Legislature(2017 - 2018)BARNES 124
02/02/2018 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB322 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 322 | TELECONFERENCED | |
HB 322-OIL SPILLS/POLLUTION:PENALTIES;PREVENTION
1:05:37 PM
CO-CHAIR JOSEPHSON announced that the first order of business
would be 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."
1:05:51 PM
KRISTIN RYAN, Director, Division of Spill Prevention and
Response (SPAR), Department of Environmental Conservation (DEC),
provided a PowerPoint presentation entitled, "Spill Penalties
Overview," dated 2/2/18. She informed the committee the SPAR's
mission is to respond to spills of oil and other hazardous
substances with the intent to protect the environment and public
health (slide 2). The division publishes an annual report to
the legislature of the data it collects on responses - such as
location and costs - and general information on contaminated
sites in Alaska. She said SPAR usually responds to
approximately 2,000 spills per year, many of which do not
warrant field inspection by the division, but are requests for
technical assistance. The largest spill reported in 2017 was
from a boat that sank in the Aleutians; she advised process
water is a hazardous spill of slurry used in a mining operation
(slide 3).
REPRESENTATIVE PARISH asked for the amount of the spill
associated with the aforementioned sinking in the Aleutians.
MS. RYAN said 87,000 gallons. She said sinking boats are
common, as are releases at mines and at oil and gas exploration
and production sites.
REPRESENTATIVE BIRCH questioned whether penalties are intended
as punishment or are collected to recover the cost of the spill.
1:10:07 PM
MS. RYAN advised authorizing statute requires SPAR to regulate
certain companies to prevent spills and respond when they occur;
the regulated companies are required to have the financial
ability to clean up a spill, and penalties come into play if the
state deems a penalty should be assessed for causing damage or
harm to the environment. After a spill is cleaned up, there can
be residual contamination and penalties are used as deterrents
against future releases.
CO-CHAIR TARR recalled a natural gas spill by Hilcorp in Cook
Inlet last year and asked whether that release was reflected in
the statistics on slide 3.
MS. RYAN noted there were many questions raised last year about
DEC penalties related to past releases; HB 322 would increase
the penalty amounts DEC could levy, but would not change what
actions are or are not violations. A natural gas release is
deemed as a hazardous substance by DEC.
CO-CHAIR TARR surmised the natural gas release was included in
the 62,527 [gallons] hazardous substances spilled as shown on
slide 3.
MS. RYAN said, "Correct, I'm not sure we can capture natural gas
in a gallon, so I don't think that is reflected in that number
but that's, that's where you would expect it to be, yes."
CO-CHAIR JOSEPHSON directed attention to the bill on [page 5,
line 3] which included a reference to AS 46.14, the section on
on air quality, and asked whether the increase in fines may
affect air quality.
MS. RYAN said yes. [AS 46.03.760(e)] is DEC's penalty authority
and covers many penalties for DEC programs; the changes proposed
by the bill primarily impact spills and penalties associated
with spills. However, some other releases into the environment
that would be violations are also affected. She expressed her
belief that AS 46.14 is related to passenger vessel discharges,
and a few other areas not related to spills of oil or petroleum
are affected.
CO-CHAIR JOSEPHSON asked whether DEC would inspect a spill equal
to the size of the spill in Bethel [date not provided] of
several thousand gallons of fuel.
MS. RYAN explained an inspection is dependent upon whether the
contractors conducting the cleanup of a spill are known to DEC,
and whether DEC is assured of compliance, as was the case in
Bethel. She said when possible, DEC will monitor a situation
via telephone and avoid an inspection to save money.
1:15:25 PM
CO-CHAIR TARR returned to the issue of reporting a release of
natural gas and expressed her understanding DEC would have a
formula to convert, calculate, and report a release of natural
gas. She suggested the addition of a reporting mechanism is
warranted in order to represent and evaluate the extent of an
ongoing problem.
MS. RYAN advised the aforementioned incident in Cook Inlet was
the first natural gas release from an underwater pipeline into a
waterbody, and deemed by DEC to be hazardous to the environment,
because natural gas does not normally exist in the aquifer. She
was unsure whether the incident was included in the statistics
shown on slide 3, but assumed not as the release was
significant, so including it would have yielded a larger 2017
spill volume total. Ms. Ryan said DEC will find a way to report
the release of natural gas should incidents continue; although
DEC's decision to label the release as a hazardous substance was
controversial, DEC believes it has the statutory authority to do
so. She continued to slide 4, which illustrated a decline in
the release of volumes of petroleum products; she attributed the
decline both to self-policing by industry and a response to DEC
regulations. Ms. Ryan said the companies that are regulated by
DEC exhibit good records of compliance. Slide 5 illustrated a
decline in the number of spills from 1996-2017.
REPRESENTATIVE BIRCH questioned the need for an increase in
fines when there has been a decline in the number and volume of
spills under the present regulations.
MS. RYAN advised the administration has no position on the bill
at this time. She opined DEC's penalty amounts - written in the
'70s and '80s - are antiquated and are not commensurate with the
potential harm caused by a release into the environment.
REPRESENTATIVE BIRCH asked for an accounting of penalties
assessed, the fines collected, the number of spills, and where
the fines are deposited after they are recovered.
1:20:35 PM
MS. RYAN explained collected penalties are deposited into the
Oil and Hazardous Substance Release Prevention and Response Fund
(Response Fund), which is an account that pays for the
division's services and from which the legislature allocates the
division's operating budget. She offered to provide information
on penalty amounts that have been collected; however, due to the
way the statutes are written, "it's not the easiest path for us
to go down, to issue penalties and fines, and the amounts are
pretty small."
REPRESENTATIVE BIRCH asked for an estimate of the amount
recovered in a certain period of time.
MS. RYAN estimated under $100,000 per year, and said she would
provide the requested information.
CO-CHAIR TARR surmised with fewer spills, the existing penalties
are not sufficient to cover the cost of the cleanup of a spill.
MS. RYAN further explained the amounts DEC charges for penalties
are very low; in fact, in the case of a substantial release, DEC
would be limited in recovering [costs] and penalizing a company
for a release that harmed the environment.
CO-CHAIR TARR concluded DEC would be responsible for the cleanup
and the state would pay the cost.
MS. RYAN agreed that if a responsible party did not pay for the
cost to cleanup a spill and the state completed the cleanup,
DEC's penalty authorities would probably be inadequate to recoup
the state's costs.
REPRESENTATIVE RAUSCHER asked what constitutes a spill.
MS. RYAN said, "There are varying levels of reporting, depending
on who you are." Companies that are regulated by DEC are
expected to report everything, and very small volumes are
reported monthly; larger spills, depending on the type of
substance and location, have a different timeline. [DEC's]
generic authority directs that a spill of a hazardous substance
into the environment is a spill, and that is the broad authority
of the department.
REPRESENTATIVE RAUSCHER asked whether the spills indicted on
slide 6 could have been of "a quart or less."
MS. RYAN said no, and offered to provide specific information.
1:24:55 PM
REPRESENTATIVE BIRCH related his experience is that a spill of a
teaspoon or more would be reported by Alyeska Pipeline Service
Company. He then inquired as to the value of the Response Fund.
MS. RYAN stated the Department of Revenue manages the revenue
streams into the Response Fund which is held in two accounts: a
response account for emergency responses capped at $50 million,
and a prevention account to pay for SPAR's daily operating
costs. She offered to provide the quarterly report of each
account to the committee.
1:26:43 PM
MS. RYAN returned attention to slide 6 which was a map of spill
locations. She advised the location of a spill - marine, land,
and underground - is paramount to SPAR's response and impacts
the cleanup method (slide 7). Ms. Ryan said oil and petroleum
products and other hazardous substances are considered harmful
to human health and the environment, thus SPAR seeks to avoid
human contact through skin, inhalation, and ingestion, and to
protect the environment (slide 9). Slide 10 was a photo of a
release of home heating oil. Slide 11 provided examples of
spill impacts to the environment and she said SPAR and companies
want to avoid releases. Slide 12 was a photo of a tanker truck
rollover. Ms. Ryan said the bill would require commercial
trucks hauling crude oil to have contingency plans; a
contingency plan is SPAR's way to know a company is preventing
spills and what it would do in the case of a spill, including
the availability of equipment, equipment operators, and other
information.
CO-CHAIR JOSEPHSON added that currently, if one is transporting
a refined product, there is no requirement for a contingency
plan.
MS. RYAN confirmed SPAR does not regulate trucks hauling refined
fuel products; however, companies are required to have insurance
and meet certain safety standards established by the Department
of Transportation & Public Facilities (DOTPF). Contingency
plans are not required for trucks carrying refined fuel or crude
oil. The bill would require SPAR to regulate the transportation
of crude oil.
CO-CHAIR JOSEPHSON related concern from some, questioning
whether it is fair - as affects companies' economics - to
[regulate] crude oil in a different manner.
MS. RYAN observed crude oil is thicker and can be easier to pick
up, but it is also more persistent and more toxic in the
environment thus, from SPAR's perspective, crude oil presents
more risks to the environment and human health than refined
fuel. This is the basis of SPAR's concern about the increasing
occurrences of crude oil hauled by tanker [truck].
REPRESENTATIVE DRUMMOND expressed dismay about the absence of
regulation over spills of refined products such as jet fuel,
aviation gas, and gasoline.
CO-CHAIR JOSEPHSON clarified SPAR does not require contingency
plans for refined products and asked whether contingency plans
are required by DOTPF or the U.S. Department of Transportation.
1:32:07 PM
MS. RYAN said no; however, DOTPF does require insurance.
Furthermore, the trucking companies, in response to increasing
spills from fuel trucks, have been working with SPAR to reduce
accidents; accidents are usually due to operator error, so
additional driver training has reduced the number of accidents.
She pointed out after the closure of a refinery on the North
Slope, the number of [tanker trucks] carrying refined fuel
across the state has increased.
CO-CHAIR TARR noted the industry is regulated through mechanisms
such as the Clean Water Act, stormwater pollution prevention
plans, which work to capture discharges. She asked for
clarification on the aforementioned tankers.
MS. RYAN said the increased transportation of refined fuel by
truck is commonly occurring across the state. She agreed the
industry complies with many requirements, but not contingency
plans; further, if a spill occurs, SPAR requires an adequate
response from the company. She pointed out the response
standard exists, but not the prevention aspect of contingency
plans.
MS. RYAN clarified federal and state regulations require oil
tanker vessels in Prince William Sound to be double-hulled, but
her reference [during today's hearing] was to tanker trucks.
REPRESENTATIVE BIRCH pointed out Alaska is transporting refined
low-sulfur fuel from Valdez to the North Slope even though it
can be produced on the North Slope with modest changes to the
"sulfur requirements." He urged for sanity in this regard.
MS. RYAN said the U.S. Environmental Protection Agency (EPA)
requires low-sulfur fuel and companies on the North Slope chose
not to meet the new standard, and instead to buy refined fuel
from Valdez, and truck the fuel to the North Slope.
1:37:20 PM
REPRESENTATIVE BIRCH suggested Alaska should seek a waiver from
EPA for low-sulfur fuel. He directed attention to HB 322 [on
page 4, lines 19-20] which read:
(4) the need for enhanced civil penalty to deter
future noncompliance.
REPRESENTATIVE BIRCH questioned whether SPAR has encountered
willful noncompliance with state regulations that would warrant
increasing a penalty from $5,000 per day to $25,000 per day.
MS. RYAN said she could not recall an incident of a company
paying a penalty and continuing its violations. However, the
penalties are "pretty small, compared to modern economics" and
present no concerns for a company. She returned to slide 13,
which listed socio-economic examples of spill impacts.
Instances where the state has taken a lead role - when the
responsible party was unable to pay - have cost the state about
$12 million in the current fiscal year and "penalties could help
us in those scenarios, we think." The current fine and penalty
structure addresses less than 5 percent of the average oil spill
response and cleanup costs (slide 14).
CO-CHAIR JOSEPHSON returned attention to the Response Fund
"spill portion," which has a balance of about $44 million, and
asked whether the aforementioned $12 million will be paid from
the Response Fund.
MS. RYAN advised SPAR can use prevention account money to pay
for cleanup, and pays for small spills out of its operating
budget, but cleanup for big spills comes from the response
account.
CO-CHAIR JOSEPHSON surmised if the Response [Fund] account
balance reaches $50 million, the funding stops.
MS. RYAN said correct. The [Response Fund] account is funded by
a surcharge on oil of a penny per barrel.
CO-CHAIR JOSEPHSON suggested the bill could replenish [the
account and keep the balance at $50 million] so oil companies
would not have to pay a surcharge for spills for which they are
not responsible.
MS. RYAN said yes.
REPRESENTATIVE RAUSCHER questioned whether the state sues
offenders for costs uncollected through [fines], penalties, and
the recovery of cleanup costs, and if not, "why?"
1:42:55 PM
MS. RYAN said SPAR holds statutory authority to pursue recouping
its costs, but the amounts are so low, complete recovery of
costs is not assured. In further response to Representative
Rauscher, she said recovery would be civil action through the
court process.
CO-CHAIR JOSEPHSON inquired as to whether the bill creates a new
set of administrative penalties so that SPAR does not have to
"go to the court in the first instance?"
MS. RYAN stated the bill follows examples from other divisions
within DEC that have administrative penalty authority; for
example, SPAR would have the authority to issue a ticket for
serious and repeat offenses, and the penalty would be
administered by DEC rather than through the court system - which
is less expensive - and an administrative penalty would be
limited by the bill to a spill of 18,000 gallons or less in
volume.
REPRESENTATIVE RAUSCHER asked whether the bill affects one who
spills fuel oil on the neighboring property.
MS. RYAN said the bill increases penalty authority for refined
fuel spills. In further response to Representative Rauscher,
she said the bill would direct that a spill of 500 gallons of
refined fuel would receive an administrative penalty.
CO-CHAIR JOSEPHSON noted one may also bring a cause of action
for nuisance and trespass, seeking damages in addition to the
penalties imposed by the state.
MS. RYAN acknowledged often neighbors seek damages in court.
REPRESENTATIVE PARISH returned attention to the second bullet
point on slide 14 and asked how the state comes to be the
leading investigator and responsible party for cleaning up a
spill.
1:47:10 PM
MS. RYAN said the state becomes the leading investigator and is
authorized to use state funds only when statutory criteria are
met, such as a response to an imminent threat, or a serious
threat to the environment or to public health. An additional
criterion requires cost recovery, thus if there is a viable
responsible party it behooves the company to pay for cleanup
directly. She gave an example of a situation which threatened a
neighborhood in Wrangell and on which the state has spent
several million dollars to contain the contamination.
REPRESENTATIVE PARISH asked whether other state funds have been
used in spill response or mitigation.
MS. RYAN said SPAR used to have undesignated general funds (UGF)
to pay for engineering work for leak detection that was related
to pipelines; however, to reduce state cost, SPAR eliminated
UGF, cut several positions and combined programs, and now relies
on the prevention accounts.
REPRESENTATIVE LINCOLN asked how often SPAR leads cleanup
efforts.
MS. RYAN advised rarely; 95 percent of the time the responsible
party is the lead. If the responsible party is an oil company,
SPAR is assured the cleanup will be done right; however, if the
responsible party is a homeowner, SPAR will work with the
homeowner because they are not a knowledgeable party, their
insurance will not help them, and the costs are very high.
REPRESENTATIVE LINCOLN questioned whether HB 322 seeks to deter
homeowners and private citizens from taking risks by increasing
fines and penalties.
MS. RYAN opined the bill would not have an impact on homeowners;
releases by homeowners are always unintended and the actual cost
of response acts as a huge deterrent.
REPRESENTATIVE LINCOLN returned attention to the third bullet
point on slide 14 [the current fine and penalty structure
addresses less than 5 percent of the average oil spill response
and cleanup costs] and asked if this applies to instances in
which the state is the lead in the cleanup.
MS. RYAN said correct.
REPRESENTATIVE LINCOLN surmised there may be some recovery of
costs through lawsuits and court settlements that would augment
the fine and penalty structure.
MS. RYAN agreed and will provide additional information.
1:53:09 PM
REPRESENTATIVE BIRCH questioned whether there is the potential
of any of the fines being levied against a homeowner or a
commercial enterprise. He gave examples of spills because of
theft or vandalism.
MS. RYAN directed attention to the criteria in the bill that
must be considered to determine a penalty; one of the criterion
is to consider what economic benefit occurred as a result of the
spill, for example, a company that caused a release by deciding
to save money. She said a homeowner would not meet the
criterion related to economic benefit.
CO-CHAIR JOSEPHSON recalled Ms. Ryan estimated SPAR collected
approximately $100,000 per year in fines and penalties and asked
how much of that was collected from individuals who were
responsible for a spill.
MS. RYAN said the amount is small. Homeowners are reluctant to
report a spill because SPAR is required to recover its costs,
and the delay in reporting affects the outcome of the cleanup.
As director, she said she has never penalized a homeowner, and
none of the aforementioned $100,000 was related to a homeowner
spill. For a homeowner, paying to cleanup a spill is the
penalty.
MS. RYAN directed attention to slide 15 and observed there are
two companies that are moving oil by tanker truck from Nikiski
to the refinery, crossing several waterbodies. There have been
no compliance issues with BlueCrest Energy Inc. (BlueCrest), and
the bill would require the companies to file a contingency plan.
1:58:07 PM
CO-CHAIR JOSEPHSON questioned whether drafting a contingency
plan is a burden.
MS. RYAN explained a contingency plan contains two main aspects,
one is a prevention plan such as how to mitigate the risks of a
certain route, and BlueCrest has a prevention plan. Also, a
contingency includes the actions that would be taken after an
oil spill: how to clean it up; the location of equipment; the
deployment of booms in water. The point of a contingency plan
is to be prepared for what could happen; she opined they are not
a significant amount of work and are a part of good business
practice. The bill requires companies to provide plans to DEC -
in a specific format - and to drill and exercise the plans to
prepare for implementation.
CO-CHAIR TARR asked whether travel by the tanker trucks is
limited by restrictions such as the time of day.
MS. RYAN said limitations on travel are outside the bounds of a
contingency plan and deferred to DOTPF. Ms. Ryan stated another
provision of HB 322 would include produced water when SPAR
calculates the volume of a spill for a penalty. Slide 16
provided two examples, and she explained as fields have matured
on the North Slope, more saltwater is pulled out of the
reservoir with the oil. In current statute, saltwater cannot be
considered by SPAR as a factor in the penalty volume, yet
saltwater is toxic to the tundra environment and hard to wash
away. [SPAR] feels the damage to the environment caused by
produced water is significant and should be considered in the
volume calculations for penalties.
CO-CHAIR JOSEPHSON asked how this aspect of the bill compares
with that of other states.
MS. RYAN was unsure and will provide the information.
CO-CHAIR JOSEPHSON returned attention to slide 16 and the
example of produced water in penalty volume. He asked whether
the responsible parties [in the examples] could have been
penalized administratively under HB 322.
MS. RYAN said correct, noting that volumes in the example would
have been at the threshold where the penalties would be less.
For example, there have been recent spills with "a couple
gallons of oil but hundreds of thousands of gallons of produced
water ... the formula has shifted on what's being spilled."
REPRESENTATIVE PARISH asked for a comparison of the impact of a
gallon of produced water to that of a gallon of oil.
MS. RYAN stated the proportion of salt in produced water varies
by each spill and there is no standard; further, SPAR lacks good
tools for the cleanup of highly saline water.
2:05:32 PM
THOMAS ATKINSON, Staff, Representative Andy Josephson, Alaska
State Legislature, on behalf of Representative Josephson, co-
chair of the House Resources Committee, sponsor, provided a
PowerPoint presentation entitled, "HB 322 The Spill Bill." Mr.
Atkinson informed the committee the first change proposed by the
bill is to Section 1, on page 1, line 7, which deletes text
"recent information discloses that." On page 2, there are
changes to grammar, and on line 15, "but not punitive" would be
deleted because civil and administrative penalties could be
considered punitive. On line 16, "civil" would be deleted
because the bill proposes to add administrative penalties, and
on line 17, "judicial" would be deleted because fines would be
judicial fines assessed by a court or administrative fines
assessed by the department (slide 1). Section 2 would increase
penalties for non-crude oil spills over 18,000 gallons into
aquatic environments or on public land. Section 2 read:
Sec. 2. AS 46.03.758(b) is amended to read: (b) The
[NO LATER THAN THE 10TH DAY AFTER THE CONVENING OF
THE SECOND SESSION OF THE TENTH ALASKA LEGISLATURE,
THE] department shall establish in [SUBMIT TO THE
LEGISLATURE] regulations [ESTABLISHING] the following
schedule of fixed penalties for discharges of oil:
(1) subject to (2) of this subsection, the penalties
for the following categories of receiving
environments may not exceed
(A) $20 [$10] per gallon of oil that [WHICH]
enters an anadromous stream or other freshwater
environment with significant aquatic resources;
(B) $5 [$2.50] per gallon of oil that [WHICH]
enters an estuarine, intertidal or confined saltwater
environment; and
(C) $2 [$1] per gallon of oil that [WHICH]
enters an unconfined saltwater environment, public
land or freshwater environment without significant
aquatic resources;
(2) for discharges of oil that are caused by the
gross negligence or intentional act of the discharger,
or when the court finds that the discharger did not
take reasonable measures to contain and clean up the
discharged oil, the penalty shall be determined by
multiplying the penalty established under (1) of this
subsection by a factor of five.
MR. ATKINSON stated [subparagraphs] (A) and (B) are related to
aquatic releases and [subparagraph] (C) relates to releases into
an unconfined saltwater environment or public land. He pointed
out penalties in existing law are more severe for a release into
an anadromous stream, or other freshwater environment with
significant aquatic resources; fines decrease as the receiving
environments are less biologically important. Also, the
existing penalties were first imposed in 1977 and have been
undercut by inflation; for example, the 2018 equivalent for the
1977 penalty of $10 is $39.70, and the bill proposes penalties
of $20 (slide 2).
2:09:59 PM
CO-CHAIR JOSEPHSON called attention to slide 2, noting the
penalties would be higher if adjusted to actual inflation from
1977.
CO-CHAIR TARR questioned whether the penalty amounts are
supported by DEC.
MR. ATKINSON confirmed the amount of the penalties in [Section
2] were suggested by DEC. Continuing to Section 3, he said the
intent of Section 3 is to automatically inflation adjust
penalties annually to the Consumer Price Index (CPI), Bureau of
Labor Statistics, U.S. Department of Labor.
REPRESENTATIVE BIRCH questioned whether Alaska Statutes contain
other instances of penalties that are annually adjusted.
CO-CHAIR JOSEPHSON provided the example of Senate Bill 91
[passed in the Twenty-Ninth Alaska State Legislature] and the
value of property relative to C felonies.
MR. ATKINSON offered to provide additional examples.
CO-CHAIR TARR expressed her belief [automatic inflation
adjusting] will be pursued by various divisions that seek to
avoid the necessity of legislation solely to address
administrative tasks.
REPRESENTATIVE JOHNSON cautioned the CPI does not always
increase. She stated her understanding the bill would double
the base amount of the [penalties] and then use the base to
adjust to CPI. She asked for the basis upon which the penalties
were doubled.
CO-CHAIR JOSEPHSON suggested DEC may wish to comment.
2:16:10 PM
REPRESENTATIVE PARISH returned attention to Section 2 (slide 2)
and said although the proposed [base] penalties are doubled,
they approximate one-half of what the inflation-adjusted amount
would be.
REPRESENTATIVE BIRCH restated his objection to the introduction
of HB 322 as a committee bill. He directed attention to the
bill on page 4, line 8, which read in part:
nor more than $25,000[$5,000] for each day after
REPRESENTATIVE BIRCH remarked:
... the daily fine rate can be a maximum of $25,000
rather than $5,000, so somebody suggested $25,000,
which is five times $5,000 and ... where did that come
from?
There followed brief discussion on the drafting of the bill and
the source of proposed fines that double and/or increase by
five-fold.
MR. ATKINSON responded that in general the proposed penalty
amounts came from DEC and some were adjusted by Representative
Josephson's staff to reflect the CPI. The only proposed
penalties that were quintupled came from DEC and are related to
continuing spill violations by a responsible party, not to an
initial violation. In further response to Representative Birch,
he restated the quintupled penalties were proposed by DEC.
REPRESENTATIVE JOHNSON surmised the quintupling of the penalty
is explained on line 19, [paragraph 4] which read:
(4) the need for an enhanced civil penalty to deter
future noncompliance.
REPRESENTATIVE JOHNSON recalled discussion [unrelated to HB 322]
that concluded increasing penalties is not a deterrent to
criminal behavior.
MR. ATKINSON continued to Section 4, noting the civil penalties
in Section 4 were enacted in 1989 and are unchanged. He pointed
out the 1989 $8.00 penalty for a spill under 420,000 gallons -
when based on the CPI calculator for 2018 - equals $15.64, and
would be rounded up in the bill to $16.00; similarly, the 1989
$12.50 penalty for a spill exceeding 420,000 gallons would be
raised to $25.00 (slide 4).
2:22:27 PM
REPRESENTATIVE PARISH asked where the bill reflects the cost of
environmental damages to the fishing industry and supporting
data.
MR. ATKINSON said he did not provide data in this regard.
There followed a brief discussion on civil action brought by the
state that does or does not address environmental damages.
2:25:13 PM
REPRESENTATIVE PARISH recalled following the Exxon Valdez oil
spill in 1989 there were certain direct costs to the state for
damages and cleanup, and considerable costs to members of the
public, which can be mitigated by civil court action. He asked
whether the state can seek redress for indirect costs, for
example, job training for those whose jobs were displaced by a
spill.
CO-CHAIR JOSEPHSON advised under [Alaska Statutes: AS 09. Code
of Civil Procedure], after proving liability, a person can seek
compensatory damages; however, the bill does not directly
address this question.
MR. ATKINSON returned attention to the sectional analysis and
said Section 5 calculates penalty amounts by counting produced
water mixed with crude oil, as crude oil, and directs DEC to
increase civil penalties annually as indicated by the CPI (slide
5). Section 6 addresses penalties unchanged since 1976 related
to the illegal discharges of oil and crude oil under 18,000
gallons, including discharges of other hazardous substances.
The bill would double the maximum penalty for the initial
violation, quintuple the maximum penalty for continuing
violation, and allow a court to increase the maximum penalty. A
comparison of 1976 and 2018 equivalent penalty amounts for
certain violations was provided (slide 6).
2:29:1 5 PM
REPRESENTATIVE JOHNSON pointed out most oil spills are not as
catastrophic as the oil spill in 1989; she provided an example
of a relatively small accident that a small company could afford
to clean up, but cautioned that a $25,000 daily penalty could
bankrupt a small operation in a short period of time.
MR. ATKINSON said the penalty applies to all spills, but the
bill "allows a court to increase maximum penalty to deter future
spills." Therefore, the court is not required to increase the
maximum and can review efforts to stop the spill by the
responsible party; however, a large company, when oil prices are
high, may decline to respond when penalties are low. In further
response to Representative Johnson, he restated the maximum
penalty does not have to be applied, but the minimum does; the
proposed minimum is $1,000 for the entire spill.
REPRESENTATIVE RAUSCHER questioned whether the bill would apply
to a gas leak in Cook Inlet.
MS. RYAN said DEC has concluded a gas leak in Cook Inlet is a
release of a hazardous substance into the environment thus the
bill would allow DEC to apply penalties.
CO-CHAIR JOSEPHSON asked whether DEC sought to apply the
existing minimum $500 fines during the release [of gas] in Cook
Inlet that occurred about one year ago.
MS. RYAN said DEC did not seek penalties. In further response
to Co-Chair Josephson, she confirmed because natural gas is a
hazardous substance when released into a waterbody, DEC has the
authority to issue penalties.
CO-CHAIR JOSEPHSON recalled Hilcorp tried to act responsibly.
2:35:05 PM
MS. RYAN noted existing statute directs DEC to consider certain
criteria when calculating penalties, such as the intent of the
responsible party to stop the spill; in the aforementioned
example, Hilcorp acted as a responsible operator and thus DEC
found no grounds to initiate penalties.
CO-CHAIR JOSEPHSON recalled winter weather conditions affected
the response to the release.
REPRESENTATIVE RAUSCHER inquired as to the identity of the
person referred to [in the bill on page 4, line 2].
MS. RYAN deferred to the Department of Law; from the perspective
of DEC, the responsible party is the owner of the product
released.
REPRESENTATIVE RAUSCHER asked whether [Section 6, subsection
(a)] allows for the state to be charged.
MS. RYAN acknowledged sometimes the state is the responsible
party; for example, the Department of Transportation & Public
Facilities may be responsible for a fuel spill and she opined
DEC holds the authority to penalize sister agencies.
REPRESENTATIVE PARISH directed attention to the bill on [page 4,
lines 10-16, which read:
(1) reasonable compensation in the nature of
liquidated damages for any adverse environmental
effects caused by the violation, which shall be
determined by the court according to the toxicity,
degradability, and dispersal characteristics of the
substance discharged, the sensitivity of the receiving
environment, and the degree to which the discharge
degrades existing environmental quality;
(2) reasonable costs incurred by the state in
detection, investigation, and attempted correction of
the violation;
REPRESENTATIVE PARISH expressed his belief the term "reasonable"
is used to protect against the assessment of unreasonable fines,
which may be subject to custom. He asked whether the fines
assessed by DEC err on the side of aggression or caution.
2:38:48 PM
MS. RYAN opined DEC is very reasonable in its assessment of
penalties; in fact, last year $82,000 in penalties was received
by DEC; [the penalties in the bill] recommended by DEC were
based on models by other states and are below those of EPA.
CO-CHAIR JOSEPHSON asked whether other jurisdictions impose
additional fines after a [responsible party] fails to respond to
an initial violation.
MS. RYAN said correct, for the purpose of encouraging the
responsible party to stop a release.
REPRESENTATIVE LINCOLN returned attention to slide 3 of the
earlier SPAR presentation and asked whether large spills are
defined as over 18,000 gallons.
MS. RYAN said yes. In further response to Representative
Lincoln, she explained processed water is associated with mining
activities and is used in a slurry to remove elements from rock;
produced water comes up in the wellhead during oil exploration.
REPRESENTATIVE LINCOLN observed there are many incremental
changes in the bill which are hard to evaluate because their
effects are compounded; he asked for modeling of the changes in
a combined way, "so that we can have a better understanding of
the, the magnitude of the changes taken together."
MS. RYAN said SPAR has good historical data on spills and
offered to provide data on penalties that have been assessed.
She added the existing statute as written is complicated which
has necessitated HB 322 include multiple similar changes.
2:43:56 PM
REPRESENTATIVE BIRCH surmised the state entrusts Alyeska
Pipeline Service Company (APSC) and the Trans-Alaska Pipeline
System (TAPS) to transport its royalty share of oil; in the case
of a crude oil spill, he asked how the royalty share is
represented "in the fining process, or the penalty process."
MS. RYAN said ownership of the oil is not complicated by the
royalty portion that goes to the state and which is accounted
for by the Department of Revenue; DEC regulates APSC and the oil
companies that are the responsible parties managing exploration,
production, and processing of the product, and that own and hold
the contingency plans.
REPRESENTATIVE BIRCH concluded the shared ownership of the oil
is not a factor when penalties are considered by DEC.
MS. RYAN pointed out all the oil in TAPS is comingled and APSC
is the responsible party in the case of a release.
CO-CHAIR TARR returned attention to the bill in Section 2, which
relates to non-crude discharges over 18,000 gallons, Section 4,
which relates to crude discharges over 18,000 gallons, and
Section 6, which relates to crude discharges under 18,000
gallons; she clarified a responsible party is penalized in one
applicable category, but not in each of the categories.
MS. RYAN said correct.
MR. ATKINSON returned attention to [the bill on page 4, line 19,
which read:
(4) the need for an enhanced civil penalty to deter
future noncompliance.
MR. ATKINSON said the aforementioned language mirrors language
on page 6, lines 22-23, related to spills addressed in Section
9, thus there is already an enhanced civil penalty to deter
future noncompliance.
MR. ATKINSON continued to Section 7, which is a conforming
amendment (slide 7). Section 8 affects penalties unchanged
since enacted in 1984 by doubling the minimum penalty for
discharges of hazardous wastes, doubling the maximum penalty for
initial violation, and multiplying the maximum penalty for
continuing violation by 2.5 (slide 8). Section 9 affects civil
penalties enacted by a voter initiative in 2006 by doubling the
maximum penalty for discharges under 18,000 gallons from cruise
ships, doubling the maximum penalty for the initial violation,
and multiplying the maximum penalty for continuing violation by
2.5 (slide 9).
2:49:04 PM
CO-CHAIR JOSEPHSON noted an error on slide 9: 1984 penalties
should read 2006 penalties.
REPRESENTATIVE RAUSCHER inquired as to where new language is
found in HB 322.
CO-CHAIR JOSEPHSON said new subsubsections are added in Sections
3, 5, and 11, and Section 12 is a new section.
MR. ATKINSON continued to Section 10 which describes factors a
court may consider when determining economic benefits of
noncompliance, such as deferred and avoided costs of compliance,
competitive advantage gained, and income derived.
CO-CHAIR JOSEPHSON advised "economic savings" is a legal term of
art and opined its usage in HB 322 is not the first occurrence
in Alaska law.
MS. RYAN nodded in affirmation.
REPRESENTATIVE JOHNSON questioned whether it is common for
responsible parties to decline to clean up spills "under our
fine schedule or fee schedule."
CO-CHAIR JOSEPHSON called attention to reports in the media
[documents not provided].
REPRESENTATIVE JOHNSON opined committee members seek to know the
vision behind a committee bill. She expressed her understanding
the bill changes fees and sets higher caps on penalties, and
asked who wrote the bill and why; she pointed out the bill would
not fix the shortfall in the state's revenue and asked for the
purpose of the bill.
2:54:50 PM
CO-CHAIR JOSEPHSON explained it was brought to his attention the
affected statutes need updating.
MR. ATKINSON continued to Section 11 and remarked (slide 10):
I did want to bring the committee's attention to line
12 on page 7, "other penalties assessed for the same
violation" ... and the idea there is that the court
must take into consideration, actually not just take
into consideration any administrative penalties levied
by the department, but must offset the court's civil
penalty; in other words, subtract the administrative
penalty from the civil penalty.
CO-CHAIR JOSEPHSON pointed out also on page 7, [line 7] in
subsection (h), are included opportunities to argue for factors
to mitigate penalties.
MR. ATKINSON continued to Section 12 which is a new section to
authorize DEC to assess new administrative penalties in addition
to civil penalties for serious or repeated illegal discharges,
as defined elsewhere in statute. For the initial violation, DEC
could penalize a responsible party no less than $1,000, no more
than $10,000, and no more than $24 per gallon spilled. He
restated the new penalty amounts were suggested by DEC.
Further, the bill describes factors that must be considered by
DEC, allows DEC to sue a responsible party for nonpayment,
prohibits a court from adjusting administrative penalties,
requires the award of prevailing party's attorney's fees and
collection costs, and must subtract administrative penalties
from any civil penalty. Section 12 incorporates previous
provisions such as including water mixed with oil to determine
spill volume, directs DEC to inflation-proof administrative
penalties, and for Section 12 only, defines oil to include
crude, petroleum, and any substance refined from oil (slide 11).
Sections 13-18 are related to the trucking of crude, and require
commercial motor vehicles used to transport crude oil to have an
approved contingency plan (slide 12). Section 19 repeals
legislative disapproval of regulations governing civil penalties
for oil discharges - which is a separation of powers issue - and
repeals prohibition against punitive penalties for illegal
discharges of ballast water, pesticides, paints, underground
storage tanks, cruise ships, and illegal drug sites (slide 13).
Finally, Sections 20-22 provide authority to DEC to adopt
regulations before the bill takes effect, and if enacted, the
bill would take effect 1/1/19.
[HB 322 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 322 HRES PwrPt for Feb 2.pdf |
HRES 2/2/2018 1:00:00 PM HRES 2/9/2018 1:00:00 PM HRES 2/12/2018 1:00:00 PM |
HB 322 |
| HB 322 Sponsor Statement.pdf |
HRES 2/2/2018 1:00:00 PM |
HB 322 |
| HB 322 Sectional Analysis.pdf |
HRES 2/2/2018 1:00:00 PM HRES 2/12/2018 1:00:00 PM |
HB 322 |
| HB 322 DEC Spill Penalties Overview 2.2.18.pdf |
HRES 2/2/2018 1:00:00 PM HRES 2/9/2018 1:00:00 PM HRES 2/12/2018 1:00:00 PM |
HB 322 |