Legislature(2001 - 2002)
04/26/2002 01:53 PM 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
SB 140-SMALL WATER-POWER DEVELOPMENT PROJECTS CO-CHAIR MASEK announced that the first order of business would be CS FOR SENATE BILL NO. 140(FIN), "An Act relating to regulation and licensing of certain water-power development projects; and providing for an effective date." Number 0075 DARWIN PETERSON, Staff to Senator John Torgerson, presented SB 140 on behalf of Senator Torgerson, sponsor. Mr. Peterson explained that U.S. Senator Frank Murkowski had sponsored a bill amending the Federal Power Act to provide state jurisdiction for Alaska over small hydroelectric projects. Consequently, this legislation transferred licensing and regulatory authority over hydroelectric projects of five thousand kilowatts or less to the State of Alaska. MR. PETERSON suggested that bringing this regulatory authority to the state will reduce the great time and expense associated with federal licensing and the regulation of small hydro projects in Alaska. He noted that the time and money required for federal licensing is virtually prohibitive for some small utility and personal projects. Before Alaska can acquire jurisdiction from the Federal Energy Regulatory Commission (FERC), the legislature must approve this bill and the governor must submit a program satisfying FERC's regulatory requirements. As SB 140 is currently drafted, the Regulatory Commission of Alaska (RCA) would be the regulatory agency responsible. He said all of the current environmental protections required under federal law will still apply, and cannot be preempted by this legislation. Number 0228 CO-CHAIR SCALZI noted that the Alaska Department of Fish & Game (ADF&G) had expressed concerns about the scope of review and the time allotment, and he said ADF&G suggested that there hadn't been adequate time to address issues that may occur in the approximately six hundred different sites throughout the state. He asked Mr. Peterson if there had been discussion with ADF&G on remedying those concerns. MR. PETERSON in response, noted that Senator Torgerson is familiar with ADF&G's concerns. He offered his understanding that the program will go forth by enacting this legislation; subsequently, the RCA would establish a program very similar to FERC's current program and would work with FERC to develop a much better understanding of how this program is currently regulated. Mr. Peterson suggested that the [new program] can't be much different from FERC's current program or FERC would not approve of it, and that FERC has ultimate veto power as to whether the State of Alaska acquires jurisdiction over this program. He said the unknown variables could not be addressed in this legislation, but rather would be addressed by the administration when developing the new program. Number 0391 REPRESENTATIVE STEVENS referred to the sponsor statement and he asked for clarification about hydroelectric projects [located on Indian reservations, conservation units of [Alaska National Interest Lands Conservation Act (ANILCA)], or rivers designated for the Wild and Scenic Rivers System] that would not be eligible for state jurisdiction. MR. PETERSON explained that the language was taken directly from federal legislation and that the only Indian reservation in Alaska is Metlakatla, which the state wouldn't acquire jurisdiction over. Mr. Peterson said he didn't know how many Wild and Scenic Rivers there are in Alaska, but that any small hydro projects on those rivers would not be applicable. Number 0500 CO-CHAIR SCALZI moved to adopt CSSB 140(FIN). There being no objection, it was so ordered. Number 0510 CO-CHAIR SCALZI turned attention to a proposed written amendment, which read [original punctuation provided]: The Regulatory Commission of Alaska, in colsultation [sic] with the Commissioners of DNR, DCED and DF&G, will report to the legislature by February 15th 2003 with their assessment of how the licensing of small hydro projects by the state of Alaska would be accomplished. This report will include the impact on the operating budget, funding mechanism, staff requirements, potential statutory changes, timelines and public participation for developing regulations and any other items deemed important by the administration. CO-CHAIR SCALZI said he thought the proposed amendment essentially asks for direction from the legislature and won't have any effect on the bill. He asked if Senator Torgerson had any problem with the proposed amendment. MR. PETERSON, in response, said Senator Torgerson doesn't think the proposed amendment is necessary because this bill would go into effect January 1, 2003. He suggested the new administration should be able to coordinate with those departments and work together so the RCA can develop a program that closely resembles FERC's program and satisfies all of the agency's concerns. Mr. Peterson said it is the sponsors' opinion that this [amendment] would complicate the issue. He explained that the intent of the bill is to take the enabling federal legislation and authorize the administration to begin the process of discovering how the program will work and to work with FERC to establish a program. Mr. Peterson noted that the proposed amendment may have an unnecessary fiscal impact. Number 0780 SALLY SADDLER, Legislative Liaison, Division of Community and Business Development, Department of Community & Economic Development, testified. She explained that when this bill was introduced, the administration convened an interagency team that consisted of DNR, ADF&G, [Alaska Coastal Management Program (ACMP)], RCA, and DCED to look over the bill to try to determine what the full effects and impacts would be. She said some of those common points that had emerged from the interagency team's review of the bill are that the RCA is an appropriate agency to assume these duties, and while it represents an expansion of what the RCA is currently doing, it is believed that the fiscal notes will reflect those additional duties; that the development of small hydro projects can support economic development and improve the availability and cost of hydropower in rural Alaska; and that a state program may have advantages by allowing the focus of the process to be on those issues that are pertinent to Alaska. MS. SADDLER explained that when this federal legislation was pending in Washington, D.C., then-Governor Knowles wrote a letter that supported giving Alaska jurisdiction for the takeover of those "FERC-like" responsibilities. She said the governor also recognized that this is a complex undertaking and the [importance] of a state program that results in the proper protection of fish, wildlife, and the environment at least as well as, or as rigorously as, FERC currently does it. Ms. Saddler said the governor also acknowledged the importance of establishing an appropriate funding mechanism for the process that could either be a direct appropriation or based on a user- fee system. Currently, she said, the RCA operates under the regulatory cost-charge, which is a recovery system that passes those fees on to different users. She offered her understanding that [the RCA] is coming up against the regulatory cost-charge cap. MS. SADDLER noted that the packet contains three fiscal notes for the RCA, DNR, and ADF&G, and she suggested it will take up to two years to develop regulations that define the program operations. She said once those regulations have been recommended or are established, FERC would have up to one year to approve the program before ceding authority to the state, and that the interagency team believes it would be prudent to have the RCA and respective commissioners report the results of the scoping project back to the legislature. Ms. Saddler said agencies currently understand their roles and responsibilities under the FERC process, but it is not entirely clear whether all that FERC does and what the state will be assuming are fully understood. MS. SADDLER said, for example, in the case of ADF&G, it is unknown whether the state would have the statutory authority to take on the FERC program. She explained that FERC has jurisdiction over entire watersheds, while ADF&G only has oversight over streambeds. She suggested that there may be a mismatch and that some statutory requirements may need to be implemented. Ms. Saddler said the thought is that with this amendment, items like the impact on the operating budget, the kind of funding mechanism that would be recommended, staffing requirements, and any sort of statutory changes that are needed for the smooth implementation of the provisions of this program would be included. Number 1078 SUSAN SCHRADER, Alaska Conservation Voters (ACV), testified. Ms. Schrader explained that this bill does begin the process of authorizing state takeover of FERC authority for licensing of small hydro projects. She said ACV's main concern with this program is the expense that will be entailed to do this properly, and while it is realized that FERC will have ultimate authority to approve whatever program the state comes up with, it is pretty unrealistic to suggest that this is a place where the state should be putting its limited funds. Ms. Schrader acknowledged that there are some problems with the FERC process, and she said an appropriate response would be what the congressional delegation can do to address those problems with FERC. She suggested that there are no particular advantages to the state's taking over this costly process, and she expressed concern as to whether RCA is the appropriate lead entity to be looking at this. MS. SCHRADER noted that FERC regulations are particularly esoteric, and suggested that the RCA might find that it is quite a daunting task to design a program [and implement] all of the regulations within two years. She turned attention to the ongoing funding [that would be necessary] for the departments to implement this program, and she pointed out that DNR has had problems with its water-quantity program because it doesn't have enough funding or staff needed to process the applications, and yet the legislature is looking at adding more tasks and jobs to its [workload]. She suggested that one of two things is going to happen: With not enough money to support the state's doing this type of licensing, the small hydropower developers that want the licenses are going to find that they're not gaining time by the state having the authority and that it will be just as timely a process as having FERC do it; in the alternative, the process will be short-cut so that the developers don't have long time delays, and that will come at the expense of unavoidable environmental impacts, resulting in a lot of outraged public. MS. SCHRADER expressed concern about the language of the bill and she said as it is currently written, there is no protection for state special lands - state parks, state game refuges, and critical habitat areas - leaving them all possibly open for consideration for hydropower development. Certainly, she said, any proposals to do projects in those areas are going to meet with a lot of public opposition and lead to a lot of delays, which, to her understanding, is one of the major points of the state's taking over, to avoid the delays that already exist with FERC. She said ACV is very interested in finding ways to bring cleaner, more economically affordable power generation to the rural communities and would like to see the reliance on diesel generation minimized as much as possible. Number 1312 MS. SCHRADER suggested that hydropower is not necessarily a clean, environmentally friendly source; she said it can be under certain situations but does require careful oversight. She said ACV would like to see [rural communities] get away from diesel generation and move toward hydropower, which, she suggested, could still be done within the framework of the FERC process. Ms. Schrader said there is no need for the state to assume what she suspects will be a very costly program that the legislature is going to have to deal with yearly to fund all those positions at the various departments involved. She pointed out that Alaska would be the very first state to which FERC would have delegated the authority for this oversight. Ms. Schrader suggested it may be a good thing, but she said she didn't know, and that she thought it was little risky for the state to be looking at that [because] it is the first time this has ever been done. CO-CHAIR MASEK noted that Representative Stevens' research indicated that there are 27 rivers listed in the state designated under the Wild and Scenic River System that are exempt from this bill. Number 1464 JAN KONIGSBERG, Trout Unlimited, noted that he was testifying on behalf of Alaska Public Waters Coalition ("Coalition"). He characterized the Coalition as an association that includes sport fishing groups, conservation organizations, former members of the "Alaska water board," and other individuals who are concerned about executive actions or legislative and regulatory initiatives that affect Alaska's water resources. Mr. Konigsberg explained that SB 140 will allow the State of Alaska to assume licensing authority for hydroelectric projects of five megawatts or less. He said the Coalition believes that regardless of the size, all proposed hydroelectric projects should be scrutinized thorough a rigorous licensing process to ensure that the project, once constructed and in operation, will have the least environmental impact possible over the life of the project. Mr. Konigsberg said the Coalition is not opposed to this legislation if the state can accomplish this licensing in a manner at least as stringent as FERC, but the Coalition does not believe that this will necessarily be the case. MR. KONIGSBERG said the Coalition is puzzled by the legislatures' "seeming eagerness" to mandate that the state assume a federal program for which there is no accompanying appropriation, especially given the magnitude of the state's current fiscal problems. He suggested that the fiscal note, of approximately $300,000 after the three-year period, is probably too conservative of an estimate. Mr. Konigsberg talked about the legislature's rationale for embracing an unfunded federal mandate, and he suggested that the proponents of this legislation are convinced that a state licensing program will provide regulatory relief from what they believe to be an onerous federal process, but that these same proponents acknowledge that the state process must be as rigorous as that of the federal government. "How can both be true, we would like to know," he asked. MR. KONIGSBERG asked, if the program was to be funded at $300,000 per year, how the general public would take that appropriation that may come from a general fund, when other dire needs exist within human service agencies. He pointed out that some of these projects will be built by out-of-state hydropower developers, some of whom will receive federal grants. Mr. Konigsberg said not only will the state be incurring significant administrative costs pursuant to hydropower licensing, it will assume, "we believe," significant liability, particularly in the area of dam safety. Currently, he explained, the state has no liability for FERC-licensed projects; once the state undertakes licensing, it will also be responsible for dam inspection. Therefore, he said, in the case of a dam failure, should that result in damage to life and private property or result in natural resource damage, it may not be the dam owner alone that is responsible or held accountable. Number 1678 MR. KONIGSBERG suggested that if the state were sued, the cost of litigation and actual damages could dwarf the annual cost of the licensing program. He said it is wishful thinking to presume that a state regulatory program will be any speedier than the current federal program. First, he said, this will be new terrain for the RCA, so startup missteps and delays can be expected, and he pointed out that DNR has not been able to keep up with a relatively simple and straightforward water rights program. So, realistically, how would DNR deal with an increase in workload in its water and dam safety programs as required by state hydropower programs, he asked. Mr. Konigsberg suggested if the real intent of this legislation is to achieve hydropower licensing efficiency at the expense of stringent environmental enforcement by skimping on environmental review and permitting, then these projects will face lengthy delays due to legal challenges. He suggested that the FERC process works but needs improvement, and he said it would behoove the state to join with others to improve the federal program rather than take on a new program in this period of fiscal uncertainty. Number 1753 WILL ABBOTT, Commissioner, Regulatory Commission of Alaska (RCA), Department of Community and Economic Development, testified briefly. Mr. Abbott concurred with Ms. Saddler's testimony. Number 1783 REPRESENTATIVE STEVENS turned attention to the fiscal notes and he asked Mr. Abbott if he had an idea of what the costs to the state would be and if licensing fees would cover the cost of inspections. MR. ABBOTT, in response, said federal legislation is silent on whether the state will receive the funding that now goes to FERC for those projects. Currently, he explained, each operating project pays FERC a charge based on the kilowatts that it generates. He indicated that FERC puts that money back into its program to assist with staffing costs and to keep costs low for future licensees. He questioned how the state would do that without tapping into the general fund "a whole bunch." He also questioned how the state would get [the program] started and whether it would assume responsibility for existing hydro projects of five megawatts or less. He indicated he did not know whether the state would be receiving those funds and that was one of the reasons the [department] wanted time to communicate with FERC to try and resolve those issues. Number 1878 REPRESENTATIVE KERTTULA asked, if the legislature gives the department state authority to have licensing fees, whether that will that resolve it or whether federal authority will also be required. MR. ABBOTT remarked, "Because it doesn't say on there, I would assume that we'll get that; maybe that's optimistically assuming on my part, but I'm assuming because it is silent, that we will." REPRESENTATIVE KERTTULA asked for clarification on whether he was referring to the state bill or the federal law. MR. ABBOTT, in response, said they are both silent. Number 1929 REPRESENTATIVE STEVENS asked if giving [management] of the licensing process to the state rather than the federal government would be less rigorous and less demanding. MR. ABBOTT suggested FERC was not going to let the [state] "get away with a whole lot," and that the [objective of a state- operated program] is not only to try to make it an easier process, but also to get the process back to the state where [residents] deal with the problems, rather than somebody in Washington [D.C.]. He mentioned that many of the permitting functions and the tasks done by the state agencies will require sending the data back to the FERC for its decision. Number 2003 CHIP DENNERLEIN, Director, Division of Habitat and Restoration Alaska Department of Fish & Game (ADF&G), testified. Mr. Dennerlein noted he had prior involvement with FERC in some of his former capacities. He said the position of ADF&G is supportive and consistent with the administration's position and has been expressed throughout the development of the congressional enabling legislation. Mr. Dennerlein speculated that [restructuring the program] could be a positive contribution to energy needs, particularly, in rural Alaska. He suggested that the state program can provide at least the [same] level of fish and wildlife resource protection as the current FERC process. Mr. Dennerlein advised the committee that that qualifier is very important because most of these projects will be in or adjacent to rural Alaskan communities, in stream and river valleys that are close to these communities, and that local and state residents utilize fish and wildlife resources in these areas. MR. DENNERLEIN said the FERC process allows ADF&G to work effectively with these issues on a watershed basis to get the information needed to make good decisions and in defining what information will be needed, both in helping to define the scope of information needed from applicants and other sources and in getting FERC as an agent in helping obtain that information. Mr. Dennerlein said this is not unlike, in some ways, the state coastal management process for coastal projects, where the [department] works on a broader scale with other resource agencies and puts a package of standards together for a project. He remarked, "ACMP is the way we step out of the streambed where Title 16 gives us clear authority bank to bank." Number 2169 MR. DENNERLEIN mentioned that a mechanism that would allow this to be done beyond an ACMP process in the Interior, outside of the coastal zone, was unknown or could not be foreseen at this time. He talked about an example involving a major interchange that the Department of Transportation and Public Facilities (DOT&PF) is building along the Parks Highway and Glenn Highway and the permitting that is going forward the following summer. He mentioned that an anadromous fish stream exists in the area and it is very clear the [department] has Title 16 authority, but the real issue is beyond the defined stream banks and the flooded wetlands; [the issue is] that the area in between is a host to 6,000 juvenile coho salmon per acre that go to five streams. MR. DENNERLEIN said this is one of the highest producing coho- rearing areas in Upper Cook Inlet and is a major resource- protection interest and major public interest. He said the department works on that issue through the ACMP; in the FERC process, the department is also able to work on a watershed basis without a statutory basis. He noted that the department is unsure how to do that in this legislation and that it is one of the things that needs to be investigated. Mr. Dennerlein mentioned an example of a project that was built in Kodiak in which the major wildlife concern was brown bears. He said the project is operational but did require some creative solutions. Number 2291 MR. DENNERLEIN cited False Creek as an example because it fits in this range as a 3.5 megawatt [project] and is unique because it is a project that is proposed in Glacier Bay National Park and Preserve, in congressionally designated wilderness. He said it may well receive a license because of some creative solutions, including a land exchange. He noted that False Creek is similar and that it involved locals, property owners, spawning fish, subsistence, and so forth. Mr. Dennerlein offered support for the concept but expressed concern about statutory authority, the front-end ability of funding, and the follow-through and re-licensing of these projects. He said this is why there is such strong support for the report back to the legislature so the legislature has a clear chance to see what exactly this takes for the job to be done right, because if it goes wrong, it will go wrong for a lot of people. Number 2394 CO-CHAIR MASEK, upon determining no one else wished to testify, closed public testimony. CO-CHAIR SCALZI noted his belief that this is a good bill and should be moved forward. He said after listening to testimony, he felt the amendment would be unnecessary. Number 2453 REPRESENTATIVE KERTTULA asked if the commission has the authority to charge a fee for licensing. MR. PETERSON, in response, said it is his understanding that the intent of the federal enabling legislation is that the RCA would charge user fees in the same manner it does currently. He said there will be some startup costs to get the program under the state's jurisdiction, but eventually the program will be paid for by the fees from the hydro projects. REPRESENTATIVE KERTTULA asked if the bill has to contain specific language that allows the agency to receive funds. MR. PETERSON said he didn't believe so and that it is going to be part of the discussion between the RCA and FERC when this program is established. He suggested that the bill only needs to [contain language] giving the administration authority to develop the regulations for this project because FERC is going to have the ultimate veto on whether [the state] is able to do it. Mr. Peterson suggested that the RCA would ask for the authority to charge those fees and use those fees to pay for the project, which is what FERC currently does. He said hopefully, [it would be approved] as long as it's not in direct conflict with the way FERC currently manages the program in the state. Number 2572 CO-CHAIR SCALZI moved to report CSSB 140(FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSSB 140(FIN) was reported from the House Resources Standing Committee.
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