Legislature(1993 - 1994)
01/26/1994 08:00 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CHAIRMAN WILLIAMS announced the committee would consider
House Joint Resolution 49 sponsored by Representative Joe
Green. Chairman Williams stated Representative Green has
provided a draft committee substitute version located in
committee member folders.
REPRESENTATIVE JOE GREEN, PRIME SPONSOR, HJR 49, stated last
year he became aware of the problem now before the
committee. He said the Minerals Management Service (MMS)
had sent out a notice of meetings along with a draft of
their regulations. In the regulations, MMS included, what
he felt was an onerous amount of financial responsibility.
He thought what was even more onerous was that the
regulation applied to every hamlet, borough and activity;
and the guidelines included the broadest possible
interpretation of terms, as well as the definition of
wetlands. Representative Green said wetlands has been
interpreted to mean even lands containing permafrost.
REPRESENTATIVE GREEN read his sponsor statement: "In August
1993, the Minerals Management Service (MMS) of the U.S.
Department of the Interior published an `Advanced Notice of
Proposed Rulemaking' in the Federal Register, initiating the
process of implementing the financial responsibility section
of the Oil Pollution Act of 1990 (OPA '90). Currently, the
MMS requires a $35 million liability bond for Outer
Continental Shelf (OCS) facilities. OPA '90 increased the
financial threshold to $150 million, and expanded it's
application to navigable waters.
"In the process of promulgating regulations to implement OPA
'90, the MMS has interpreted the terms `navigable waters,'
`offshore facility,' and `responsible party' in a very broad
manner. Tom Fry, Director of the MMS has stated that `These
definitions seem to create a financial responsibility
requirement for any activity that can spill oil and is
located in, on, or under most of the surface waters of the
U.S. and adjacent wetlands.'
"The financial responsibility requirements apply both to
commercial and private operations, and make no allowance for
quantity. Read literally, if someone were to store or
transport five gallons of petroleum-based fuel in, on, or
under navigable waters, including wetlands, that person
would fall under the OPA '90 requirements. These
regulations will apply to marinas, port facilities, utility
companies, gasoline filling stations, trucking companies,
logging operations, railroads, refineries, airports, farms,
fishing boats and tenders, pipelines, and many other
Alaskans."
Number 055
REPRESENTATIVE GREEN stated in preparing for the committee
meeting, he noticed the original wording should be changed.
Specifically, in the resolve section, he requested the MMS
to redefine phrases which they do not have the power to
redefine. In order to remedy his oversight, he requested
legal to draft a sponsor blank committee substitute (CS) now
before the committee. He said the CS requests MMS
reinterpret the phrases, something they do have the power to
do. Representative Green asked the committee to adopt the
proposed committee substitute.
REPRESENTATIVE GREEN said HJR 49 requests the MMS to
reinterpret and narrow their definitions. Due to problems
caused by this, and other sections of OPA '90, HJR 49 asks
the MMS to propose amendments to Congress which address the
problems. He remarked that Alaskans from Ketchikan to
Anchorage to Kotzebue have written to support these
redefinitions, and copies of these letters are included in
committee members folders.
REPRESENTATIVE GREEN noted support for the CS from local
governments, including boroughs, municipalities, municipal
league, and utilities, including two statewide utility
organizations. He said Commissioner Paul Fuhs of the
Department of Commerce and Economic Development, the
Department of Environmental Conservation (DEC), Native
corporations, fuel carriers, statewide development
organizations, tug and barge companies and the majority
leader.
REPRESENTATIVE GREEN mentioned the MMS has scheduled a
hearing on the regulations for February 16 in Anchorage. He
hoped that HJR 49 can pass both houses of the legislature in
a timely manner, so that it can be included as part of the
official public record at those hearings. He added a
similar resolution is being introduced in the Senate, and
while this resolution asks the MMS for specific action, the
Senate's version asks Congress to change their definition.
Representative Green felt the two resolutions compliment
each other.
Number 088
REPRESENTATIVE DAVID FINKELSTEIN asked what the time frame
is for the regulations.
REPRESENTATIVE GREEN responded public hearings are currently
being held and the regulations will be enacted later this
year.
Number 098
REPRESENTATIVE FINKELSTEIN felt page 2, line 2 in the CS,
"without further clarification, these definitions might be
interpreted in regulations..." sounds like the regulations
do not exist. He wondered if it should say "these
definitions are interpreted in regulations."
REPRESENTATIVE GREEN replied there is a draft set of
regulations which is constantly being changed. He felt if
someone interprets the regulations as he has interpreted
them, it would mean a catastrophic situation.
Number 111
GLENN GRAY, PROJECT ANALYST, DIVISION OF GOVERNMENTAL
COORDINATION, stated the Governor asked his division to
prepare a consolidated state response to the financial
responsibility rulemaking proposed by the U.S. Department of
the Interior, the MMS and mentioned his division has also
asked individual agencies to respond. He said the
regulations are just proposed rulemaking and the regulations
will not be in draft form until the end of 1994. It will
take one more year of rulemaking before they become
finalized.
MR. GRAY explained the MMS is being vague, saying the
proposed rulemaking may affect individuals, state and local
governments and private businesses. MMS is being very
careful not to say the rulemaking will affect the parties
mentioned.
Number 125
MR. GRAY stated the proposed rulemaking relates to Section
1016 of the OPA '90 and covers both vessels and offshore
facilities. He remarked for vessels, the most dangerous
polluters, there is a sliding scale of financial
responsibility. For offshore facilities, it is a flat $150
million proof of financial responsibility, regardless of the
size of the facility. He pointed out it will be impossible
for any facility, except the largest companies, to meet this
requirement because coverage is not available and if it is
available, it is not affordable.
MR. GRAY said only a few insurance companies are willing to
give pollution insurance and noted that those who do, need
$1.5 billion in capital and surplus. He distributed to
committee members, a copy of his remarks and draft
consolidated state comments (on file), which the state has
developed and are currently under review by the Department
of Law and may change.
MR. GRAY believed Congress did not intend the proposed
rulemaking to apply to everyone, and stressed the initial
interpretation by the Department of Law implies that the
proposed rulemaking is a little narrower than what the MMS
is saying because of the definition of responsible parties.
In Section 1016, it clearly says that only responsible
parties must provide proof and refers to lessees, permitees
and holders of a right.
MR. GRAY felt an argument can be made by the MMS that
applicable state laws are laws which are similar to the
Outer Continental Lands Act, because the words applicable
state laws occur before that, but the Department of Law says
opposition could argue the other way and say that applicable
state laws are all state laws. That would mean anyone who
has a lease or permit would have to provide the $150 million
proof of financial responsibility. He felt the MMS is
trying to be careful in case of a suit and taking the
broadest interpretation possible.
MR. GRAY noted there is a hint from the MMS people that they
may be backing off, but he has not seen it in writing nor
has he had it clarified verbally. He said the proposed
rulemaking could be devastating to Alaska in that everyone
will have to operate in noncompliance or shut down
completely. He also noted it will be an enforcement
nightmare.
MR. GRAY said the MMS has no choice but to go with what
attorneys are telling them on the interpretation on what OPA
'90 means. He felt the proposed rulemaking may have to go
back to Congress but it might be possible that the MMS would
have a strong case to argue in that the rulemaking does not
include onshore wetlands, and that by navigable waters, it
means those waters commonly understood as offshore such as
oil production and exploration and development in state
waters, as well as the outer continental shelf.
MR. GRAY stated the Division of Governmental Coordination
respectfully suggests a possible change to line four, page
two where it refers to "fishing boats and tenders." He
understood vessels would not be covered by Section 1016, but
would be covered by the Coast Guard, and the MMS is the body
implementing the financial responsibility for offshore
facilities. Mr. Gray wondered if Congress intended the
rulemaking to apply to onshore areas, why would they have a
separate definition for onshore areas.
Number 192
(CHAIRMAN WILLIAMS noted for the record REPRESENTATIVE
DAVIES arrived at 8:25 a.m.)
REPRESENTATIVE ELDON MULDER expressed concern as to what the
rulemaking is going to do to the smaller operators and
wondered if they will be able to afford the $150 million
bond.
MR. GRAY responded they probably will not. He said the
Division of Insurance did a rough analysis and believe the
only people who will be able to afford the bond through
insurance are the top Fortune 500 companies.
REPRESENTATIVE MULDER felt the intention of OPA '90 was not
to make only the wealthy survive.
MR. GRAY replied he was not sure, but added that Congress
did not intend the rulemaking for onshore. He noted his
division's comments ask for a sliding scale even if it is
just applied to offshore areas.
REPRESENTATIVE MULDER asked if other states are concerned
and reacting in the same manner.
MR. GRAY replied the big oil states are, but he was not sure
about testimony from the smaller states. He added, however,
about a month ago there were only about 200 responses
nationwide, which alarmed the state.
Number 224
REPRESENTATIVE GREEN asked for a clarification on the change
suggested by the Department of Governmental Coordination.
Were they suggesting to delete "and tenders"?
MR. GRAY answered at least delete "fishing boats"; and
"tenders", if they are considered vessels.
REPRESENTATIVE GREEN asked "because of the possible question
of where does the transfer go between loading or fueling and
being set adrift, is there any objection. He expressed
concern that there may be a possibility of slipping through
the crack saying it was neither fish or fowl."
MR. GRAY said he had no objection.
REPRESENTATIVE FINKELSTEIN asked, referring to page two,
lines seven and eight, if there was any evidence of
Congress's intent.
Number 244
MR. GRAY replied there is no physical strong evidence and a
case would have to be developed by looking at the
definitions. He said the common approach would say Congress
did not intend this. Why would Congress set a sliding scale
for those vessels who are responsible for 90 percent of the
oil which goes into marine waters?
REPRESENTATIVE FINKELSTEIN felt the WHEREAS (lines seven and
eight on page 2) is not supported by any evidence and is not
necessary to the rest of the resolution.
REPRESENTATIVE GREEN stated in the announcement made by Tom
Fry, Director of the MMS, the words "in broadest possible
interpretation" are used and the WHEREAS in question is in
response to those words.
Number 270
REPRESENTATIVE FINKELSTEIN argued that this WHEREAS speaks
to what Congress's intent is, which the Director of the MMS
would not be aware of. He said it was like trying to read
someone's mind.
REPRESENTATIVE GREEN disagreed, because when words are
written and someone interprets them in the broadest possible
sense, it usually goes beyond what was intended.
REPRESENTATIVE FINKELSTEIN stressed in order to determine
the intent, there needs to be an understanding of what
Congress's intent was. He felt it was important that in
resolutions, all of the WHEREAS are proven facts.
REPRESENTATIVE JOHN DAVIES suggested to insert the words
"appears to have been" after the word "than" on page two,
line seven. The line would read "WHEREAS this kind of
interpretation would be much broader than appears to have
been intended by the Congress..."
Number 300
REPRESENTATIVE MULDER MOVED to ADOPT the draft committee
substitute for HJR 49 as CSHJR 49(RES).
CHAIRMAN WILLIAMS asked if there were any objections.
Hearing none, CSHJR 49(RES) was ADOPTED.
REPRESENTATIVE MULDER MOVED to AMEND line seven on page two
of the Resources CS, inserting the words "appears to have
been" after the word "than".
CHAIRMAN WILLIAMS asked if there were any objections.
Hearing none, the AMENDMENT was ADOPTED.
REPRESENTATIVE MULDER asked if there was a need to amend
line four on page two?
REPRESENTATIVE GREEN responded that did not need changing as
the questions were resolved.
REPRESENTATIVE MULDER agreed with Representative Green that
there is a need for a proactive stance in relation to the
potential interpretation, as no one knows what Congress did
intend. He said he is most concerned about the smaller
companies in the state and added that the oil industry in
the state was founded by the smaller companies. He stressed
the proposed rulemaking could either drive the smaller
companies out of business or they will operate without
insurance and produce the opposite effect of what the
proposed rulemaking is intended to do.
Number 350
MEAD TREADWELL, DEPUTY COMMISSIONER, DEPARTMENT OF
ENVIRONMENTAL CONSERVATION (DEC), expressed DEC's support of
HJR 49, and believes it is fully compatible with and
complimentary to the Senate Resolution. He said if one is
to read statements made by Billy Townsend, Chairman of the
subcommittee that drafted OPA '90, it is clear that there
will be an impasse over the wetlands issue, as he did not
intend for it to cover wetlands.
MR. TREADWELL felt that in the first WHEREAS clause in the
resolution (lines six, seven and eight), it would not be
proper if the legislature granted a legal interpretation
which does not have a consensus on. He suggested it should
read "WHEREAS the Oil Pollution Act of 1990 has been
interpreted to require offshore facilities..."
MR. TREADWELL, referring to the draft consolidated comments
and looking at page three of the draft, advised there are
four specific changes suggested if Congress takes up a
legislative solution. He said rather than change CSHJR 49,
the suggested changes should be considered when the Senate
considers it's resolution.
Number 401
MR. TREADWELL stressed that DEC feels it very important to
limit coverage to offshore facilities. It is also important
to use state financial responsibility requirements. He said
many times the legislature has considered the financial
responsibility necessary for operations in Alaska. He added
that the MMS already has the right to set certain bonding
requirements when it leases land, and suggested that
Congress may have reached too far in that area. Currently
the state has a high level of $50 million for the financial
responsibility requirement and liability requirements are
much higher.
Number 420
MR. TREADWELL said in terms of developing a risk-based
approach, DEC feels it should be set in law with specific
numbers similar to the way Alaska's laws have been set,
rather than leaving the MMS more flexibility to set levels
on a case-by-case basis. He noted there is another bill
which will come before the committee on financial
responsibility issues. Mr. Treadwell mentioned the Energy
Council will have a panel on the issues, and hearings will
be held with the MMS representatives February 16 in
Anchorage.
Number 445
REPRESENTATIVE BILL HUDSON appealed to Mr. Treadwell to have
the hearings in Juneau. He felt it is important that those
involved with the Oil and Gas Committee be present to
represent the views of the state. Representative Hudson
stated he was the Chairman of the Oil and Gas Committee
immediately after the Exxon Valdez spill, and remembers
clearly all of the laws which were put in place dealing with
the implementation of OPA '90.
REPRESENTATIVE HUDSON said he is convinced that it was not
the intent of OPA '90 to result in the interpretation
presently before the committee. He felt that if it truly is
the MMS's interpretation, it is a blatant misread of the
intent of Congress. He noted the Oil and Gas Committee went
through the hearing process to discuss what level of
financial responsibility should be required for different
elements within the state. At that time, it was determined
that operators storing less than 5,000 barrels of crude oil
or less than 10,000 barrels of non-crude oil are exempt from
financial responsibility requirements. He stressed that
decision was adopted by the legislature, so Alaska's intent
was clearly known by the people who interpreted it. He does
not believe there is anything on the record that indicated
it was the intent of Congress to impose a $150 million proof
of financial responsibility.
REPRESENTATIVE HUDSON stated everyone who transports and
stores crude oil is going to be required to have an oil
spill response plan. He stressed the state does not want to
expose it's marine system to oil pollution, and strong steps
have been taken to ensure the right level of financial
responsibility and response capability is in place. He felt
the state has some of the strongest laws in the nation, but
also has some of the most unique and unusual situations.
Representative Hudson voiced strong support for
CSHJR 49.
REPRESENTATIVE GREEN agreed with Representative Hudson's
comments.
The COMMITTEE had a general discussion regarding a joint
House Resources meeting with representatives from the MMS.
Number 613
REPRESENTATIVE DAVIES expressed a concern regarding lines
seventeen and eighteen on page two, the words "as narrowly
as possible." He felt "narrowly as possible" may go beyond
reasonable protection which Representative Hudson also
discussed.
REPRESENTATIVE DAVIES offered an amendment to say "more
narrowly and more reasonably."
REPRESENTATIVE HUDSON thought the word "practical" might be
a good approach. He said instead of "as narrowly as
possible," say "as practical as possible" which would imply
other considerations.
Number 670
MR. TREADWELL referring to the draft consolidated position,
at the top of page 3, remarked DEC is urging coverage be
limited to offshore oil exploration and production
facilities traditionally regulated by the MMS. He suggested
other words which might be used are "to apply only on the
outer continental shelf."
REPRESENTATIVE DAVIES stressed the clause also refers to
"navigable waters" and "responsible party" which may not be
only the continental shelf. He said he likes Representative
Hudson's suggestion.
TAPE 94-4, SIDE B
Number 000
REPRESENTATIVE MULDER felt there was not a problem with the
words "as narrowly as possible."
REPRESENTATIVE PAT CARNEY asked Mr. Treadwell to repeat his
suggested language.
MR. TREADWELL responded he had suggested the words "to apply
only on the outer continental shelf" on line eighteen. He
pointed out that DEC is urging the Department of Interior to
stay in its traditional back yard which is on the outer
continental shelf.
Number 029
REPRESENTATIVE HUDSON suggested line 18 on page 2 the "as
narrowly as possible" be changed to "compatible with Alaska
state law."
MR. TREADWELL referred the committee to the Attorney
General's November 3 letter to Tom Fry which said "he was
pleased to learn that the Department of Interior believes
the term `navigable waters' has traditionally included
wetlands among other water bodies. As the news release
states, large areas of Alaska have been classified as
wetlands. Therefore, because title to all navigable waters
passed to Alaska at statehood, the state holds title to much
more submerged land than Alaskans previously realized." He
said the state has been making a claim about navigable
waters and subsurface waters.
REPRESENTATIVE DAVIES MOVED to AMEND line 18 on page two of
the Resources CSHJR 49 to substitute the word "possible"
with the word "practical."
CHAIRMAN WILLIAMS asked if there were any objections to the
motion. Hearing none, the motion PASSED.
REPRESENTATIVE GREEN MOVED to AMEND line 6 on page one of
the Resources CSHJR 49 to read "WHEREAS the Oil Pollution
Act of 1990 has been interpreted to require offshore...".
CHAIRMAN WILLIAMS asked if there were any objections to the
motion. Hearing none, the motion PASSED.
REPRESENTATIVE MULDER MOVED to pass the committee substitute
for HJR 49 as adopted and amended with INDIVIDUAL
RECOMMENDATIONS.
CHAIRMAN WILLIAMS asked if there were any objections.
Hearing none, the motion PASSED.
The COMMITTEE again discussed a possible meeting in Juneau
with the MMS representatives and Senators Stevens and
Murkowski. The committee asked staff to research the
possibility and schedule it.
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