Legislature(2005 - 2006)FBX LIO Conf Rm
04/08/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HCR2 | |
| SB144 | |
| SB103 | |
| SB110 | |
| SB155 | |
| SB70 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 71 | TELECONFERENCED | |
| + | SB 130 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 144 | TELECONFERENCED | |
| += | HCR 2 | TELECONFERENCED | |
| += | SB 70 | TELECONFERENCED | |
| += | SB 103 | TELECONFERENCED | |
| += | SB 110 | TELECONFERENCED | |
| += | SB 155 | TELECONFERENCED | |
9:37:26 AM SENATE BILL NO. 110 "An Act relating to regulation of the discharge of pollutants under the National Pollutant Discharge Elimination System; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. KURT FREDRIKSSON, Commissioner, Department of Environmental Conservation, read testimony into the record as follows. Mr. Chairman, members of the Committee, I am pleased to testify today in support of Senate Bill 110, National Pollutant Discharge Elimination System (NPDES) Assumption. My testimony will focus on why Governor Murkowski and I believe passage of SB 110 will strengthen the ability of Alaskans to protect the State's water resources and build a strong economy. With me today is Dan Easton, Director of the Department's Division of Water to provide you with the details of how this bill was developed. The federal Clean Water Act requires that all discharges to surface waters must be permitted under the National Pollutant Discharge Elimination System (NPDES) permit program to ensure water quality protection. Community sewage treatment facilities, construction of storm water drains on more than one acre, seafood processors, log transfer facilities, ballast water discharge facilities, mining operations, oil and gas operations, and fish hatcheries all must have NPDES permits to operate. There are currently over 2300 regulated permit holders in Alaska under the NPDES permit program. The federal Clean Water Act is founded on the principle that the rights of states to manage water quality within their borders should be protected. The federal law is designed to accomplish uniform environmental quality goals nationwide using pollution controls tailored to each state's unique circumstances. The Clean Water Act includes provisions for a state to assume primacy from the federal Environmental Protection Agency (EPA) for issuing NPDES permits for discharges to surface waters within state's borders. In states that do not assume primacy, EPA runs the NPDES program. The mission and duties of the Department of Environmental Conservation to adopt and enforce standards for the control of water pollution is clearly spelled out in Alaska law (AS 44.46.020). However, like four other states, Alaska has never pursued the opportunity provided by the federal Clean Water Act to shape the NPDES water pollution control permit program to fit our state's unique circumstances. SB 110 would allow DEC to develop a comprehensive water quality protection program where all program components, from legislative budgeting and oversight to fieldwork and enforcement, are conducted here in the state, where Alaskans can shape solutions to fit Alaska's challenges. Without primacy, the federal Environmental Protection Agency (EPA) is the water authority in Alaska. EPA makes the wastewater permitting rules in Alaska. EPA decides what's important and what's not. EPA decides the permit review timeframes. EPA decides what goes into the permits and who gets inspected. EPA decides how Alaska's water quality standards will be applied to specific discharges. EPA sets Alaska's water quality priorities. As you know, Governor Murkowski has an ambitious agenda for the responsible development of Alaska's natural resources. The Governor has pledged to improve permit efficiency without a rollback of environmental protection. However, as long as EPA runs the NPDES permit program in Alaska, DEC simply cannot fix what we don't control. We can't establish appropriate performance measures with the legislature for timely permit actions, we can't establish the state's annual permit and environmental protection priorities, and we can't offer a timely appeal process that allows conflicts to be judged by Alaskans in Alaska. A state run NPDES permit program won't be free. When EPA issues permits in Alaska the costs are borne by the US taxpayer. A state permit program will shift authority and responsibility to the state, but it will also shift some of the costs to permit holders and the State. SB 110 is an important investment in the stewardship of Alaska's environment and development of our natural resources. It provides DEC with the human and fiscal resources to reform the NPDES permit program to better align regulatory requirements with real Alaskan conditions and the real risks to Alaska's water quality. A state permit program will be based on Alaska's priorities - not national "one-size-fits- all" priorities. DEC's permit priorities, level of effort and performance measures would be subject to annual review and approval by Alaskan's through their elected officials in the state Legislature. Federal programs do not adapt easily to Alaska. National goals do not always address our greatest needs. A state run program will place permit decision makers closer to the Alaskan public and regulated permit holders. Alaska's elected representatives have made clear our commitment to environmental protection and our responsibility to develop our resource development, we must accept responsibility for managing our water resources. That means assuming primacy for the MPDES program. NPDES primacy means: · A faster, more effective program for protecting our water resources. · Alaskan industries and communities working with Alaskan permitters on permits that reflect our priorities and unique conditions - permits that make sense for Alaska. · Less emphasis on cumbersome process and more emphasis on results. · Less emphasis on one-size-fits-all permits and more emphasis on specific risks to Alaska's environment. · Permitting accountability - accountability to Alaska's elected officials and the public. It's time to invest in the development of Alaska's resources by taking responsibility for protecting Alaska's environment from the federal government. I respectfully ask that you vote to pass SB 110. 9:44:18 AM Senator Bunde requested additional information regarding the fiscal notes. 9:44:32 AM DAN EASTON, Director, Division of Water, Department of Environmental Conservation, read testimony into the record as follows. Senate Bill 110 is a result of years of effort starting with Senate Bill 326. Senate Bill 326 was enacted in 2002 and effective January 1, 2003. It directed DEC to evaluate the potential benefits and consequences of the state assuming primacy for the NPDES program. The Department released its report in January 2004 recommending that the State seek program primacy. Last year, the Legislature passed House Bill 546 directing the State to apply for partial NPDES primacy just for the timber sector. The fiscal note with the bill provided a full-time position and a combination of state and one-time federal grant funds for the effort. As it turns out, DEC has assumed a more prominent role in permitting timber operations, but we have been notified by EPA that the "partial primacy" rules won't allow us to pursue primacy just for the timber sector. In November 2004, DEC formed the NPDES Primacy Work Group, an advisory workgroup tasked with examining the concerns, costs and benefits of state primacy specifically from the permittee perspective. The work group included members from each major NPDES permittee groups: The Alaska Oil and Gas Association, The Alaska Forest Association, The Alaska Miners Association, The Associated General Contractors of Alaska, The Pacific Seafood Processors Association, The Alaska Water and Wastewater Management Association, and The Alaska Native Tribal Health Consortium. Public notice was provided and the meetings were open to the public. Workgroup proceedings, findings and recommendations were captures in a report completed in January of this year. In the end, support for state assumption of the NPDES program varied between permittee sectors. Certain sectors saw substantial benefit and strongly supported moving ahead. Others saw less benefit, but would not object to state primacy. All sectors agreed that certain elements should be incorporated into a state program. Senate Bill 110 is the product of the hard work of our staff and many other Alaskans all focused on the effort that started with Senate Bill 326 over two years ago. The bill reflects the recommendation of the NPDES work group that the State pursue primacy. It also reflects the recommendations of the work group as to specific characteristics that should be incorporated into the program design. I'd like to conclude with a few notes on the fiscal note… The fiscal impact of primacy raises the two basic fiscal questions of: "How much?" and "Who pays?" Starting with the question of "How much?"… The Department's budget currently includes about $3.3 million and 30 staff devoted to activities that would contribute to, and would be considered a part of, a state NPDES permitting program. (Those figures include the resources provided last year for the timber primacy effort.) The Senate Bill 326 report took a hard look at what additional resources the state would need to operate an NPDES program. Resource requirements were estimated using EPA "workload models" as well as information from other state programs. This analysis arrived at a final figure for total program resources, including the $3.3 million and 30 positions already devoted to NPDES work, of $4.8 million and 43 positions. EPA includes whether a State has devoted sufficient resources to the program as one consideration in whether to approve an application for state primacy. Preliminary indications from EPA are that the proposed budget is sufficient. Bridging the gap between current resources ($3.3 billion and 30 positions) and what is required to operate a state program ($4.8 million and 43 positions) will require an additional $1.5 million and 13 new positions. Those are the new resources included in the fiscal note. As for the question of "Who pays?"… The fiscal note reflects the current resource agency fee policy of charging permittees for "direct costs." This policy was established in statute by House Bill 361 in the year 2000. Permittees already pay substantial fees for the state portion of the shared EPA/DEC program. With primacy, our direct costs increase and the fees paid by permittees will increase on average by a factor of 1.8. The distribution of funding sources reflected in the fiscal note also reflects the fact that the State will not receive any additional federal grant dollars with primacy. We get as much federal funding now, as we would get with primacy. The result of adding the new resources provided by the fiscal note to the current state program will be a primacy program that is funded roughly half (44%) through a combination of permitting fees and federal grant funds, and half (56%) through general funds. We have come a long ways over the last two years. The promise of State primacy is great. We would welcome the opportunity to create a truly all-Alaskan water permitting program as envisioned by Senate Bill 110. 9:51:20 AM Senator Bunde thanked the Department for its efforts in support of achieving State primacy. Senator Bunde noted that revenue is anticipated to begin in FY 08 and continue to increase through FY 11. He asked if the revenue would continue to increase beyond that date and that the permit fees would provide adequate funding for the 13 new positions. 9:52:07 AM Mr. Easton predicted that unless a statutory change is made to the resource agency fee policy, the $300,000 shown as program receipts would be the "steady" revenue amount generated from this program. Senator Bunde remarked that the policy of the legislature is that license and permit programs be self-supported. The companies receiving these permits should make a "healthy profit" and therefore general funds should not subsidize these efforts. 9:53:21 AM Senator Hoffman pointed out that the $874,200 cost of FY 06 reflected in the Department of Environmental Conservation fiscal note, dated 4/21/05, would fund the program for six months. The annual cost would increase to $1.5 million. 9:53:38 AM Senator Bunde agreed and noted personnel services cost of $441,100 for FY 06. 9:54:06 AM Senator Stedman commented that large dollar amounts receive attention. He requested a breakdown of the total revenue and the "draw" on general funds for this proposal to demonstrate the division of expenses between industry and the State. 9:54:48 AM Mr. Easton stated that two issues are involved, one being the fiscal note, which shows an incremental increase over the current program. He did not have the information Senator Stedman requested. He informed that once the transition of primacy is completed and the maximum program receipts were collected, the annual operation of the program would be $4.8 million. Of that amount, 16 percent would be funded from fees, 28 percent from federal fund sources and 56 percent would be general funds. He noted these figures differ from those reflected in the fiscal note. Co-Chair Green asked if this is "just the increment". Mr. Easton replied this is the total program. 9:56:14 AM Senator Hoffman questioned the report finding that the operating cost of the program would be $4.8 million and require 43 positions and the fiscal note listing of the program cost at $1.5 million and 13 positions. He asked how the proposed reductions were accomplished. 9:57:06 AM Mr. Easton responded that the Department currently has 30 positions and $3.3 million appropriated to the State's existing water permitting activities and that would subsequently be devoted to the new primacy program. The fiscal note reflects the additional 13 positions and $1.5 million necessary to total the 43 positions and $4.8 million required to operate the program. 9:57:45 AM Co-Chair Green suggested that comparison would be easier if the fiscal note contained a column showing the current increments for FY 05. 9:58:12 AM Co-Chair Wilken noted strong support for this bill and asked if any opposition has been raised. 9:58:36 AM Mr. Fredriksson replied that questions have been posed, although disapproval has not necessarily been voiced. The questions have related to the fiscal note and how the figures reflect the total program. 9:59:03 AM Mr. Easton was hesitant to represent other positions. He had heard recommendations to amend the bill offered, but had not heard opposition. 9:59:29 AM Co-Chair Green noted that several people were signed up to testify. 9:59:36 AM Co-Chair Wilken understood that the EPA imposes fines for violations that total an average of approximately $500,000 per year. While he hoped that once the State assumes primacy, compliance would improve and fines for violations would decrease; however the fines are not reflected in the Department of Environmental Conservation fiscal note. He understood the revenues would be deposited to the general fund but the amounts should be shown as an offset to the program costs. 10:00:21 AM Mr. Easton responded that as program compliance improves, the amount of fines for violations collected is reduced. Fines generated are difficult to identify as a revenue source in a fiscal note, although those revenues are worth consideration. 10:00:50 AM Co-Chair Wilken interpreted the fiscal not to indicate the Department did not anticipate any fines. Enforcement activity should be reflected in the fiscal note and would assist in passage of this bill. The concern over the high cost of the proposed program and the fiscal note should reflect that the State and not the federal government would receive the fines. 10:01:31 AM Mr. Easton replied that the revenue collected from the fines would be deposited into the general fund. The fines are not accounted as program receipts and are therefore not included in the fiscal note. 10:01:54 AM Co-Chair Wilken countered that the fiscal note predicts that program receipts would increase to $300,000 per year. It is appropriate to include revenues generated from fines in the fiscal note unless the Department anticipates that no fines would be collected. 10:02:24 AM Mr. Fredriksson asserted that the Department "takes enforcement seriously" as one of six key elements of a good regulatory program. Enforcement processes are in place for other Department programs and would be utilized for this program as well. He offered to provide data on fines collected by the EPA for this program for consideration. 10:03:23 AM Co-Chair Green agreed that regardless of whether revenues from fines are deposited to the general fund, identification of the amounts for the record would provide valuable information. 10:03:41 AM Senator Bunde congratulated the commissioner on his appointment to that position. 10:03:54 AM Senator Bunde cautioned against propagating public assumptions that State Troopers write speeding tickets because the State needs money. He did not want a similar perception for this program. 10:04:33 AM Co-Chair Green suggested the information be reflected as an historical perspective. 10:04:43 AM Senator Bunde noted Section 2 of the bill on page 2, line 10 provides that the Department "may adopt regulations that prescribe reasonable fees". He asked if the intent were to impose fees sufficient to cover the cost of operating this program, whether this could be done through the regulatory process. 10:05:17 AM Mr. Easton replied that fees could be utilized to cover only the "direct" costs as outlined in Section 2. The issue is how much the Department could reasonably charge for the direct services. 10:05:48 AM Senator Bunde asked if personnel services to operate the program would be considered a direct cost. 10:05:57 AM Mr. Easton answered it is not. Direct costs include the time an employee spends in writing out a permit, inspecting the facility, etc. Management, data management, computer systems and response to consumer complaints are examples of activities that are not considered direct costs. 10:06:35 AM Senator Bunde suggested that a new definition of "direct costs" should be considered. This legislation proposes to add 13 new positions to provide this service. He considered this a direct cost. 10:06:59 AM Co-Chair Green recalled other discussions of direct costs and asked if statute prohibits charging an amount other than proposed in this legislation. 10:07:43 AM Mr. Easton deferred to the Department of Law. 10:08:03 AM Senator Stedman cited the percentages of the funding sources for this program: 16 percent from the fees collected from the private sector and 84 percent from government sources. He asked the staff would only be spending 16 percent of their time directly interfacing with applicants and working on the permits. 10:08:45 AM Mr. Easton affirmed. The fiscal note denotes that approximately 19 percent of the activities of the program are direct and "billable", the remaining 81 percent is indirect and not billable. Added to the existing resources of the Department available for this program, the ratio changes to 16 percent direct activities. 10:09:20 AM Senator Stedman wanted to clarify Senator Bunde's comments. 10:09:33 AM Co-Chair Green asked if the Department would prefer the fees be limited to direct costs or instead have the ability to impose higher fees. She asked if the Department had calculated higher fee amounts. 10:09:57 AM Mr. Easton replied the Department had calculated higher fee structures and does not proposed revising the current fee policy. 10:10:11 AM Co-Chair Green asked the amount of the fees if they were to cover the entire cost of the program. 10:10:25 AM Mr. Easton answered the fees would increase a factor of four. 10:10:29 AM Co-Chair Green asked the amount of the current fees. 10:10:34 AM Mr. Easton replied the fees range from $100 to $150 per year up to $4,500 per year. 10:11:09 AM CAMERON LEONARD, Department of Law, testified via teleconference from Fairbanks that the only other law that pertains to this issue is AS 37.10.058(3) defining "direct costs". That statute must be changed to allow the direct costs to include other activities. That statute pertains to other agencies as well and the consequences of any changes should be considered. 10:12:05 AM Co-Chair Green asked if it would be legally possible to stipulate that the fees cover the applicable direct cost plus an additional amount. 10:12:27 AM Mr. Leonard replied this could legally be done. 10:12:41 AM Co-Chair Green indicated the matter would be further reviewed. 10:12:52 AM Senator Hoffman asked the impact of this legislation on waste disposal managed by small municipalities. 10:13:12 AM Mr. Easton replied that the current fees would increase by a factor of 1.8 for all permittees. In addition, the sewage discharge of many small villages is permitted by the State, but not by the EPA. EPA, "as a matter of workload and priority, hasn't got them"." A "very positive" affect of primacy is that the State's authorization to discharge is the Clean Water Act therefore all water discharges would be "perfectly legal" under the Clean Water Act. 10:14:09 AM Senator Hoffman asked the estimated collective total cost to rural communities. 10:14:21 AM Mr. Easton stated he would provide this information. 10:14:30 AM Senator Olson requested this information as well. 10:14:43 AM Senator Olson spoke to issues of the federal EPA and asked how the Department would avoid the "same trials and tribulations" as the federal government experiences. 10:15:16 AM Mr. Fredriksson answered that the legislature is the "key factor" in the enabling statutes passed. The program would be accountable to the State legislature rather than the US Congress, which is the current authority. 10:15:46 AM MIKE POLLEN, President, NTL Alaska, Inc., testified via teleconference from an offnet location about the environmental testing company located in Fairbanks and his 33 years experience in the field. He referenced a letter dated March 15, 2005 that he sent to Co-Chair Wilken [copy on file], noting it contains specific examples of issues he has observed with the existing NPDES program. He supported passage of the bill. This program must be assumed by the State and the State must "take that level of responsibility" to be "penny wise and not pound foolish". Any of the circumstances highlighted in his letter could easily have cost private industry or the State much more than the amount requested by the Department to assume primacy. Mr. Pollen remarked that significant economic development is pending and each major economic development enterprise, particularly the mining activities, potential for a natural gas pipeline, would require an NPDES permit. Each case has created a situation in which delays, errors and "serious economic disincentives" have occurred. It is time the State assumes the program. This is both an economic and an environment issue and the State could do better. 10:18:37 AM Senator Olson asked if the witness supports the bill as currently drafted. 10:18:49 AM Mr. Pollen responded that although some minor "fine tuning" could be done, he would defer to the Department to make those determinations. Otherwise, he supported this legislation. 10:19:08 AM DICK COOSE, Concerned Alaskans for Resources and Environment (CARE), testified via teleconference from Ketchikan into the record as follows. CARE is a non-profit that was established by local businesses to promote access to our resources. I'm also a retired federal forester and served two terms on the Ketchikan [Gateway] Borough Assembly. Madam Chair, I urge the Committee to support SB 110. We support the stable act of taking over the NPDES program from the federal EPA. This is only one of several programs under which the federal government continues to treat the state of Alaska like a territory. The state of Alaska needs to control its own future and not the feds. Also, I assume that you will review the NPDES primacy workshop group report that was dated February 24 of '05. So I'm not going to repeat any of that information, which supports basically State primacy. But I do want to make a couple points. The first one being that local, that being State, knowledge and experience of and with resource management development and protection is better than that of the feds or EPA. Second, DEC, in my opinion, uses better science and works better with the people in the permitting process than EPA. EPA appears to be here to say no and delay and DEC tends to ask, "How can we do it and still meet the intent of the law." I'd like to give you a Ketchikan example of EPA science and local knowledge. Currently, several Ketchikan fish processors have EPA permits to discharge fish waste. The problem is that under the EPA requirements, the fish waste simply piles up on the bottom and does not decompose in a timely manner and in the warm summer weather, burps a nice healthy smell. These EPA requirements were established in the mid '80s and they require grinding of the fish waste up like flour and then limits the deposit on the bottom to a one-acre spot. Before grinding was required, this was less of a problem, mainly because the fish waste was only chopped up and the critters on the bottom ate most of it. At a meeting within the last three or four years with EPA, they admitted here in Ketchikan, that they had no science or anything to support the fine grinding or the one acre limitation. The one-acre limitation also affects our log transfer down here so I guess I have to ask, "Where is the science based upon." [The] third point and last point is on funding. The natural resource [indiscernible] wealth of this State and our resources must be wisely managed, developed and protected to provide for Alaska's long-term financial health. DEC, DNR, and ADF&G are the State agencies who are directly involved in this management development and protection. The State funding of these three key departments is a pittance compared to the total State budget, yet they are key to Alaska's future financial health and economy. You will need to fund DEC to manage the NPDES program, but it will benefit the State many- fold. Consider the importance of these three departments to our future. All should have adequate funding to accomplish their specified required missions, but they should also be held accountable for the mission accomplished. Madam Chair, I encourage you to pass SB 110. 10:23:04 AM STAN JONES, Legislative Affairs Coordinator, Prince William Sound Regional Citizens' Advisory Counsel, testified via teleconference from Anchorage about the non-profit organization charged with ensuring the safe operation of industrial vessels in the Prince William Sound area. The Valdez Marine Terminal is a large facility that undertakes water treatment and would be affected by this legislation. He referenced a letter dated March 30, 2005 from the Counsel addressed to Senator Green, [copy on file] and noted that although he did not oppose this legislation, he had concerns. Under the existing program, the EPA is required to consult with the Counsel on all permitting activities, site-specific regulations and other matters in the area. This is important in enabling the Counsel to fulfill its mission and this legislation should be amended to provide a similar requirement for the Department of Environmental Conservation. If this does not occur, the Counsel would request the EPA attach such a provision as a condition of the NPDES transfer. Mr. Jones then spoke to the fiscal impact. He pointed out that the federal government is considering funding reductions to the EPA budget. This would provide less funding to offer as grants to state-operated programs. His concern was that this program would be under funded or that funds would be diverted from other programs, such as spill prevention and response. 10:28:25 AM MIKE MUNGER, Executive Director, Cook Inlet Regional Citizens' Advisory Counsel, testified via teleconference from Kenai, that the Counsel is similar to the Prince William Sound organization, although this represents affected parties in the Cook Inlet area. After reviewing this bill, the Counsel offered the following recommendations, which are similar to those submitted by Mr. Jones. The cooperative relationship the advisory counsel has developed with the Department of Environmental Conservation should continue. The Department agreed to do so, but the Counsel requests a formal agreement included in this legislation. This would ensure citizen oversight in the permitting process. Mr. Munger spoke to the importance that the best available technology must be used in the monitoring of the affluence of the oil industry discharges and that environmental monitoring should be required. He also recommended careful analysis of all financial implications to ensure that the program is adequately funded and staffed, and not done so to the detriment of other Department programs. He noted the Counsel submitted a position statement on this legislation [copy on file.] 10:31:16 AM STEVE BORELL, Alaska Miners Association, testified via teleconference from an offnet location that he was part of the aforementioned working group and that the Association supports this legislation. He referenced a letter submitted to the Committee dated April 4, 2005 [copy on file] and accompanying article titled "Should the State of Alaska Assume the NPDES Permit Program?" [copy on file], written by Larry Hartig, Attorney. The article describes various reasons why the Association has determined that primacy is appropriate. Mr. Borell noted statute requires that the industry pay the direct costs of the permitting activities and details how those direct costs would be determined. Three years were spend developing those statutes and he would be "extremely disappointed" if those statutes were amended. The provisions of those statutes were utilized as a basis for the Association "coming to the table" to consider the primacy issue. 10:33:22 AM EARL HUBBARD, Vice President, Trident Seafoods Corporation, testified via teleconference from offnet location that he oversees regulatory affairs for the company. He listed his experience as a former state, federal and United Nations regulator. Trident is the largest and most diversified seafood company operating in Alaska. He offered to present his comments at a later hearing. 10:34:26 AM Co-Chair Green indicated the bill would be addressed again and the witness would be heard at that time. 10:34:44 AM Co-Chair Green noted a committee substitute would be distributed. The bill was HELD in Committee.
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