Legislature(2003 - 2004)
03/12/2003 03:35 PM Senate RES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 44-OIL SPILL RESPONSE COST RECOVERY
SENATOR DONALD OLSON, sponsor of SB 44, said he introduced this
measure in response to concerns that in certain circumstances,
the Department of Environmental Conservation (DEC) needs more
flexibility to recover the actual costs of oil spill containment
and clean up. Under the current statutes, DEC is required to
promptly seek reimbursement for the state's oil spill response
costs from persons or entities that have caused or are liable
for the spill. The current statutes do not allow DEC to adjust
or waive reimbursement requirements in situations where the
costs far exceed the financial resources of the individual or
the responsible entity. The resulting financial constraints
could cause serious social impacts that affect essential local
government programs.
SENATOR OLSON explained that DEC currently utilizes the scope of
the attorney general's authority to waive or reduce oil spill
recovery costs. The attorney general has to determine these
actions without specific regulatory guidelines or standards that
are known or available to the public, resulting in inconsistent
actions. For example, Little Diomede is on a payment program for
34 years for a spill, as compared to Tetlin and Stevens Village
where the attorney general decided not to pursue those cases so
that staff time could be used in a more beneficial manner. SB 44
provides a process whereby DEC can consider waiving or reducing
the reimbursement requirements in special circumstances in a
consistent manner. The process relies on the explicit public
interest findings by DEC where a reduction or waiver is
warranted.
SENATOR OLSON said the provisions in SB 44 allow DEC to consider
waiving costs in the following circumstances:
· where the expenses are not recoverable, such as from a
federal source of funds
· where an individual is responsible for a tank system
containing residential heating fuel for less than five
families
· for an unincorporated community, a village, or a
municipality with a population of less than 5,000
· where the expenses incurred by DEC are less than $3,000
SENATOR OLSON stressed that SB 44 does not allow blanket
exemptions or automatic waivers.
SENATOR DYSON asked if Senator Olson's intent is consistency.
SENATOR OLSON said consistency is one of his goals, as well as
creating a "black and white" way to make determinations. In
addition, his intent is to prevent the attorney general's work
schedule from being burdened by time spent trying to determine
the feasibility of recovering the costs. He noted one community
is on a 34-year payment plan while another, that is more vocal,
is paying nothing.
SENATOR DYSON said his reading of SB 44 is that Senator Olson is
also hoping that some communities will not have to pay the full
cost of any amount of the damage.
SENATOR OLSON said that is an extreme view of what SB 44 does.
However, it gives DEC the discretion to decide whether it is
worth trying to recover the costs, depending on the financial
situation of the violator. He pointed out that DEC will expend
money trying to collect over a protracted time period in some
cases. He said the fact that Little Diomede will be paying
interest for 34 years on a small amount of money does not make
sense. Right now, DEC has no discretion.
SENATOR DYSON said if DEC waived the costs for the two villages,
it must have the capacity to forego charging a community for the
cost of the oil recovery.
SENATOR OLSON noted Senator Dyson's concerns are valid. He said
he cannot find any written guidelines used by DEC to make
determinations, which is the reason for SB 44. He said his
intent is not to exempt someone who is responsible for an oil
spill if that person or entity is capable of paying.
SENATOR DYSON asked Senator Olson if he considered, when looking
for a remedy, bankruptcy protections.
SENATOR OLSON said the original statute does not make it any
easier to shrug the costs associated with oil spill cleanup for
someone who files bankruptcy.
SENATOR BEN STEVENS referred to language on page 2, Section 2,
and questioned why a municipality with a population under 5,000
can be exempted. He pointed out that a municipality of that size
could have very large oil tanks.
CHAIR OGAN then questioned the provision that says, "if the
expenses incurred by the department are less than $3,000," and
asked if that includes the cost of clean up.
SENATOR OLSON noted the thought behind the waiver for a
municipality with a population of 5,000 or less was that a
municipality could be a second-class city.
SENATOR BEN STEVENS said that few communities have a population
above 3,000.
CHAIR OGAN said Palmer just recently broke the 5,000-resident
population barrier within its city limits.
SENATOR BEN STEVENS said he is curious why that number was used
because some areas on the road system have a commercial entity
that operates the distribution network. He asked if such an
entity would be exempt under SB 44.
SENATOR OLSON said any town in Alaska with a population of 5,000
is considered to be sizeable but many of Alaska's rural
communities are poised to grow. However, the intent of SB 44 is
to give DEC broad discretion. He said he assumes Palmer is a
first class city with different requirements and guidelines.
SENATOR SEEKINS asked for the definition of an "unincorporated
community" and whether that could include a commune. He
expressed concern that the bill "opens the barn door wide."
CHAIR OGAN was unsure whether a definition of "unincorporation
community" exists in statute.
SENATOR OLSON said a definition exists but he did not have it at
this time.
SENATOR ELTON said he agrees with Senator Olson's intent to give
more latitude to DEC, but he expressed concern that the
provision that limits DEC's expenses to $3,000 is too
restrictive. He pointed out if a small spill of residential
heating oil occurred in King Cove, the cost of travel and per
diem would run about $3,000. He questioned whether SB 44 will
create a situation where the legislature is telling DEC that if
the cost is over $3,000, it has no latitude and must recover
costs.
SENATOR OLSON agreed that is a valid concern, but said the bill
does not state that DEC must take action if the cost is less
than $3,000.
SENATOR ELTON said if travel costs are $3,200 or $3,300, DEC
will have to make an attempt to recover fees.
CHAIR OGAN asked a representative from DEC to answer questions.
MR. LARRY DIETRICK, Acting Director of the Division of Spill
Prevention and Response for DEC, read the following testimony
into the record.
DEC is required by statute to seek reimbursement for
its expenses in cleaning up or containing the
discharge of oil or hazardous substance. Alaska
statutes, like the federal laws and laws of most other
states, are based on the principle that the spiller
pays for the cost of clean up. It is a self-sustaining
mechanism by which costs incurred by the state are
recovered from the spiller and returned to the state's
response fund to ultimately avoid the use of public
funds for clean up.
CHAIR OGAN asked if that is the 470 fund.
MR. DIETRICK said it is. He continued.
The department very much appreciates being able to
work with the sponsor of this legislation to examine
ways to provide exceptions or guidelines to this
spiller pays, self-sustaining principle established in
the statutes. We have been working with the sponsor.
We appreciate his intent to provide some guidelines.
It's not an easy thing to do and we have been
interactive with him in an attempt to try to get a
system to meet his intent. It will help us all to
provide the clarity that we are trying to see.
This bill would establish, in our opinion, certain
exemptions for certain types of discharges and it sets
a threshold below which the department would not
recover costs. Currently we do take into account the
ability to pay, the potential costs to the state of
pursuing reimbursement or other mitigating factors
when determining whether or not to pursue cost
recovery in any given case. We currently exercise this
discretionary authority on a case-by-case basis.
After careful consideration, we've concluded that
establishing the exemptions as currently proposed, and
the threshold below which no cost recovery is
authorized will shift the cost of clean up to the
state along with the corresponding fiscal impacts.
Exemptions and thresholds we believe remove some of
the flexibility we have right now to seek recovery of
costs based on the circumstances of each case. While
we appreciate the idea of getting good guidelines and
would welcome those guidelines, I think the work that
we've done with the sponsor to date illustrates the
complexity of trying to develop those. There are so
many site-specific circumstances; it becomes a very
big challenge to do that. We appreciate the scrutiny
and the good faith efforts to improve the system, but
we've concluded that the legislation as currently
drafted will increase our costs and eliminate, we
believe, some of the flexibility we have now to take
care of individual site-specific, case-by-case
evaluations. Thank you very much Mr. Chair.
CHAIR OGAN stated that having a cost recovery provision acts as
a hammer and motivates individuals and entities to comply. He
said he recognizes how large an issue leaky tanks are in rural
Alaska and, although the Denali Commission has alleviated some
of the problem, it is still huge. He asked Mr. Dietrick if he is
also concerned that exempting communities will act as a
disincentive to do a good job.
MR. DIETRICK said he believes the system the state has created
has been very sensitive to Alaska businesses and municipalities
with regard to cost recovery and the problems with fuel systems
in rural Alaska. He said a clear example of the compassion shown
is the financial assistance program created by the legislature
for underground storage tanks. The state has also embarked on a
course of action to upgrade leaking above-ground storage tanks
in rural Alaska through the Denali Commission using federal
funding. That problem is estimated to cost $200 million to fix.
TAPE 03-14, SIDE A
MR. DIETRICK said DEC also tries to use a high degree of
compassion based on ability to pay. He noted the reason Little
Diomede has a $200 per month bill is that DEC negotiated a
workable arrangement with that village. In cases where an entity
does not have the ability to pay, DEC waives those costs on a
case-by-case basis. That is part of DEC's challenge. It
recognizes Alaska's unique situation. DEC is not opposed to
guidelines but the circumstances are highly variable.
CHAIR OGAN noted that Little Diomede's payment of $200 per month
will equate to $20 per month in 34 years after inflation.
MR. DIETRICK said those payments were dictated by affordability
and the intent of the statute to seek cost recovery.
SENATOR DYSON asked if interest is being charged on the unpaid
balance in the Little Diomede case.
MR. DIETRICK deferred to the assistant attorney general for an
answer.
SENATOR DYSON asked Mr. Dietrick if DEC's criteria includes
whether cost recovery will exceed the cost of administration.
MR. DIETRICK said that is one criteria used. If the cost of
recovery exceeds the amount to be recovered, it is not pursued.
DEC uses, as a general guideline, a cost threshold of about
$1,000. He said if the recovery cost exceeds $1,000, it is a
prime candidate for pursuing cost recovery.
SENATOR DYSON asked if DEC is comfortable with the 5,000
population cutoff mark.
MR. DIETRICK said DEC would normally conclude that a community
of 5,000 has some ability to pay but other factors would have to
be taken into consideration, such as extraordinary clean up
costs and the facts behind the spill.
SENATOR DYSON asked if DEC considers that a community or entity
acted recklessly and, if so, whether DEC would try to collect
higher recovery costs to teach a lesson.
MR. DIETRICK said penalties apply if a spill was intentional or
willful. Those penalties are considered separately from and in
addition to the clean up cost.
CHAIR OGAN asked if a lack of culpability but negligence is
factored into the cost recovery.
MR. DIETRICK said that would be taken into consideration.
SENATOR ELTON referred to language on page 2, line 24, "or (3)
the expenses incurred by the department were less than $3,000"
and repeated his concern that language would preclude DEC from
waiving cost recovery if department expenses were $3,100. He
gave King Cove as an example and asked if DEC's travel expenses
are $3,500, and DEC determined that King Cove cannot pay,
whether this language would preclude DEC from waiving costs.
MR. DIETRICK said DEC wrestled with that language and
interpreted that provision to mean that the first $2,999 would
be waived. DEC would pursue cost recovery for any costs over
that amount. SB 44 limits the liability of the spiller at the
low end but does not insulate the spiller for costs that exceed
$3,000.
SENATOR ELTON expressed surprise at that interpretation.
SENATOR WAGONER asked if service stations are now required to do
pressure tests on their tanks on a regular basis.
MR. DIETRICK said he believes Senator Wagoner is referring to
underground storage tanks, which are regulated under federal
law. DEC completed the removal and upgrade of 6,000 tanks in
Alaska in 1998. DEC originally had 7,000 on the list, about
1,000 tanks fall into that category now and are subject to the
new requirements for leak detection, overfill, corrosion
monitoring, inventory controls and other controls. All of the
new tanks have to meet those requirements so hopefully that will
result in no future spills.
SENATOR WAGONER asked if the same type of pressure test could be
performed on the tanks that SB 44 applies to before filling the
tank.
MR. DIETRICK said he was referencing commercial tanks that are
subject to those requirements. He believes the sponsor's intent
is to apply SB 44 to non-commercial tanks, which are not legally
required to follow the federal requirements.
SENATOR WAGONER said he assumed that Little Diomede's tank was
not commercial but a centralized system for the village.
MR. DIETRICK said the Little Diomede tanks are above-ground
storage tanks, which are not regulated by DEC unless they exceed
420,000 gallons.
CHAIR OGAN announced that he would hold SB 44 in committee.
SENATOR OLSON told members that DEC's interpretation of Section
2 on page 2, as described by Mr. Dietrick, regarding the
expenses of $3,000, was not his intent. Regarding the incident
at Little Diomede, he noted the tanks did not leak, a valve on a
line downstream ruptured. The tanks had nothing to do with the
spill and the spill was not even discovered until the snow began
to melt. He noted that Mr. Dietrick said there was a threshold
level of the cost recovery that DEC would not go after, however,
he did not intend to put any minimum amount in the bill. He
asked Mr. Dietrick to respond.
MR. DIETRICK said that DEC's understanding is that the first
criteria would be that the expenses that would be incurred would
not be recoverable from the federal fund.
SENATOR OLSON asked Mr. Dietrick to cite the language that
applies to the federal funds.
MR. DIETRICK said that language is on page 2, line 13. He then
stated:
Criteria number one then - that is being carved out
here - is the person here that would qualify would be
an individual. The fuel would have to be residential
heating oil. And the tank, from which the fuel leaked,
would have to serve fewer than five families and the
spill would not be the result of overfilling. That
would be the criteria that would be met there for them
to waive costs.
The second one then, as we understand it, the
responsible party would be a municipality, i.e.
unincorporated community, village, or municipality
with a population under 5,000. It again applies only
to residential heating oil. There [are] no limitations
- it presumably is from any tank system as opposed to
number one, which is explicit that it would be
residential oil for fewer than five families. This
could be any tank and we have a lot of tanks in rural
Alaska with residential fuel that may be serving a lot
of different uses - and, again, the discharge was not
the result of a tank overfill. So, in any given case,
we would apply these given criteria and, if they fit,
if the circumstances fit these then we understand - we
would conclude then that the cost recovery would be
waived, if we properly understand your intent.
SENATOR ELTON said he reads it to mean that DEC can then make a
determination to waive, but DEC is not required to waive.
MR. DIETRICK said he would agree.
SENATOR OLSON said Mr. Dietrick testified that SB 44 will limit
DEC's flexibility and asked him to elaborate. He said that was
not his intent.
MR. DIETRICK said he was saying that DEC has a lot of
flexibility to consider these and other criteria now. DEC sees
SB 44 as limiting what it can consider in any given case.
CHAIR OGAN announced that he would hold SB 44 in committee and
that the committee would not meet during the following week. He
then adjourned the meeting at 5:30 p.m.
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