   asked  if  a  spill   on-pad  in  a                                                                    
contained environment was considered damaging to tundra.                                                                        
Ms.  Ryan responded  that  DEC was  focused  on spills  that                                                                    
caused  damage to  the environment.  A  spill on  a pad  was                                                                    
captured in  gravel and was  not impacting  the environment.                                                                    
There were many spills on-pad,  which the department did not                                                                    
issue  penalties  for.  Penalty  language  would  apply  for                                                                    
spills off the pad.                                                                                                             
Representative  Pruitt  highlighted   Ms.  Ryan's  testimony                                                                    
about thousands  of gallons [of produced  water]. He thought                                                                    
there would  be significantly  more reporting of  the spills                                                                    
[if  spills were  at that  level]. He  thought Ms.  Ryan was                                                                    
making  it  sound like  the  problem  was frequent.  He  was                                                                    
trying  to  determine  the  frequency   of  the  spills.  He                                                                    
wondered  if   there  were  bad   actors.  He   thought  the                                                                    
discussion from  the previous bill  hearing was  that people                                                                    
would   rather  do   something  inappropriate   because  the                                                                    
penalties  were  so  low.  He   asked  if  the  problem  was                                                                    
happening  without   abandon,  which  was  the   reason  the                                                                    
amendment was necessary.                                                                                                        
2:34:10 PM                                                                                                                    
Ms. Ryan  did not have the  numbers on hand, but  there were                                                                    
several  [produced water]  spills  per year  (not more  than                                                                    
10). The spills were semi-frequent.                                                                                             
Vice-Chair  Gara  was  comfortable with  the  amendment.  He                                                                    
believed  the   point  of  the  legislation   was  to  deter                                                                    
individuals from  taking less care.  There was a  history of                                                                    
companies  that had  acted very  responsibly and  those that                                                                    
had acted irresponsibly at times.  He cited the Exxon Valdez                                                                    
oil spill  and Deepwater  Horizon as  spill examples  in the                                                                    
past.  He  reasoned that  everyone  did  not always  act  as                                                                    
desired, which was the reason for penalties.                                                                                    
Representative Kawasaki  stated that the scope  of Amendment                                                                    
3 was limited  to adding a definition of  produced water. He                                                                    
asked  if  the  definition  included in  the  amendment  was                                                                    
typical when defining produced water.  He wondered if it was                                                                    
inclusive or exclusive.                                                                                                         
Co-Chair  Seaton   answered  that  a  couple   of  different                                                                    
suggestions  had  been  provided including  "water  that  is                                                                    
brought  to the  surface as  a byproduct  of extraction  and                                                                    
hydrocarbons"  and "produced  water means  extracted in  the                                                                    
development,  extraction  or   disposal  of  energy  related                                                                    
products."  He elaborated  that  Legislative Legal  Services                                                                    
had  developed  the  definition  as there  was  not  one  in                                                                    
statute.  The  goal  was  to  avoid  confusion  as  to  what                                                                    
constituted produced  water. His  objective was to  have the                                                                    
ability to  solve a problem and  to avoid going to  court to                                                                    
determine  what the  definition of  produced water  was. The                                                                    
amendment was  limited to defining  produced water  and made                                                                    
no changes to fines or fees.                                                                                                    
2:36:35 PM                                                                                                                    
Ms. Ryan confirmed that the  definition in the amendment was                                                                    
consistent  with what  she  had seen  in  other states.  The                                                                    
definition  was  an  explanation  that  produced  water  was                                                                    
related to  the development, exploration, and  production of                                                                    
oil or other oil related products.                                                                                              
Representative  Kawasaki  surmised   the  definition  was  a                                                                    
general  concept of  produced water  that was  inclusive and                                                                    
similar to  definitions in  other states.  He was  trying to                                                                    
ensure the  definition was accurate. He  added the amendment                                                                    
was in  context to Section  5 dealing with  fines associated                                                                    
with produced water. He believed  it was appropriate for the                                                                    
public,  industry,  legislators,  and courts  to  understand                                                                    
what was meant when the term produced water was used.                                                                           
Representative  Wilson WITHDREW  her OBJECTION.  There being                                                                    
NO further OBJECTION, Amendment 4 was ADOPTED.                                                                                  
2:38:12 PM                                                                                                                    
Co-Chair Seaton  MOVED to  ADOPT Amendment  5, 30-LS1015\U.4                                                                    
(Nauman, 4/2/18) (copy on file):                                                                                                
     Page 9, line 9, following "law.":                                                                                          
     Insert "The person shall submit the oil spill response                                                                     
     plan to the department electronically."                                                                                    
Representative Pruitt OBJECTED for discussion.                                                                                  
Co-Chair Seaton  explained the  amendment would  require oil                                                                    
spill  response plans  to be  submitted electronically.  The                                                                    
idea was  for plans to  be viewable  by people in  more than                                                                    
one location. He  elaborated that the process  would be much                                                                    
more  efficient  for  responders  and  could  save  time  in                                                                    
cleanups  when people  knew exactly  what the  response plan                                                                    
was including items  that would be available on  scene or on                                                                    
board. For  example, what  a truck was  hauling and  who was                                                                    
designated in their response plan  as the responder in order                                                                    
to avoid confusion.                                                                                                             
Representative Wilson clarified that  the oil spill response                                                                    
plans  were  submitted  to  DEC  for  the  record  and  were                                                                    
approved by a separate entity.  She surmised the purpose was                                                                    
to let people  know what would take place in  the event of a                                                                    
Co-Chair Seaton answered in the  affirmative. The intent was                                                                    
for  plans  required  of  companies   to  be  available  for                                                                    
cleanup. The amendment  did not require anything  else to be                                                                    
done. Updating plans would also  be much more convenient and                                                                    
everyone would be apprised of the current plan.                                                                                 
Representative  Pruitt WITHDREW  his OBJECTION.  He did  not                                                                    
believe DEC  needed all of  the plans; however,  he believed                                                                    
if the  state was  going to make  companies submit  plans it                                                                    
was better  to have them submitted  electronically. He noted                                                                    
his concern there would be  numerous documents that were not                                                                    
needed. He elaborated  that the department had  not known of                                                                    
the  federal  requirement  until  recently.  He  thought  it                                                                    
showed  either the  failure of  the department  or that  the                                                                    
issue  had been  managed in  the past  without needing  [the                                                                    
spill  plan].  He thought  the  documents  would sit  in  an                                                                    
electronic file that may not be needed.                                                                                         
There being NO further OBJECTION, Amendment 5 was ADOPTED.                                                                      
2:42:13 PM                                                                                                                    
Vice-Chair  Gara  reviewed the  fiscal  note  from DEC.  The                                                                    
amendment  reflected a  cost  of  $10,800 in  FY  19 and  an                                                                    
ongoing  expense of  $2,700  in outyears  from  the Oil  and                                                                    
Hazardous  Substance Release  Prevention and  Response Fund.                                                                    
The note  also reflected the  gain in revenue of  $74,700 in                                                                    
FY 20 up to $80,100 in FY 24.                                                                                                   
Representative  Wilson asked  if  the inflation  calculation                                                                    
would cost $2,700.                                                                                                              
Ms. Ryan replied  in the negative. The  only cost associated                                                                    
with doing  the inflation adjustments was  the publishing of                                                                    
the  regulations,  which  would  be on  a  three-year  cycle                                                                    
(based on an amendment that passed).                                                                                            
Representative Wilson  asked for verification it  would cost                                                                    
$2,700 to update  for inflation every three  years. The note                                                                    
included  language   that  regulations  would  need   to  be                                                                    
reviewed  annually, which  would be  changed to  every three                                                                    
years  based  on  an  amendment that  passed.  She  did  not                                                                    
understand the cost.                                                                                                            
Ms. Ryan  answered that it  would not  cost that much  to do                                                                    
the  inflation   regulations.  She  believed   the  language                                                                    
implied  the overall  cost of  doing regulation  changes for                                                                    
updating penalties over several cycles.                                                                                         
Representative  Wilson  assumed  the  $10,800  was  for  the                                                                    
initial  regulation   in  FY  19.  She   wondered  if  other                                                                    
regulations had  to be  done annually  because of  a federal                                                                    
government   requirement.  She   asked  if   the  cost   was                                                                    
associated with  something the  department already  did that                                                                    
had nothing to do with the legislation.                                                                                         
2:44:45 PM                                                                                                                    
Ms. Ryan  answered that  the bill  assumed DEC  would update                                                                    
regulations every  year, but  it had  been changed  to every                                                                    
three years. She believed the  cost in the fiscal note would                                                                    
be slightly reduced due to the change.                                                                                          
Representative  Wilson  stated  the   only  thing  the  bill                                                                    
required  every  three years  was  inflation.  She asked  if                                                                    
there  was  some  other regulation  update  requirement  the                                                                    
department would have to update every three years.                                                                              
Ms. Ryan answered in the negative.                                                                                              
Representative Wilson remarked  that calculators were pretty                                                                    
Co-Chair  Foster relayed  there  may be  a  new fiscal  note                                                                    
forthcoming with more revenue.                                                                                                  
Vice-Chair  Gara clarified  that the  cost reflected  in the                                                                    
fiscal note was not for  someone using a calculator, but for                                                                    
the   RSA  [Reimbursable   Services   Agreement]  with   the                                                                    
Department  of Law  to address  the  regulations. There  was                                                                    
also a cost  when regulations went to public  notice. He did                                                                    
not see anything in the  fiscal note attributing the cost to                                                                    
someone calculating the inflationary effect.                                                                                    
Representative Wilson pointed  to language on page  2 of the                                                                    
fiscal  note specifying  that regulations  would need  to be                                                                    
reviewed annually to reflect inflation.                                                                                         
2:46:17 PM                                                                                                                    
Vice-Chair  Gara countered  that it  was not  what the  full                                                                    
sentence said.                                                                                                                  
Representative Wilson  read the  sentence on  page 2  of the                                                                    
fiscal note:                                                                                                                    
     Contractual  costs  reflect   estimated  RSA  with  the                                                                    
     Department  of Law  for consultation  and legal  review                                                                    
     during the  development of new  regulations as  well as                                                                    
     required  public  notice   in  Anchorage,  Juneau,  and                                                                    
     Fairbanks.  Regulations  would   need  to  be  reviewed                                                                    
     annually to reflect inflation.                                                                                             
Representative  Wilson  stated   the  fiscal  note  included                                                                    
$2,700 in FY 20 through FY 24 associated with the work.                                                                         
Co-Chair  Foster  asked  Ms.   Ryan  to  provide  a  written                                                                    
response with clarification.                                                                                                    
Ms. Ryan agreed.                                                                                                                
Co-Chair  Seaton  MOVED  to  REPORT  CSHB  322(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
Representative Wilson OBJECTED.  Stated there was opposition                                                                    
to the bill  from the Alaska Trucking  Association and AOGA.                                                                    
She  did  not  believe   the  committee  had  addressed  the                                                                    
entities' concerns.  Conversely, she thought the  bill added                                                                    
additional things for the trucking industry to do.                                                                              
Representative  Thompson corrected  the motion  to move  the                                                                    
Co-Chair Seaton restated his motion.                                                                                            
Representative Wilson OBJECTED.                                                                                                 
2:49:09 PM                                                                                                                    
Representative Kawasaki  supported the updates  dealing with                                                                    
inflation.  He  remarked  there had  been  myriad  inflation                                                                    
changes since  1976, 1984,  and 1989.  He had  concern about                                                                    
the  policy dealing  with  resource  issues. He  appreciated                                                                    
clarity on  the definition of  produced water. He had  a bit                                                                    
of  trouble with  some of  the other  policy issues  dealing                                                                    
with  punitive  administration fees  in  Sections  1 and  6.                                                                    
Additionally,  he  had  overriding   concerns  about  how  a                                                                    
penalty  deters or  changes bad  behavior. He  did not  know                                                                    
that  it had  proven  to  be the  case.  He appreciated  the                                                                    
sponsor bringing the bill forward  and wanted to see it move                                                                    
forward. He believed the bill  was ready for a more thorough                                                                    
debate on the House floor.                                                                                                      
Vice-Chair Gara stated  that he had worked with  some of the                                                                    
penalties when he had worked  on the Exxon Valdez oil spill.                                                                    
There had been  a debate at the time on  whether to just use                                                                    
the  penalties, which  had  been  inadequate. He  elaborated                                                                    
that  the  state would  not  have  received the  $1  billion                                                                    
settlement if it had merely  imposed the per gallon penalty.                                                                    
Additionally, in a  big case there were resources  to try to                                                                    
prove damages, but  in a smaller case, trying  to assess the                                                                    
value  of  a bird,  100  pink  salmon,  or other,  was  very                                                                    
difficult.  He stated  that  the  penalties were  especially                                                                    
important in  those cases, meaning  someone did not  have to                                                                    
go through  the vast expense  of measuring the value  of the                                                                    
harm. He believed penalties were  important. He reasoned the                                                                    
state might as well throw  out the penalties in criminal and                                                                    
administrative law and driving  violations if the belief was                                                                    
they were ineffective. He stressed  there would be a cost if                                                                    
the  state was  not careful,  especially at  the expense  of                                                                    
fishing streams  and waters,  which were  a hallmark  of the                                                                    
state. He noted the state  had always bragged to the federal                                                                    
government  that Alaska  did  things right  -  that oil  was                                                                    
produced in a  way that protected those  things. He believed                                                                    
the bill was important.                                                                                                         
Representative  Pruitt opposed  the legislation.  He thought                                                                    
the bill seemed  to try to force certain actions  as if they                                                                    
were not  already being  done. He  referenced a  letter from                                                                    
AOGA (copy on  file) indicating the millions  of dollars per                                                                    
year put  into ensuring industry did  everything possible to                                                                    
prevent spills.  He pointed to the  Alyeska Pipeline Service                                                                    
Company  with  over 200  drills  and  $100 million  annually                                                                    
spent on prevention and readiness.  He recalled Alaska Clean                                                                    
Seas  had  specific equipment  on  the  North Slope  costing                                                                    
hundreds of thousands of dollars.  He stressed that industry                                                                    
was  already  doing  the  things the  bill  aimed  to  force                                                                    
industry to do. He pointed to  a report from the Division of                                                                    
Spill Prevention  and Response showing the  number of spills                                                                    
and  volume had  declined.  He emphasized  that many  people                                                                    
working in the oil industry did  not want to see damage done                                                                    
to the environment  and were doing everything  they could to                                                                    
prevent it. He  was concerned the bill was  aiming to attack                                                                    
a group  of people as  if they were  bad actors. He  did not                                                                    
believe   the   group   was    filled   with   bad   actors.                                                                    
Alternatively, he believed  the group was trying  to put the                                                                    
investment,   time,   and   energy   into   protecting   the                                                                    
Representative  Pruitt   understood  a   conversation  about                                                                    
penalty fees,  but he  did not  support multiplying  them by                                                                    
four. He discussed  that the state had been  going after the                                                                    
cruise ship industry - the  penalties had been added in 2006                                                                    
and would be  increased beyond inflation under  the bill. He                                                                    
believed the bill was wrapped  in punitive policy as opposed                                                                    
to  considering what  the state  was doing  to partner  with                                                                    
industry to  protect the environment. He  believed the focus                                                                    
should  be on  partnering  with  industry/groups instead  of                                                                    
pitting people against each other.                                                                                              
2:55:41 PM                                                                                                                    
Representative  Guttenberg highlighted  a recent  occurrence                                                                    
as an  example. He elaborated  that someone had  not checked                                                                    
their [truck] load  and had taken out a  bridge. He recalled                                                                    
that one woman waiting in  traffic had a baby. He questioned                                                                    
how  all of  the people  waiting in  traffic felt  about the                                                                    
company not following procedures.  He supported the bill and                                                                    
was happy  there had not  been a recent accident  that would                                                                    
single out one  company in Alaska. He  referenced Ms. Ryan's                                                                    
testimony  there was  an Alyeska  issue  that was  basically                                                                    
sabotage that Alyeska  had nothing to do with  - the company                                                                    
was not fined, and it  participated in the cleanup. However,                                                                    
there had  been instances  where companies were  bad actors.                                                                    
He noted the incidents occurred  much less than in the past.                                                                    
When considering  the punitive  aspect, he asked  members to                                                                    
consider how  the individuals waiting  in traffic  for hours                                                                    
felt about  the situation.  He continued  that if  the truck                                                                    
had  not taken  out a  bridge there  would not  have been  a                                                                    
problem;  however, one  bad  apple  could cause  significant                                                                    
damage that could hurt many people.                                                                                             
Co-Chair Seaton made  it clear that he did  not believe they                                                                    
were being  overly burdensome on  industry by  adjusting for                                                                    
inflation.  The  goal  from  1977  to  present  was  not  to                                                                    
continually  reduce  the  penalties.   He  believed  it  was                                                                    
prudent  to  adjust  for inflation.  The  passed  amendments                                                                    
merely  brought  penalties  up   to  account  for  inflation                                                                    
because the years the given  penalties were established were                                                                    
15 years earlier  than the penalties in  other bill sections                                                                    
(1977  versus  1985 and  1989).  He  did not  believe  prior                                                                    
legislatures   that  had   set   the   penalties  had   been                                                                    
overburdensome at  the time. He  reiterated his  belief that                                                                    
adjusting the  fines for  inflation was  the right  thing to                                                                    
2:58:54 PM                                                                                                                    
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Guttenberg, Kawasaki, Gara, Grenn, Foster, Seaton                                                                     
OPPOSED: Pruitt, Thompson, Tilton, Wilson                                                                                       
Representative Ortiz was absent from the vote.                                                                                  
The MOTION PASSED (6/4).                                                                                                        
There  being   NO  further  OBJECTION,  CSHB   322(FIN)  was                                                                    
REPORTED   out   of   committee    with   four   "do   pass"                                                                    
recommendations,  four "do  not  pass" recommendations,  and                                                                    
two "amend" recommendations; and  with one new fiscal impact                                                                    
note from the Department of Environmental Conservation.                                                                         
3:00:26 PM                                                                                                                    
AT EASE                                                                                                                         
3:01:07 PM                                                                                                                    

Document Name Date/Time Subjects
HB 322 - Amendment packet.pdf HFIN 4/7/2018 1:00:00 PM
HB 322
HB 299 - Letter of Intent.pdf HFIN 4/7/2018 1:00:00 PM
HB 299
HB 316 Support 4-6-18.pdf HFIN 4/7/2018 1:00:00 PM
HB 316
HB 322 Support 4-6-18.pdf HFIN 4/7/2018 1:00:00 PM
HB 322
HB 322 - DEC Response to H FIN re HB322.pdf HFIN 4/7/2018 1:00:00 PM
HB 322