Legislature(1995 - 1996)
02/23/1996 08:20 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HJR 59 NPDES PERMIT FOR COOK INLET OIL & GAS JEFF LOGAN, Legislative Assistant to Representative Joe Green, said HJR 59 states the legislature's support of the Environmental Protection Agency's (EPA) National Pollutant Discharge Elimination System (NPDES) permit for the Cook Inlet oil operations. He said the NPDES permit is a federal permit for the Cook Inlet operators and is currently being renewed. He said, as part of this renewal process, the EPA has included some conditions to the permit, increasing the monitoring and reporting obligations. He said HJR 59 supports the NPDES as it exists now, without those additional requirements. ALICE BULLINGTON, Senior Environmental Scientist, UNOCAL, was first to testify. She said the NPDES permits for oil and gas facilities have received attention from the legislature, the general public and from industry. She said the regulation of water quality, and its impact, has been a hot topic throughout the United States. She said her discussion would explain the history of the NPDES permit system, how it is applicable to every part of our society, and she would conclude with how it affects the oil industry in the Cook Inlet. MS. BULLINGTON said NPDES, is a permit system that was created under the Clean Water Act back in the 1970s when the general public became alarmed at the number of polluted water bodies in the lower 48 states. She said catastrophic events, such as rivers catching on fire, caused Congress to regulate the discharge of pollutants into the water system through the NPDES permit. She said Congress did not understand, at the time, how to regulate water. She said Congress recognized that banning all pollutants from the water would result in the loss of jobs and create an economic burden for urban areas. The goal of Congress, in the Clean Water Act, was to have fishable and swimmable rivers by 1983. She said society has made progress in that goal and she noted that there are many water bodies that have recovered from past pollution. She said a second goal of the Clean Water Act was to eliminate discharges by 1985. She said the reason this provision was included was because, at the time, there was not a lot of knowledge about environmental science. Environmental science tells us what kind of impacts harm the environment as well as how much discharge is and is not acceptable. The goal of no discharge has not been met. MS. BULLINGTON cited examples in Alaska, such as the municipality of Anchorage, city of Kenai and the city of Homer, which currently have NPDES permits for their municipal sewage treatment discharges. She said eliminating discharge entirely would create an economic burden. Congress asked the EPA to take a look at the types of technologies that were available, how effectively it would treat the discharges and asked the EPA to provide a cost analysis determining the economic burden on industry and cities. Based on those two factors, the EPA developed permit limitations with the end goal being an implementation of technology that was economically feasible and would allow for, an eventual, zero discharge. MS. BULLINGTON said in the last 20 years, it has been recognized that there is no need to eliminate discharges to clean water bodies. She said treated sewage discharge has no impact on the environment, even though cities are continuing to develop towards a zero discharge goal. She said the municipality of Anchorage, which treats its sewage less thoroughly than the city of Kenai, has had no environmental impact due to its discharges. MS. BULLINGTON said the NPDES permit is formulated under the Clean Water Act and it is working towards the zero discharge goal. She said the issue has been diverted from one of environmental impact to an analysis of available technology and their associated costs. A question has arisen from this policy, asking whether regulation of industries and municipalities should occur if no environmental benefits are being seen. She said the NPDES permit in the Cook Inlet, for oil and gas facilities, is an excellent example where zero discharge is not necessary because the additional costs will not benefit the environment. MS. BULLINGTON said the current oil and gas NPDES permit was issued in 1986 and expired in 1991. Due to the work load of the EPA, the draft permit was issued in September 1995 and added that hopefully more efficient, stream-lined methods will be developed for this permit process. She said the current NPDES permit has successfully protected Cook Inlet. She referred to recent studies, completed in the Cook Inlet regarding water quality, sediment, and biota there. She added that, in addition to those recent studies, 80 other studies have been conducted on the biota, water quality and sediment since the late 1960s. She said, one of the later studies was able to compare the results from the 1993 studies to studies that were preformed by the MMS in the 1970s with no notable difference between them. MS. BULLINGTON said one of the most interesting studies, preformed within the last few years, was done by Marathon and UNOCAL and targeted the most significant produced-water discharge in Cook Inlet. She said the Trading Bay production facility, accounts for approximately 95 percent of discharges into Cook Inlet. She said the study examined whether the water quality standards were being met and whether there was compliance with the mixing zone requirements. A mixing zone is an area around a discharge outfall where you can exceed water quality standards as long as the whole water body is not being harmed. She said the mixing zone utilizes the mixing dynamics of a water body and does not harm the water body. She said this study found, within the 750 meter mixing zone, no violations of water quality standards were found within 50 meters of the discharge. She said compliance with the mixing zones is being met. She said the computer models that determined how much dilution was occurring in Cook Inlet significantly underestimated what was occurring in that water body. MS. BULLINGTON said the proposed NPDES permit significantly increases existing permit limitations. The proposed permit becomes much more stringent regarding major discharge. She said most of the proposed requirements are 47 percent to 50 percent more stringent than the existing permit limitations. She said there has been a 300 percent increase in the administrative burden associated with the additional monitoring and reporting that will be needed by the new requirements to the NPDES. She added that additional planning documents and general studies have also been proposed by the EPA. She mentioned the irony of these requirements as there has been a lack of evidence on the impact to the environment and the current EPA policy which seeks to reduce, by 20 percent, the amount of monitoring and reporting being done by NPDES permitees. MS. BULLINGTON mentioned the two primary discharges in the Cook Inlet. One of them is the produced water discharge. She said produced water comes from a reservoir, and is water that has been in the reservoir for millions of years. In general terms, the water has been there since the formation of oil and gas. She said the concentration of metals and hydrocarbons are consistent over time and that monitoring provides no useful information. She made the analogy to the requirement and requiring that her height be measured on a daily basis. She said the proposed NPDES permit would implement three new limitations in addition to the two established limitations. She said there is more stringent monitoring of produced water discharges than any other oil and gas facility in the United States which is allowed to discharge. The EPA based these requirements on metals and hydrocarbon data in produced water. MS. BULLINGTON said another primary discharge, in the Cook Inlet, is the sanitary effluent. She said EPA has required 50 percent more stringent requirements on two of the parameters that are regulated and have increased the monitoring from once a month to once a week. The EPA notes, in the NPDES permit, that sanitary discharge is not harmful. She said that the current limitations in the Cook Inlet are almost half of what the municipality of Anchorage is restricted to and the new limitations would be a third of that. She said the municipality of Anchorage does annual impact studies of sewage discharge on Cook Inlet and has found no impact from the 30 million gallons of discharged sewage. She said UNOCAL told the state of Alaska and the EPA that there has never been an identified technology that can fit on a platform and achieve these limits. Recently, the state of Alaska has agreed with UNOCAL on this point. In the state's certification of the NPDES permit, they asked the EPA to delete these new requirements. MS. BULLINGTON said the NPDES has received more public comment than any other permit in Region 10. In September, the NPDES draft permit was issued and Cook Inlet Region Citizens Advisory Council (CIRCAC), the local watchdog monitoring group, held a workshop regarding the permit. Two hearings were held, in Anchorage and Kenai, by EPA on the NPDES permit. The public comment period on the NPDES permit was extended until the end of January. The Cook Inlet Keeper Program, a new environmental group based in Homer, held a workshop in late January followed by a hearing in Homer. Currently, the EPA is in the process of reviewing, the over 400 comments that were issued on this permit, three-fourths of which oppose the new NPDES requirements. She said EPA will respond to each and every comment, and that likely there will be another comment period. In addition, changes in the proposed permit will cause the whole process to occur again. A final NPDES permit will be issued between August and December of 1996. After that time period the permit is open to litigation by the oil industry or other parties who disagree with the permit requirements. CO-CHAIRMAN GREEN clarified that UNOCAL would want everything to remain the same, as things are going well within the environment. MS. BULLINGTON said the three main points she wanted to emphasize included the fact that the oil industry has been in Cook Inlet for 30 years, there is no evidence of any impacts occurring in the inlet and lastly that the EPA, the President and Congress have recognized the burden that the NPDES places on industry and have indicated that there should be reductions in this burden. REPRESENTATIVE DON LONG asked if there were any incident that occurred in the Cook Inlet which has caused more stringent recommendations to be placed in the proposed permit. MS. BULLINGTON said no, and added that the way in which the Clean Water Act is written, the focus is on technology to reduce the discharge over time which caused the requirements to be more stringent, regardless of environmental impact. REPRESENTATIVE ALAN AUSTERMAN asked if the EPA came out with anything in writing as to why they have set up different requirements for different industries. MS. BULLINGTON said the requirements go back to the way the Clean Water Act was written, which places the emphasis on technology and economics. She said the EPA looks at each entity differently when determining the NPDES requirements because the oil industry has different economics than municipalities. The EPA has broken the entities down by category and include mining, oil, municipalities and the timber industry. She said a balance across the scale is not seen because different industries are able to support different levels of technology. REPRESENTATIVE AUSTERMAN asked if this was due to financial capabilities. MS. BULLINGTON said when the EPA becomes aware of new technologies, they estimate the economic impacts on industry and put it out for comment. JOEL COOPER testified via teleconference from Homer. He said he was against HJR 59 and added that the NPDES permit is not written in a strong enough manner. He said a legislative resolution should be written that listed zero discharge level as its goal. He said the waters of Cook Inlet must be protected and the importance of maintaining clean water must be understood. He referred to the studies done in the Cook Inlet and said there are areas that haven't been sampled where he believed the pollutants might be settling out. He said, as the oil wells get older, 20 times more formation waters are being produced. He believed this fact meant that stricter technologies should be implemented to handle this change. He said the legislature should encourage the municipalities to meet the zero discharge limit. He said if zero discharge limits cannot be met, we should do the best we can. MARLA McPHERSON testified via teleconference from Homer. She said that if pollutants are being discharged into the water, it seems both necessary and responsible that reporting and monitoring obligations should be increased. She said it will give industry a good and responsible reputation. She said if the EPA is not meeting the 25 percent reduction goal of monitoring the Cook Inlet industries, there must be a reason. She suggested that perhaps the industry has not been responsible in the past with discharges. She said currently, the industry is allowed to discharge 400 million gallons of waste per year and last year they reported having over 4,000 violations of the Clean Water Act. She said, in Seattle, UNOCAL is being sued for illegal discharge. She said the EPA recognizes the importance of monitoring and reporting in order to prevent illegal discharges. MS. McPHERSON reiterated the goal of the Clean Water Act was to meet zero discharge by 1985. She said, because the goal was not met, it does not mean that we should change the goal. She said there is not currently enough science to declare that the discharge is harmless. She said it is not known what the long term effects of chronic exposure to low levels of toxins are and the effects on the food chain. Current studies have not been up for peer review and there are uncertainties in their findings. PAMELA MILLER, staff member, GREENPEACE, testified via teleconference from Homer. She said the NPDES permit is a license to pollute. She said the industries in the Cook Inlet and around the Kenai Peninsula have not proven themselves responsible as evidenced by the thousands of violations the oil industry has committed during the last nine years of their NPDES permit. She said her organization believes the NPDES permit to be lax and unenforced. She said other oil industries in the United States are required to meet zero discharge standards and Cook Inlet is the only exception to this standard. She said technology exists to protect against the impacts of discharges and protect the environment. MS. MILLER said we have an incomplete understanding of the complex physical oceanography and the potential for bio-accumulation of these toxic substances away from the sampled areas. She said the studies have only looked at a handful of sampling stations in a complex body of water. She added that the Kenai Peninsula delegation wrote a letter stating that regulations for the oil and gas industry must be derived from scientific measurement and observation. MS. MILLER said she was disappointed by HJR 59 and by the legislature's response reiterating UNOCAL's position. She said an independent scientist, Dr. Robert Howarth from Cornell University, reviewed the draft. Dr. Howarth concluded that the scientific basis for issuing a proposed NPDES permit is (indiscernible) and inadequate. His report states that the current studies are inconclusive and that the actual risk can not be determined and likely to be far greater than stated. He said the monitoring standards, required by the EPA in the draft permit, are inadequate. She asked the legislature to reconsider HJR 59, and asked the EPA to require the oil industry to meet zero discharge limits. NINA FAUST, Member, Kachemak Bay Conservation Society, and former school teacher, testified via teleconference from Homer. She said her organization is against HJR 59 and interested in preserving the water quality and the economic subsistence livelihoods which the residents depend on. She said Kachemak Bay and Kamishak Bay may be depositories for sediments that flow in the current from the upper inlet. She said in the lower part of the inlet, there are gyres which may concentrate pollutants. She said the drilling rigs in the upper inlet are permitted to discharge produced waters and drilling sludge into the inlet which include some of the worst types of toxins. Her organization feels that monitoring should occur where the sediments are collecting and possibly concentrating. She said 50 years of discharging may have long term and, as of yet, undetermined effects. She said it makes economic sense to prevent pollution, rather than have to deal with the consequences later. MS. FAUST said Kachemak Bay Conservation Society supports zero discharge. She said the Cook Inlet is the only water body where this type of NPDES permit is allowed. She said pollution within this water body has been occurring for 30 years despite the enactment of the Clean Water Act. She said new drilling rigs should have zero discharge and that requirement would eliminate monitoring. She said her global coastal management program has recommended that new rigs meet zero discharge. She said, in regards to HJR 59, monitoring and recording should not be reduced and that zero discharge should be the goal. She reiterated the unknown affects of pollutants and that technology is available. PAUL SEATON, Commercial Fisherman, testified via teleconference from Homer. He was against HJR 59 and said discharges deemed acceptable have, sometimes, been found to be harmful to the environment causing expensive clean-ups. He reiterated the point about the NPDES permit being allowed here and not in other places. He was concerned about Sale 149 and the effect of this permit on drilling mud. He said Pacific Cod tends to be found in areas where the drilling mud settles and concentrates and that any impact on the quality of those fish would result in economic hardship. He referred to a part of UNOCAL's testimony regarding the fact that Congress did not intend for zero discharge and asked Ms. Bullington to provide the legislative history to document this statement. CO-CHAIRMAN GREEN stated that HJR 59 requires monitoring and reporting requirements remain in current form, not increased by 400 percent. He said the Alaskan Pacific Cod's reputation as being the best fish goes along with the fact that the waters remain clean, despite concern over drilling mud. He said the state of Alaska might be taking themselves out of the competitive market by allowing these additional NPDES requirements. MS. BULLINGTON said Cook Inlet is not the only oil drilling platform which allows zero discharge. She said there are hundreds of oil drilling platforms in the Gulf of Mexico which have NPDES permits allowing discharges to occur. She said the exception, regarding Cook Inlet, is its being listed as a coastal area. She said coastal areas, as defined by the EPA, are low energy, shallow environments with large resident species. She said Cook Inlet does not fit this definition, but it is included in this definition because of how the EPA marked off the map. She said the Cook Inlet has fifteen offshore platforms and three onshore facilities compared with the hundreds in the Gulf of Mexico. TAPE 96-21, SIDE B Number 000 MS. BULLINGTON said zero discharge is not the issue. She said the issue is one of whether the discharge is having an impact on the environment. She said, during the evaluation of the Trading Bay discharge, it was found that within 50 meters of the discharge outfall there was not significant levels of contamination. She said those areas were within compliance of water quality standards. She said pollutants are not going to be found 60 miles or 80 miles away, if you do not find them 50 meters away. She said pollutants do not jump across areas. MS. BULLINGTON said UNOCAL was fined for approximately 300 violations occurring over a five year period. She said UNOCAL provided evidence to EPA that the agency has never identified a technology that could meet the proposed limits, let alone the existing limits. She said, UNOCAL learned, that 1986 was the time that they should have shown this evidence and because UNOCAL didn't, they were found to be in violation. She said, UNOCAL has resolved this issue by zero discharging their sanitary effluent. She said the cost of zero discharge is significant, especially when it is considered that the Anchorage limits are higher than any of the exceedencies that occurred from the platforms. MS. BULLINGTON said she is opposed to the issue of implementing zero discharge because there is technology available to do so. She said zero discharge should only be required if there is an environmental impact. She referred to the reported mentioned by Pamela Miller, and said she would supply documentation made in response to that report, but in summation said that Dr. Howarth used 15 year old information. CO-CHAIRMAN GREEN said Ms. Bullington was given additional time in response to issues that were raised in her testimony. NORMA CALVERT, Lobbyist, Marathon Oil Company, was next to testify. She said her company supports the position as stated by Ms. Bullington. She said the oil industry's environmentally sound operations have been proven over time and urged support for HJR 59. MARILYN CROCKETT, Assistant Executive Director, Alaska Oil and Gas Association (AOGA) and Member, Resource Development Council (RDC), was next to testify. She read from a sponsor statement, "let me begin by saying that we do appreciate the significant efforts required of EPA Region 10 in compiling this complex permit. The permit does provide for the continued ability to discharge produced water and mud and cuttings. A zero discharge requirement would force the early closure of many operations because of high costs. However, we are very concerned about the draft permit' s proposed increase in the amount of monitoring and reporting. These additional requirement s will not result in any benefit to the environment, but they will add cost and administrative burden not only to the operators, but to EPA as well. Based on very conservative assumptions, the draft permit requires monitoring the largest number of parameters ever in such a permit. Additionally, the frequency of monitoring is extreme compared to similar permits. We've estimated that to comply with these requirements will require the expenditure of $1 million annually. Changing regulations and requirements such as these pose special challenges for these mature fields which are under increasing pressure to maximize production while minimizing expenditure sin order to remain economical. It is somewhat ironic that EPA would propose significant increases in monitoring and reporting, given the objectives contained in EPA's 1996 National Water Program Agenda as described in HJR 59. The elements of the '96 agenda are not new, but rather are an extension of President Clinton and Vice President Gore's March 16, 1995, report entitled `Reinventing Environmental Regulation.' Oil and gas exploration and production has occurred in Cook Inlet for almost 30 years. This development has positively affect the lives of all Alaskans and in particular the residents of southcentral Alaska. Without it, consumers would not be able to enjoy the benefits of low-cost natural gas and electricity. The development has coexisted with one of the state's most productive commercial salmon fisheries and active sport fisheries, provided jobs for the area's residents and significantly contributed to the Peninsula's tax base. They've been conducted in a safe and environmentally sound manner over the life of the development. AOGA and RDC commend the legislature for consideration of HJR 59. We would like to recommend tow minor technical amendments which I have attached to my copy of the testimony. I'd be happy to answer any questions you may have about these recommended amendments." MS. CROCKETT said on page one, line eight of HJR 59, "Cook Inlet," be inserted at the end of line seven so that it reads, "not more rigorous than those requirements of the Cook Inlet NPDES permit in place." She added, that for Cook Inlet area, the NPDES permit is a single permit for all of the operations in the area. She asked for the same change to be made on page three, line 12. MS. CROCKETT said on page two, line 14 and line 16, there is a reference that the NPDES permit covers Cook Inlet oil and gas productions, which it does, but she added that the permit also includes exploration activities as well. The recommendation is that the word, "production," be deleted from both lines 14 and 16. JIM EVANS, Chairman, Kenai Chapter, Support Industry Alliance, was next to testify. He supported the testimony of Ms. Bullington and said there should be no changes made to the NPDES permit currently in place. He said the current NPDES permit has not shown any detrimental affects to the Cook Inlet, based on the current, on- going information. REPRESENTATIVE RAMONA BARNES made a motion to adopt the amendments are presented by Ms. Crockett. CO-CHAIRMAN GREEN asked if there were any objections to the proposed amendments to HJR 59. Hearing none the amendments were so adopted to CSHJR 59 (RES) by the House Standing Committee on Resources. DENNIS RANDA, Member, Alaska Council of Trout Unlimited, and fishing guide was next to testify. He said his organization consists of 550 members statewide and said the Cook Inlet ecosystem is complex. He said there are "giant holes in the returns of salmon to Cook Inlet." He said there is no explanation for what happened to the Chinook salmon from the Upper Susitna drainage, those salmon are gone and maybe those problems occur because of this issue. He said he could not state this accusation scientifically and added that he didn't believe we would ever have the money to figure it out. MR. RANDA said he hoped the committee would remain objective and said he didn't think that Ms. Bullington should have received the opportunity to rebut the testimony of other people. MR. RANDA said, "we are talking about dead zones, killing zones here when we look at this NPDES permit and this mixing zone concept." The Trading Bay facility has a 16 inch pipe with a dead zone of a 300 meter radius which means that they are going to be able to kill anything that moves within that radius. He did not say that the industry is directly threatening his job, but there is a reason for the NPDES process. He referred to a study, sponsored by ARCO, which showed that the Cook Inlet area has significance in providing habitat for salmon. These salmon use the estuary to grow before they move out to the sea. He reiterated the 300 meter radius killing zone. MR. RANDA said there is evidence of accumulation in the sediments around these areas. East forelands has a toxic level which has shown up in studies. He mentioned the problem with only using 12 sampling sites, when you have a mixing zone of nearly a thousand feet. He said in winter you do not have the flushing action because the low water is freezing in the rivers and the pollutants just come and go. He said studies show an impact, and give us the opportunity to find the depositional zones where contaminants come out of the pipe and grab on to sediments. He said they should show up with the mixing zone, but added that the Cook Inlet has a volatile water system. MR. RANDA said that increased development will be occurring from Lease Sale 149 and questioned whether this was being considered. He mentioned that this is a federal government and questioned the involvement by the legislature. REPRESENTATIVE AUSTERMAN asked about his reference to "killing zones." MR. RANDA said if the public were allowed to know how much effluence that the municipalities put into Cook Inlet, we would be more concerned than the amount allowed by the NPDES permit. He said the municipalities are given a "free ride." REPRESENTATIVE AUSTERMAN mentioned his experience in the fishing industry and the requirements made by EPA. He said he found it difficult to judge the value of environmental clean-up even with his direct experience. He asked for clarification of toxins in the sediments. MR. RANDA said there were toxins found in the pilot studies of the Cook Inlet Region Citizens Advisory Council, Environmental Monitoring Committee, which were conducted around Cook Inlet between 1993 and 1995 showing evidence of toxicity in the Trading Bay area and one year in the east forelands area. He said he didn't think that human waste is a problem, but the problem is one of the household chemicals contained in the sewage. REPRESENTATIVE AUSTERMAN asked if the toxins he was referring to could be traced back to the oil rigs. MR. RANDA said the source of the toxins was unknown, but said it was in the area of the oil rigs. CO-CHAIRMAN GREEN asked for specific information regarding these studies. MR. RANDA referred to the study conducted by A. D. Little in 1993 and Parametrix Lab in 1995. He repeated that these pilot studies cannot trace the toxins to a specific location. He said the "dead zone" he referred to is referred to as a mixing zone by the NPDES permit. He said those areas are allowed a higher toxicity than that which would sustain life. CO-CHAIRMAN GREEN said the mixing zone is a place where the water is allowed to mix with the native waters, and added that it is not a dead zone. REPRESENTATIVE OGAN said the assertion made that the mixing zone killed off fish and animal life was new to him. He said it was the first time he had ever heard of it in all his work regarding resource issues. BILL STAMPS, Board Member, Alaska Support Industry Alliance Chapter Officer, Kenai Chapter, Alaska Support Industry Alliance, was next to testify. He said the six studies of the water quality in Cook Inlet have shown no evidence of harm done by the oil industry in 30 years of operation and discharging into the waters. He said three of these studies were conducted by CIRCAC, one oil industry, one mineral management service and one by GREENPEACE. He said the results of the GREENPEACE study were not published and inferred that if it had been different from those other studies, then it would have been published. MR. STAMPS said the oil industry is important to the Kenai Peninsula's economy as is the fishing industry. He reiterated the record fish harvest in recent years. He said the decline in the Susitna fishery might not have been managed in the same manner as the Kenai fishery and that this was, perhaps, the reason for its decline. He said in 1994, the oil and gas industry accounted for $292.3 million in revenue for the Kenai Peninsula Borough. He said in 1994, the top nine out of ten taxpayers in the borough were oil and gas companies which accounted for approximately 33 percent of the borough's assessed value. He said these figures were obtained from the Department of Labor and the Kenai Peninsula Borough. MR. STAMPS said special interest groups will attempt to shut down the oil industry in Cook Inlet and deplete the economy of the region. He said in letters he has written to the EPA he has asked them to continue monitoring the waters of Cook Inlet. He asked the EPA to consider the following, "the trustees, through the oil industry, for discharges in the Cook Inlet, will the trustees file a lawsuit against the fish processors, will they sue the municipalities of Anchorage and/or the municipalities of Kenai, Soldotna and Homer because each, individual municipality, discharges more in the Cook Inlet than all the oil facilities combined. Or will the trustees in GREENPEACE continue to single out the oil industry." MR. STAMPS said there is no evidence that the discharge by the industry or the municipalities are harmful. He said zero discharge is not economically feasible for any of the discharges. He did not support any action that would cause additional or more stringent standards or reporting requirements to be placed on the oil industry. He supported HJR 59. KATHRYN THOMAS, Chair Elect, Alaska State Chamber of Commerce, was next to testify. She read from a sponsor statement, "Our organization represents a direct membership of approximately 700 businesses and an indirect membership of more than 6,000 Alaskan firms. Most of our members are small business people with 20 or more fewer employees. Founded in 1953, we represent Alaskans from Barrow to Ketchikan. I am here to speak with you because we are the voice of Alaska business." MS. THOMAS, said she was reading from a presentation made to the EPA in Homer on January 25, 1996, "in recent years, Alaska has seen huge business reversals in major industries due to actions taken by the federal government. The timber industry has closed mills and laid off hundreds of employees because of federal action limiting the use of Alaskan timber for logging. The fishing industry has seen recent federal action which has halted commercial salmon fishing in Southeast Alaska because the Pacific Northwest and Canada were suffering major salmon shortages. Alaska, on the other hand has managed its resource to see record returns in its waters. We believe that Alaskan's are competent in the care and management of their resources. We ask that you, the EPA, recognize that the Alaska Department of Environmental Conservation does not include Cook Inlet on the list of impaired water bodies in Alaska, as defined under the federal Clean Water Act. The Alaska State Chamber of Commerce, has a commitment to create a prosperous Alaskan economy; to reduce the cost of doing business in Alaska and to the development of Alaska's vast mineral resource wealth while balancing sound environmental considerations. For 30 years the oil platforms in Cook Inlet have provided jobs for Alaskans, heated our homes, provided a source of low cost power to keep our businesses competitive and more profitable, and contributed to the tax base that supports our government and schools. And this is a real Alaskan success story, because the recent environmental studies have shown that the major contribution to our economy, that this major contribution to our economy has been achieved without any adverse impact to our Cook Inlet waters. The business community in Alaska is puzzled as to why the federal government wants to fix something that is not broken and that has performed so well. We ask that you recognize that the Alaska State Chamber of Commerce feels that additional stringent requirement of the NPDES permitting is not warranted by the data that is reflected in the most recent studies of Cook Inlet waters. By not recognizing the environmental success of the development of Cook Inlet's oil resource, the federal government will cause a loss of revenue to large and small businesses and Alaskan will lose jobs that we cannot replace from other sectors." MS. THOMAS presented a newspaper article from the Peninsula Clarion, dated February 23, 1996, to be inserted in the committee packet. DENNIS STEFFY, Director, Mining and Petroleum Training Service, was next to testify. He said he was representing himself, but has been actively involved in the oil and gas industry as well as in education with the University of Alaska during the past 20 years. He supported HJR 59 and encouraged its passage. MR. STEFFY said there is no scientific way to determine the source of any petroleum oils and lubricants. He said over the years he has spent a lot of time on the waters of Cook Inlet and has seen direct evidence of petroleum oils and lubricants in the water, but in all likelihood it probably is not directly traceable to the oil industry. He said he would take any such study with a cautious grain of salt because the source cannot be identified. MR. STEFFY said, in his education career, a large number of people in the oil industry were trained in the reduction and the elimination of pollution. He said people were trained on floatation cells and pre-water knock-outs on behalf of the industry. He said those curriculums are available and added that those curriculums, developed by the oil industry, are directed at environmental issues. He said a tremendous amount of attention has been given in response to the environment, in particular the off- shore operators in Cook Inlet. He mentioned that the quality of water of the Cook Inlet is as important to the oil industry as it is to anyone else. He mentioned his experience as a commercial fisherman and that the fish in the Cook Inlet have not been impacted. TAPE 96-22, SIDE A Number 000 NANCY HILLSTRAND, Pioneer Alaska Fishery, testified via teleconference from Homer. She mentioned her experience in the fishing industry and the importance of water quality. She asked that the oil industry maintain water quality. She mentioned the accumulation of heavy toxins, not the discharges, but in the drilling mud. She said we should do whatever we can to protect the waters. She said the crab, shrimp, clams, and scallops species in the Cook Inlet have been impaired and those fisheries have been closed for 15 years. EMILY JOHNGREN testified via teleconference from Homer. She said she was opposed to HJR 59. She added that she agreed with Mr. Cooper, Ms. McPherson and Ms. Miller's testimony and the other witnesses who testified from Homer. TIM NAVARRE said he was representing himself. He said the economic concerns must also be addressed in this issue, especially if there is no scientific evidence which shows a negative impact from the oil industry. He said the loss of the oil industry would create a economic burden around Cook Inlet. He supported HJR 59 as it looks at the whole picture. He believed that the 30 years of testing and the presence of the oil industry in Cook Inlet shows that it has not had a detrimental affect. KEN TURNAGE, General Manager, VECO, said he was representing himself. He said he was part of an effort to made recommendations to the EPA. He read the petition, "we the undersigned citizens of the Kenai Peninsula area feel that there are adequate restrictions and safeguards under the existing NPDES permit. No additional testing or monitoring should be required as there will be no environmental benefit derived through more onerous restrictions. Mixing zones are an intricate part of the economic viability of oil and gas facilities. Since all scientific data and studies conducted, to date, indicated that no environmental harm has occurred in over 30 years of oil and gas development in the Cook Inlet the practice of mixing zones should be maintained. The economic viability of the Kenai Peninsula area would be unjustly threatened by imposing of increased regulatory restrictions on an already overly regulated industry. We are pleased to see that the EPA has recognized that there is no significant evidence to warrant zero discharge and propose a (indiscernible). The livelihoods of thousands of residents are at stake and we encourage the EPA to protect jobs and the economic stability of the area. No scientific environmental evidence has presented to suggest otherwise as required." MR. TURNAGE said in only a week, he collected 500 signatures. REPRESENTATIVE BARNES made a motion that HJR 59, as amended, be moved with individual recommendations. Hearing no objections CSHJR 59 (RES) was moved from the House Standing Committee on Resources. PRESENTATION: COOK INLET OIL INDUSTRY CO-CHAIRMAN GREEN announced that the next item on the agenda would be an overview on the state of the Cook Inlet oil industry by the residents. JOHN DONOHUE, General Manager, UNOCAL, said there were two different types of operations in Cook Inlet, oil and gas. He said his presentation would includes the scope, the health and the potential of oil and gas operations in the Cook Inlet. He said presently there are about 1,500 employees, primarily on the Kenai Peninsula, who make their living from oil and gas. He said the industry spends about $250 million to maintain the oil and gas industry in Cook Inlet. MR. DONOHUE said 600 million cubic feet per day of gas is being produced and just over 40,000 barrels of oil. He compared this amount with the million barrels of oil being produced in the North Slope. He showed a slide of a map listing the gas producing properties in Cook Inlet. It showed the city of Kenai, the UNOCAL chemical plant, Phillips plant, the major fields including the Marathon Kenai field, Beaver Creek, UNOCAL's Swanson River, Steelhead Platform which is producing gas from the drilling gas sands at the McArthur River field and the Phillip's North Cook Inlet field, ARCO's Beluga River field, and a couple of smaller onshore fields operated by UNOCAL. MR. DONOHUE said the gas producers include ARCO, Marathon, Phillips and UNOCAL. He said the users of gas in Cook Inlet are the Phillips Petroleum plant, UNOCAL fertilizer plant and the utilities of Southcentral Alaska. He said gas industry started in the late 1950s with "big jumps" in the late 1950s and early 1970s as UNOCAL opened their chemical plant and Phillips opened their liquid natural gas (LNG) plant. He said the gas industry in the Cook Inlet is healthy from the point of view of the producers, the utilities, Phillips, and UNOCAL. MR. DONOHUE said there are four fields producing oil in the Cook Inlet including Swanson River which is onshore. He said the fields offshore include the Middle Ground Shoal, Granite Point field and McArthur River field. He said west McArthur field is operated by Stewart Petroleum production on the west side. He said east side oil refers to everything that comes on the east side of the inlet including Swanson River and Middle Ground Shoal field ending up at the Tesoro refinery. The west side includes Granite Point and McArthur field and comes down the Cook Inlet pipeline to Drift River where it is picked up by tanker and taken out of state. MR. DONOHUE said all of the oil fields are operated by UNOCAL, except for two platforms which produce from the central part of Middle Ground Shoal and Stewart Petroleum's production. He asked the committee to keep in mind the infrastructure as it is a critical part of the oil production in the Cook Inlet. He said the oil producers include SHELL, UNOCAL and Stewart. He added that UNOCAL also produces oil for Mobile and Marathon, as they are working partners of UNOCAL in various parts of the Cook Inlet. He remarked that the platform the committee viewed on Thursday was partly owned by Mobile. MR. DONOHUE referred to a graph of oil production which showed oil production ramping up very rapidly in the mid to late 1960s and reached its peak in 1969, at just under 175,000 barrels per day and has declined to about 40,000 barrels per day. He said the oil industry is not a healthy industry, but said the goal is to improve this industry. He said these fields were first discovered in the 1950s and cited an axiom of the oil and gas industry that once production begins, you are in decline. He said they are high cost fields with low production. MR. DONOHUE said UNOCAL has reduced their total cost of operations in the field, within the last three years, by 30 percent. He said increasing production amounts must be targeted. He said capital costs are high, with half of those costs spent on new development every year. He said the average oil decline in Cook Inlet is about 18 percent, so every four years you have to reproduce what you have on production. MR. DONOHUE said any regulation implemented must be effective, efficient and cost effective. He said oil production needs new discoveries and needs to attract new companies to Cook Inlet. He said the state's role in the oil industry is being realized with the passage of HB 207 last year. He said UNOCAL is working with the state in formulating an application to use for royalty relief in Cook Inlet. He said incentives need to occur in order to drill more wells and add new players to increase exploration. MR. DONOHUE said there is a need for consistent and systematic lease sales in Cook Inlet. He said changes need to be made in the best interest finding process so that a comprehensive study can be done and be used for five years, rather than "reinventing the wheel every single time." He said oil and gas production provide employment to the residents, create tax revenue for the state and the borough, and provide fuel for the community. He said most of the electricity produced in Southcentral Alaska is produced from Cook Inlet natural gas. He added that a significant portion of the gasoline, diesel and aircraft fuel used in Southcentral Alaska is refined in Cook Inlet by Tesoro and that the oil and gas industry in Cook Inlet also affects the Fairbanks region. MR. DONOHUE said a partnership between industry, contract industry, state, local officials and public is needed to keep the oil industry in the Cook Inlet. REPRESENTATIVE KOTT referred to a slide showing a downward curve reaching towards the zero mark. MR. DONOHUE said the spike in production of oil went up very fast and then came down very rapidly. He said this is typical of fields this size, and added that the largest field in Cook Inlet is 500,000 barrels per day. He said a system which taps this field will result in a graph that looks this way. He said the Prudhoe Bay production peaked and remained peaked at a high level because of the transportation factor. TERRY KOVACEVICH, Operations Superintendent, Marathon Alaska, was next to testify. He referred to a map which showed the Cook Inlet oil and gas fields along with the pipeline network. He said, currently, Marathon operates four onshore gas fields on the Kenai Peninsula including the Kenai cannery loop, Beaver Creek and Sterling gas fields. Marathon also operates 90 miles of gas gathering line which transports the natural gas to market. He said Marathon employs 35 people, with 11 employees working in the Kenai Peninsula. He said this is a drastic change, since December of 1994, when there were 142 Marathon employees in Alaska. He said a consolidation of operations granted UNOCAL the operation of two offshore platforms and one onshore production facility while Marathon retained ownership. MR. KOVACEVICH said in 1995, Marathon's net gas production was a 131 million cubic feet of gas per day and 8,700 barrels per oil per day as compared to the 1990 gas production rate of 132 million cubic feet per day and 10,100 barrels of oil per day. He said the majority of oil was sold to UNOCAL with a small amount of produced onshore oil being sold to the Tesoro refinery. A portion of the gas is sold to ENSTAR for distribution in the Anchorage and Kenai markets and sold to Chugach Power. Thirty percent of the natural gas is supplied to the Phillips plant for conversion to liquid natural gas (LNG) which is exported to Japan. MR. KOVACEVICH said the primary goal, for the future of the Kenai Peninsula, is to explore and develop new supplies of natural gas allowING Marathon to maintain and potentially add to the daily sales volumes. He said as gas supplies become more difficult to find, the existing infrastructure will allow his company to find and produce more gas in an environmentally sound and economic manner. He said, within the next week, an exploration well will be drilled on a recently obtained acreage four miles south of Clam Gulch. He said Marathon is continuing to evaluate other areas for potential drilling. DAVE PERKINS, Manager, Marathon Alaska said his company established their first Alaskan office in 1959. He said numerous investments have occurred over that time. He said Marathon co-exists with other industries such as fishing and tourism and that he believed Marathon was a good steward in environmental issues and in industry. He said Marathon can provide natural gas for consumers and continue oil production with UNOCAL. He said the older oil wells Marathon owns need extra work to maintain profitability, employment and make them environmentally sound. MR. PERKINS said, in their exploration activities, Marathon decided to keep the wells onshore and "kick them under the inlet" in consideration of the fishing industry. He said the drilling program does not interfere with the recreational activities of the Kenai area. MR. PERKINS said the issue, from a legislative standpoint, is land acquisition in terms of accessing and utilizing these lands. He said Marathon likes the concept of areawide leasing and areawide best interest findings. He said Marathon is concerned about the air quality, Title 5 Acts, adopted by the EPA and the stringent regulations associated with them. He also mentioned the NPDES permit system. MR. PERKINS expressed concern regarding the business environment in the state and said a tax appeals process should be resolved where businesses can get a de novo type of review when there is a conflict of interest between the taxpayer and the Department of Revenue. BETTY J. GLICK, President, Cook Inlet Regional Citizen Advisory Council (CIRCAC), was next to testify. She said her organization is a non-profit organization and was incorporated in 1990 to meet the mandates of the Oil Pollution Act of 1990 (OPA). She said the OPA describes the membership, the appointment, the process and the structure of CIRCAC. She said the thirteen members are from Anchorage, Kodiak, Homer, Seldovia and Kenai with representation of the Kenai Peninsula Borough and Kodiak Island Borough. She said there is representation from native groups, commercial fishing groups, aquaculture associations, tourism and recreation and from environmental groups. MS. GLICK said, when CIRCAC was first formed, it had a representative from the environmental community. She said because of circumstances and funding agreements, the environmental group resigned and upon that resignation there was not an environmental group participating in CIRCAC until 1994 when she became president. She said this seat comes up for reauthorization this year and CIRCAC has sent out solicitations to 25 different environmental groups. She said two of those solicitations were returned as non- deliverable, 23 others chose to not become certified. She said only four environmental groups responded, and as a result, there was somewhat of a conflict in filling that particular seat. She said the person, who was appointed in 1994, will continue in that capacity until CIRCAC goes through the election process one more time to ensure that the seat is filled by a representative that the environmental groups chooses. MS. GLICK said CIRCAC has "ex-officio" members representing the Department of Environmental Conservation (DEC), Department of Natural Resource (DNR), Division of Emergency Services, Bureau of Land Management, EPA, Minerals Management Service, National Oceanic and Atmospheric Administration, the United States Coast Guard and the United States Forest Service. She said there is good participation from those different agencies at the quarterly meetings and that these members also serve on the committees. She said all work is voluntary in manner. MS. GLICK said OPA 1990 states that the oil industry utilizing the inlet shall fund the CIRCAC up to $1 million. She added that there is another regional resource citizens advisory council in Prince William Sound with a similar structure, but different because they contract specifically with Alyeska Pipeline Service Company for their funding, between $2 million and $3 million. She said CIRCAC deals with all of the oil industries and the charter companies that fund CIRCAC include Cook Inlet Pipeline Company, Kenai Pipeline Company, Phillips Petroleum, Tesoro Alaska Petroleum Company, UNOCAL, Marathon, Chevron, SHELL, Western E&P Incorporated, ARCO Incorporated and the defense fuel supply. She said CIRCAC has entered into a three year contract, the first year was for funding of $637,000 and this year the funding will be at $616,000 due to the reduction of MAPCO funds. MS. GLICK said CIRCAC works through two committees which are mandated through OPA 1990 and include the environmental monitoring committee and the prevention, response, operation and safety committee (PROPS). She said these committees utilize funding to the best of their ability. She read the PROPS mission statement, "the commitment to the prevention of oil spills in Cook Inlet. The committee primary work has involved the development of work plans, projects and studies designed to provide recommendations to minimize the risk of oil spills. The secondary mission of the committee is to review and monitor spill response efforts and the best available technology." Some work topics have included the oil spill contingency review which is an ongoing process within this committee. She said PROPS also reviews the spill, drill exercises, spill response efforts, evaluation of spill response equipment, near shore response pilot development, dispersant and in-situ burning. She said, last year PROPS in conjunction with the Alaska Clean Seas, participated in an in-situ burning demonstration at Prudhoe Bay. MS. GLICK said the environmental monitoring committee is required to develop a comprehensive monitoring program within the Cook Inlet, but are limited by their funding. She said monitoring has been conducted on a regular basis over the last three years, 1993, 1994 and 1995. She said the committee contracted with A. D. Little for 1993 and 1994 and the 1995 report was done by Kinetic Laboratories, Limited. She reiterated that these studies are not as comprehensive as CIRCAC would have liked to do, but the same sites were monitored to see if there was any change and different sites were also selected. She said the studies are not conclusive, but they contain sound science to refute or support other evidence, providing a different view point. She said CIRCAC is trying to come up with a data base of scientific monitoring of the Cook Inlet. TAPE 96-22, SIDE B Number 000 MS. GLICK said CIRCAC has the reputation of "rubber stamping" the oil industry. She said CIRCAC was created to foster a long term partnership between industry, government and citizens following the Exxon Valdez oil spill. She said it was also created to provide citizen oversight of terminal and tanker operations. TAPE 96-23, SIDE A Number 000 MS. GLICK mentioned the 1995 CIRCAC annual report which includes the letter to the EPA regarding the NPDES permit. She said the NPDES permit was already addressed in the committee meeting, but wanted to show the committee the research that CIRCAC had done. She said two years of research has been done on this project, including hearings on this issue. She said the results, concerning the NPDES, are not sided towards or against the industry. She said some results will favor the industry and others favor a more stringent application of the NPDES permit, placing the conclusion on the side of the environmental community. She said this was a major CIRCAC project. MS. GLICK said the report also contains the 1996 environmental monitoring committee's work plan. She said the majority of funding is going to a monitoring program dealing with sampling in the Shelikof Strait, located in the Kodiak area. She said the intertidal structure will also be monitored in the lower Cook Inlet, a modified P-450 methods for sediments and tissues, and a contract with the National Park Service to do a joint project involving sampling on clam beds and other areas of the shore. She referred to other issues including a public outreach project which educates citizens through "AL," the display board and a brochure. She said the brochure includes a survey to get public response. She added that the Coast Guard, upon recertification, complemented CIRCAC on their outreach program. MS. GLICK said the report also contained a work plan for the 1996 PROPS committee which includes contingency plan drill reviews, sea plan control group and near shore response. She said there has been interest in having a near shore response facility in case there is a potential oil spill. She said a pilot program has been done, regarding this issue, in Seldovia. She said CIRCAC would like to put near shore response facilities in other areas and they wrote a letter to Commissioner Gene Burden asking for an expenditure of the 470 Fund for this purpose and said developing near shore facilities would fit well within its intent. She said involvement by the legislature regarding this issue would be helpful as it is an important project to CIRCAC. MS. GLICK said, at their last meeting, CIRCAC developed a resolution regarding tug boats. She said, in Cook Inlet, there has been discussions as to whether there should be tug boats or tug escorts. She said the resolution records CIRCAC's support of the promulgation of a rule and or regulations requiring the placement of a tug boat, capable of year round duty, in the vicinity of oil terminals in Cook Inlet. MS. GLICK said CIRCAC has the ability of entering into a "basic ordering agreement" with the Coast Guard in regards to emergency response. She said, in 1994 discussions with the industry, CIRCAC mentioned the need for an emergency response plan which was reduced because of funding. She said, in working with the Coast Guard, CIRCAC's response capabilities would be enhanced. AL HASTINGS, Director of Oil and Gas, Cook Inlet Region, Incorporated, (CIRI) was next to testify. He said Cook Inlet Region is one of twelve Native Regional Corporations established under the Alaska Natives Claims Settlement Act (ANCSA). He said CIRI has about 6,700 shareholders, half of which live in the greater Cook Inlet area. He said CIRI is the largest private landholder in Cook Inlet with 924,000 acres of surface land and 1.6 million acres of subsurface land. He said CIRI is both a lessor and a lessee on lands and they act in a similar manner to the state when they are a lessor and act as an working interest owner when they are the lessee. He said CIRI either has royalty or working interest ownership in 13 active oil fields in Alaska. MR. HASTINGS said CIRI has been active in the Kenai area for 20 years and have formed partnerships with BP, ARCO, Chevron, Exxon, Marathon, Mobile, Phillips, Shell, Union Texas Petroleum and UNOCAL over the years. MR. HASTINGS said he would discuss the exploration aspect. He said CIRI participated with ARCO in drilling an exploratory well in the north end of Swanson River, the Buffalo Head well and that well is temporarily abandoned. In 1994, an area of mutual interest agreement was signed with Union Texas Petroleum (UTP) covering close to 340,00 acres on the Kenai Peninsula. He said, at this time, UTP has taken about 14,500 acres and have the option on another 75,000 acres. Union Texas Petroleum has also been active in the last three state lease sales to consolidate their land position on their potential land prospects. He said they have spent about $6 million gathering data, reprocessing data and preparing to pursue exploration activities. He said if Sale 85-A continues for December, UTP plans exploratory drilling in 1997 MR. HASTINGS said ARCO has 25,000 acres under lease from his corporation in McCaulty near Tyonek. He said ARCO is evaluating the oil and gas potential in that area. He said the state lease sales are very important to CIRI and added that when the land selection process took place, under statehood and ANCSA, the land received was in a checkerboard pattern. He said geological prospects overlap land ownerships, the CIRI lands and the state lands. He said CIRI supports areawide leasing, as annual leasing is the best way to tap available resources. MR. HASTINGS expressed concern over the possible loss of infrastructure in the Cook Inlet because CIRI would lose their potential resources. He said this infrastructure includes the mechanical structure, the labor force, service industry and all the other people who provide skills to operations. He said CIRI is hopeful and optimistic that the increased exploration activity by ARCO, Marathon, Stewart, UNOCAL and UTP will lead to discoveries which will provide jobs, revenues, taxes and continued oil industry life in the Cook Inlet. BILL STAMPS, Board Member, Alaska Support Industry Alliance, Chapter Officer, Kenai Chapter, Alaska Support Industry Alliance, was next to testify. He repeated his testimony saying in 1994, the oil and gas industry accounted for $292.3 million in revenue for the Kenai Peninsula Borough. The oil and gas extraction accounted for estimated salaries of $64.6 million, the manufacturing section accounted for $36.7 million and the service section accounted for $191 million. He said the oil industry accounts for only 36 percent of the borough's work force, yet account for 41 percent of the work force revenues. He said in 1994, the top nine out of ten taxpayers in the borough were oil and gas companies, accounting for approximately 33 percent of the borough's assessed value and said the revenue derived from property tax was $8.7 million. MR. STAMPS said, over the past nine years, from 1986 to 1994 the fish processing industry averaged 1,010 people and the oil and gas section accounted for 995 people with a 61 percent payroll difference between them. He said in 1988 there were 77 businesses registered and that in 1996 there are 53 businesses which was a decrease of 31 percent. He said the employment figures for 1995 are predicted to resemble this same downward trend. He requested that the legislature help the oil industry in any way possible. DREW SCALZI, President, Kenai Peninsula Borough Assembly, was next to testify. He said oil companies and oil properties add a tremendous amount of revenue to the borough and reiterated Mr. Stamps view of their importance. He said, through the economic development district, the assembly tries to enhance every portion of their economy. He said the Kenai Peninsula Borough is only second in the state with accessed value per capita, somewhere around $72,000 per capita. The first area being the North Slope and the third area being Ketchikan. MR. SCALZI said the borough supports a tourist industry, it supports a commercial fishing industry with value "addedness" and supports the oil industry through the economic development district. He said the assembly encourages incentives for old and marginal fields. He said SB 308 and lease Sale 78, which came up in the last few years, brought a lot of adverse attention to the borough. He said, upon research of the findings, there were good reasons to object to some of the things in SB 308 and added that, from the fishing perspective, there were good reason to object to some of the things in lease Sale 78. He said the fishing industry did not take an opposition to the oil industry, but to the location of some of the tracts. He said negotiations, regarding this issue, are continuing today. MR. SCALZI said the borough supports the oil industry. He said the assembly is following the legislative events and encourages all the support the legislature can provide. JOHN WILLIAMS, Mayor, City of Kenai, was next to testify. He said the tax base derived from the oil industry was more than 50 percent nine years ago, and today it represents less than 35 percent. He said the peninsula has grown to around 50,000 people and has 38 schools to support. He said the oil industry is the cornerstone to the peninsula's economy. MR. WILLIAMS said the NPDES permit affects the city of Kenai as well as the oil industry. He said when the city makes modifications to their sewage and water treatment, there is always the possibility that it will have to be redone or modified whenever the final issue of the NPDES permit gets resolved. He said the Kenai Peninsula Borough would like some of their waste liquids processed through their plant, but the issue has been unresolved because of the lack of closure regarding the NPDES permit requirements. He said the borough supported HJR 59.