Legislature(2005 - 2006)BUTROVICH 205
04/26/2006 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SJR17 | |
| HB484 | |
| Bp North Slope Oil Spills - Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SJR 17 | TELECONFERENCED | |
| += | HB 484 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | HB 57 | TELECONFERENCED | |
| + | HB 415 | TELECONFERENCED | |
| + | HB 419 | TELECONFERENCED | |
| = | SB 170 | ||
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 26, 2006
3:40 p.m.
MEMBERS PRESENT
Senator Thomas Wagoner, Chair
Senator Ralph Seekins, Vice Chair
Senator Ben Stevens
Senator Fred Dyson
Senator Bert Stedman
Senator Kim Elton
Senator Albert Kookesh
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE JOINT RESOLUTION NO. 17
Urging the United States Department of Justice and the Alaska
Department of Law to identify all natural resource damages from
the Exxon Valdez oil spill that were unanticipated at the time
of the 1991 settlement, to develop plans to remedy the damages,
and to present the ExxonMobil Corporation with a request for the
full $100,000,000 that is available through the "Reopener for
Unknown Injury" clause of the 1991 civil settlement to carry out
these plans.
MOVED CSSJR 17(RES) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 484(FSH)
"An Act allowing for revenue received from issuance of
additional entry permits to be appropriated for reimbursement to
salmon fishery associations."
MOVED CSHB 484(FSH) OUT OF COMMITTEE
BP North Slope Spills - Update
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 57(FIN)
"An Act relating to the sale of certain state land to adjacent
landowners."
BILL HEARING POSTPONED TO 4/27/06
CS FOR HOUSE BILL NO. 415(JUD)
"An Act relating to landowners' immunity for allowing use of
land without charge for a recreational activity; relating to
landowners' liability where landowner conduct involves gross
negligence or reckless or intentional misconduct; relating to
claims of adverse possession and prescriptive easements, or
similar claims; and providing for an effective date."
BILL HEARING POSTPONED TO 4/27/06
HOUSE BILL NO. 419
"An Act repealing the Board of Storage Tank Assistance, the
underground storage tank revolving loan fund, and the tank
cleanup loan program; repealing certain reporting requirements
relating to underground petroleum storage tank systems; making
conforming amendments; and providing for an effective date."
BILL HEARING POSTPONED TO 4/27/06
SENATE BILL NO. 170
"An Act relating to the Department of Fish and Game, the Board
of Fisheries, and the Board of Game; relating to the taking of
big game and to the disposition of a mount, trophy, or part of a
fish or game animal; setting fees for certain trapping licenses
and certain hunting licenses, permits, and tags; setting fees
for the resident combined hunting, trapping, and sport fishing
license and the resident combined hunting and sport fishing
license; relating to the resident small game hunting license;
setting application fees for certain hunting permits and stamps;
establishing a surcharge on hunting, trapping, and sport fishing
licenses; relating to certain hunting, trapping, and sport
fishing licenses, tags, permits, and stamps; relating to the
fish and game fund; relating to violations of fish and game
laws; relating to state management of wildlife; relating to
endangered fish and wildlife; and providing for an effective
date."
BILL HEARING POSTPONED
PREVIOUS COMMITTEE ACTION
BILL: SJR 17
SHORT TITLE: COLLECT MORE EXXON VALDEZ SPILL DAMAGES
SPONSOR(s): SENATOR(s) FRENCH
02/01/06 (S) READ THE FIRST TIME - REFERRALS
02/01/06 (S) RES, JUD
04/19/06 (S) RES AT 3:30 PM BUTROVICH 205
04/19/06 (S) Scheduled But Not Heard
04/24/06 (S) RES AT 3:30 PM BUTROVICH 205
04/24/06 (S) -- Meeting Canceled --
04/26/06 (S) RES AT 3:30 PM BUTROVICH 205
BILL: HB 484
SHORT TITLE: FISHERY ASSOCIATION REIMBURSEMENT
SPONSOR(s): REPRESENTATIVE(s) WILSON
02/13/06 (H) READ THE FIRST TIME - REFERRALS
02/13/06 (H) FSH, RES, FIN
03/22/06 (H) FSH AT 8:30 AM CAPITOL 124
03/22/06 (H) Moved CSHB 484(FSH) Out of Committee
03/22/06 (H) MINUTE(FSH)
03/24/06 (H) FSH RPT CS(FSH) 3DP 2NR
03/24/06 (H) DP: WILSON, ELKINS, THOMAS;
03/24/06 (H) NR: HARRIS, KAPSNER
03/31/06 (H) RES AT 1:00 PM CAPITOL 124
03/31/06 (H) Moved CSHB 484(FSH) Out of Committee
03/31/06 (H) MINUTE(RES)
04/03/06 (H) RES RPT CS(FSH) 4DP 1NR
04/03/06 (H) DP: SEATON, ELKINS, CRAWFORD, RAMRAS;
04/03/06 (H) NR: OLSON
04/10/06 (H) FIN RPT CS(FSH) 3DP 7NR
04/10/06 (H) DP: KERTTULA, FOSTER, CHENAULT;
04/10/06 (H) NR: HAWKER, HOLM, KELLY, STOLTZE,
WEYHRAUCH, MOSES, MEYER
04/10/06 (H) FIN AT 9:00 AM HOUSE FINANCE 519
04/10/06 (H) Moved CSHB 484(FSH) Out of Committee
04/10/06 (H) MINUTE(FIN)
04/19/06 (H) TRANSMITTED TO (S)
04/19/06 (H) VERSION: CSHB 484(FSH)
04/20/06 (S) READ THE FIRST TIME - REFERRALS
04/20/06 (S) RES, FIN
04/24/06 (S) RES AT 3:30 PM BUTROVICH 205
04/24/06 (S) -- Meeting Canceled --
04/26/06 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
SENATOR HOLLIS FRENCH
State Capitol
Juneau AK
POSITION STATEMENT: Sponsor of SJR 17.
STACY STUDEBAKER, Vice Chair
Public Advisory Committee (PAC)
Exxon Valdez Trustee Council
Kodiak, AK
POSITION STATEMENT: Supported SJR 17.
MIKE MAXWELL
Cordova, AK
POSITION STATEMENT: Supported SJR 17.
PATIENCE ANDERSON FAULKNER
Cordova, AK
POSITION STATEMENT: Supported SJR 17.
ROXY ESTES
Cordova, AK
POSITION STATEMENT: Supported SJR 17.
NANCY BIRD, President
Prince William Sound Science Center
Cordova, AK
POSITION STATEMENT: Supported SJR 17.
STANLEY RICE, Senior Scientist
National Marine Fisheries Service
Juneau, AK
POSITION STATEMENT: Supported SJR 17.
PEGGY WILSON
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 484
LINDA MILLER, staff
Representative Peggy Wilson
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced HB 484 on behalf of the sponsor.
LARRY DIETRICK, Director
Division of Spill Prevention and Response
Department of Environmental Conservation
410 Willoughby
Juneau, AK 99801-1795
POSITION STATEMENT: Presented the North Slope Oil Spill Update.
ROBYNN WILSON, Director
Tax Division
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Provided information related to the North
Slope Oil Spill Update.
MS. DENISE HAWS, Economist
Tax Division
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Provided information related to the North
Slope Oil Spill Update.
ACTION NARRATIVE
CHAIR THOMAS WAGONER called the Senate Resources Standing
Committee meeting to order at 3:40:18 PM. Present at the call to
order were Senators Bert Stedman, Fred Dyson, Albert Kookesh,
Kim Elton and Chair Wagoner. Senator Ben Stevens arrived soon
thereafter.
SJR 17-COLLECT MORE EXXON VALDEZ SPILL DAMAGES
CHAIR THOMAS WAGONER announced SJR to be up for consideration.
SENATOR HOLLIS FRENCH, sponsor of SJR 17, explained that the
resolution asks the attorneys general for Alaska and the U.S. to
pursue a reopener clause seeking up to $100 million for damages
that were not anticipated when the Exxon Valdez oil spill
litigation was settled in 1991. He directed committee member's
attention to copies of a 1991 New York Times article that
provides a glimpse at the confrontational litigation that took
place in settling the claims and the role the transportation
secretary played as a critical go between.
The article mentions President Bush's EPA administrator, William
Riley, who insisted that the settlement contain some provision
for future and as yet unforeseen injuries. The figure Mr. Riley
put forth initially was $300 million, but the figure was
eventually reduced to $100 million.
SENATOR FRENCH noted that in 2003 the National Research Council
conducted a study that said one of the profound outcomes of the
1989 Exxon Valdez oil spill was that the affect of oil spills on
marine resources is largely unpredictable. It found that there
is a lack of understanding of the structure and function of
complex ecosystems.
SENATOR FRENCH outlined the six legal steps that are required
before the state could get money from Exxon.
1. Populations, habitats and species must have suffered losses
or declines of the spill area.
2. Losses have to be substantial.
3. Losses have to have resulted from the oil spill.
4. Losses could not have reasonably been known or anticipated
at the time the Trustees settled the case.
5. Restoration projects must be identifiable.
6. Costs of the projects must not be grossly disproportionate
to the magnitude of the benefits anticipated from the
remediation.
3:44:08 PM
SENATOR BEN STEVENS arrived.
SENATOR FRENCH highlighted the groups that support the measure.
Notably the City of Cordova, Kodiak Island Borough, Alaska
Municipal League, Kenai Peninsula Borough, and the Prince
William Sound Science Center have issued supporting resolutions.
Also, the United Cook Inlet Drift Association, the United
Fishermen of Alaska, the Chugach Regional Resources Commission,
and the Cordova District Fishermen United have issued letters of
support.
3:45:13 PM
CHAIR WAGONER asked how much money is left in the current Exxon
Valdez Oil Spill (EVOS) account.
SENATOR FRENCH said he did not know.
3:45:29 PM
STACY STUDEBAKER, Vice Chair, Public Advisory Committee (PAC),
Exxon Valdez Trustee Council, Kodiak, reported that she has been
a member of the EVOS PAC for the last 10 years and has been
following the restoration process and scientific studies
carefully. She urged the committee to supported SCR 17, which
encourages the state and federal government to reopen the
settlement with Exxon and to seek $100 million for projects and
damaged resources that could not have been anticipated at the
time of the settlement.
MS. STUDEBAKER related that lingering oil was found at 58
percent of 91 test sites. That is estimated to have a linear
shoreline equivalent of at least 6 miles of shoreline in Prince
William Sound. Seventeen years ago it wasn't possible to predict
that so much oil would still be present below the surface in a
form that resembles that encountered in 1989. The lingering oil
is bio-available and continues to impede the recovery of species
that live and or feed in the oiled areas. Furthermore, recent
studies show that lingering oil is more toxic than was
anticipated in 1991 and it's possible that organisms are being
exposed to sources of lingering oil that have yet to be
discovered.
Adding to the list that Senator French highlighted, she said the
Kodiak Island Borough, the City of Kodiak, the City of Homer,
the City of Cordova, and the Kenai Peninsula Borough have all
passed resolutions supporting SJR 17. Essentially all the
communities within the spill region as well as a number of
organizations support reopening the settlement. She emphasized
that list includes the EVOS Trustees Council Public Advisory
Committee.
MS. STUDEBAKER said local people don't consider the oil spill to
be over because they are living with the long-term impacts to
fisheries, subsistence food, and wildlife populations. Long-term
monitoring must go hand-in-hand with short-term restoration
projects, she concluded.
3:50:34 PM
MIKE MAXWELL, Cordova, said he was born and raised in Cordova.
He has been a commercial fisherman for 37 years and he is still
very angry with Exxon because after 17 years there is still a
lot of lingering oil on the beaches. He asked the committee to
support SJR 17 and help revitalize the once great herring
fisheries.
PATIENCE ANDERSON FAULKNER, Cordova, stated support for SJR 17.
[Abbreviated testimony due to audio difficulty.]
ROXY ESTES, Cordova, said she is a second-generation Cordova
fisherman who is no longer able to fish because of the collapse
in the herring fishery. Although the reopener won't directly
affect fishermen, it would benefit both the human and animal
species that depend on herring as a part of their food chain.
Pointing out that scientists are talking about a 100-year clean
up, she said we need help in a desperate fashion.
NANCY BIRD, President, Prince William Sound Science Center,
Cordova, spoke to the resolution the board passed last
September. It urges support for reopening the claim and suggests
that the funds be used to endow long-term programs to study and
monitor the long-term effects of the lingering oil on the marine
environment as well as to assess remediation techniques.
Programs should specifically include a long-term herring
research and restoration program that would advise fisheries
management entities on further restoration efforts.
She noted that others have highlighted the main issues of
lingering oil on the beaches and the decline of herring species
both of which provide a link to unanticipated damages. As far as
how the money is used, she said the issues before us don't
necessarily have specific plans. No one has ever tried to
enhance herring populations on the scale that is under
discussion. In the same vein there aren't any known techniques
for beach remediation on the scale that is necessary here.
However, small projects can be started and the lack of detailed
plans should not inhibit forward movement.
MS. BIRD emphasized the importance of herring to all species
throughout Prince William Sound. At this point the ecosystem is
changing because of the lack of herring.
3:57:51 PM
SENATOR RALPH SEEKINS arrived.
MS. BIRD advised that the restoration reserve fund currently has
about $120 million. Those funds are specifically to restore
damages that were known at the time of the settlement while SJR
17 addresses damages that were unanticipated in 1991.
CHAIR WAGONER inquired about the clam and muscle populations.
MS. BIRD replied she isn't aware of the details, but she has
seen indications that bivalves in the oiled areas are having
difficulty. She elaborated that herring are having a
particularly hard time because so many species are dependent on
herring.
4:00:33 PM
SENATOR FRED DYSON asked how many miles of beach were oiled
originally.
MS. BIRD replied she understands it was 1,500 miles.
SENATOR DYSON asked how many miles of beach have lingering oil.
MS. BIRD replied between 6 and 15 miles, but it covers a
deceptively wide region because the oiling doesn't occur
continuously. It's more like a few hundred yards here and there.
She related that when she recently visited the Bay of Isles on
the north end of Knight Island it was easy to find lingering oil
that came to surface. It still sheens and looks and smells like
fresh oil. It's not everywhere but it's still impacting the
ecosystem, she said.
SENATOR DYSON asked about the status of the beaches that were
left as test sites.
MS. BIRD replied she believes it's been a mixed bag. Initially
it took longer for species to come back on beaches that were
treated because the treatment killed so much. The untreated
beaches have a lot of residual oil and the result of that is
that the critters have been slow to come back.
SENATOR DYSON asked if the untreated test beaches are included
in the shoreline estimate for lingering oil.
MS. BIRD said she didn't know. She elaborated on aspects of the
testing.
SENATOR DYSON said he'd like to know specifically. He changed
topics and noted that the last report he saw on herring
indicated that the petroleum could cause genetic damage in the
species. He asked Ms. Bird if oil is the certain cause of the
herring population demise as opposed to other causes or long-
term cycles.
MS. BIRD clarified that she is not a scientist and then said
that despite the fact that strong correlations can be drawn,
there is no scientific way to definitively make the link that
the oil spill caused the demise of the herring. She related that
recent acoustic surveys indicate that the demise of herring most
likely began in 1990 right after the oil spill, but the evidence
isn't definitive because acoustic studies were not done in 1990
through 1993. She offered to send further study information as
well as the specific beach information.
SENATOR DYSON asked if the marine animal species that are
troubled in Prince William Sound are also troubled in areas of
Alaska that were not oiled.
MS. BIRD said Stellar Sea Lions are stressed in areas other than
Prince William Sound and that species relies heavily on herring.
Harbor Seals were on the decline, but they are stabilizing now.
She didn't know about populations in other areas. Killer Whale
populations in Prince William Sound have dropped but that's not
the case in other areas such as Southeast.
4:10:15 PM
CHAIR WAGONER closed the public hearing.
SENATOR RALPH SEEKINS asked if there are natural oil seeps in
the Prince William Sound area.
SENATOR DYSON said insignificant amounts occur in the northeast
corner. He then said he would like to get more information
before voting on the resolution.
CHAIR WAGONER commented on the amount in the EVOS account and
said the money is going further since Governor Murkowski stopped
the previous spending practices. He suggested that the $120
million that's left in the fund should go a long way toward
doing some of the studies that are indicated.
He stated that he would like to see the resolution move; it
simply asks that the reopener clause be considered before the
June 2 deadline.
4:13:15 PM
SENATOR KIM ELTON suggested that not passing the resolution
expeditiously could be interpreted to mean that the legislature
doesn't support pursuit of the reopener clause.
SENATOR BERT STEDMAN referenced page 3, line 10, and asked if
the March 24, 2006 date should be changed.
SENATOR FRENCH responded the date has passed so it should
probably be removed from the resolution.
SENATOR DYSON declared a potential conflict of interest. He has
participated in seven or eight marine science projects in
Southcentral and is actively pursuing more of that work.
4:16:29 PM
SENATOR ALBERT KOOKESH said he would like the resolution to
move.
SENATOR DYSON said he would like more information, but he didn't
want to impede progress.
CHAIR WAGONER asked Mr. Rice to respond to Senator Dyson's
questions.
SENATOR DYSON asked what science has said about the damage that
was done to the herring populations.
STANLEY RICE, senior scientist for oil spill studies at the Auke
Bay Lab, National Marine Fisheries Service, Juneau, provided
information on the herring decline in Prince William Sound. He
explained that in 1989 most eggs were not spawned in oiled
zones, but just about all the herring larvae that hatched
drifted into the oiled areas so there was a very significant
effect in the 1989 year-class. The damage was cellular rather
than reproductive cell genetic damage so it did not affect
successive generations. Nevertheless it was a significant impact
to the 1989 year-class even though the population didn't crash
until sometime later.
One researcher suggests that the population may have started to
decline as early as 1989 while other evidence says it started in
1993. Clearly, by that time a lot of disease issues were evident
and now the population is confronted with either a viral or a
fungal disease on an annual basis. One disease affects
recruiting year classes and the other affects the older year
classes and probably terminates life one to three years
prematurely at the most reproductively capable age.
When compared to other populations, the Prince William Sound
herring population is not showing signs of recovery. Up and down
fluctuations are normal, but for a population to stay down this
long is relatively unusual. It is also fairly unusual for a
population to be limited by disease for this length of time.
Although the links aren't hard and fast, the suggestion is that
the depressed population is oil related.
SENATOR DYSON asked about the report that six miles of beach
still have profound residual oil and asked if that includes any
of the beaches that were deliberately not remediated.
MR. RICE explained that when the beaches were selected as part
of the 2001 survey, they were chosen randomly within a
population of heavily and moderately oiled beaches. The beaches
that were in the selection pool did not include those that were
set aside to receive no remediation.
He elaborated that the statistical measure of oil indicates
about six miles of beach inside Prince William Sound only. The
distribution of oil is patchy so the six miles is spread
throughout the sound with some areas showing heavier
concentration than others.
One thing that surely wasn't known in 1989 or 1991 when the
settlement occurred is that the distribution of oil went down
into the beach in depth as well as tidal height. Today the
majority of oil is in the mid zone. Mussels and clams start in
that zone and move down the beach meaning that a lot of biology
and prey resources are in the oiled zone.
SENATOR DYSON asked if there is a consistent pattern of tide and
storm surges on the beaches that aren't recovering.
MR. RICE replied it's a bit mixed, but it's not the exposed
rocky beaches. It's the more protected environments such as the
Bay of Isles, Herring Bay, Lower Pass, and Northwest Bay. In
those places you can dig four or five inches down and after that
the oil seeps in and sometimes fills the hole with oil that's
the same consistency as it was in 1989. That's why it's still
referred to as toxic and mobile. If an otter or Harlequin Duck
disturbs that sort of environment it will receive an oil dose
exposure, he said.
4:24:20 PM
SENATOR DYSON asked which fish and mammals feed on herring.
MR. RICE replied if there is a single most important fish, it is
herring because almost everything feeds on that species.
Although most birds feed on herring, it's the chicks that are
dependent on herring for survival. Many of the marine mammals
are in the same situation. Humpback Whales feed on herring
heavily in the winter, as do sea lions and seals. Sea otters are
one of the rare species not connected to herring; they feed
almost exclusively on invertebrates.
Herring is important because it has a biology that takes energy
from phytoplankton and zooplankton, which is unavailable to the
larger species, and absorbs it into their bodies. Then the
herring makes itself available to predators.
[LARRY DIETRICK, Director, Division of Spill Prevention and
Response, Department of Environmental Conservation (DEC),
advised that a comprehensive synthesis of all the science on the
condition of the injured resources in Prince William Sound is
available on the EVOS website. The list is sorted by species.]
4:26:20 PM
CHAIR WAGONER suggested amending the resolution to remove "March
24, 2006, the 17th anniversary of the spill," from page 3, line
10, and to insert "June 2, 2006" in its place.
SEEKINS moved Amendment 1 as outlined above. There was no
objection and it was adopted.
4:27:33 PM at ease 4:29:07 PM
SENATOR ELTON moved to report CSSCR 17(RES) from committee with
individual recommendations. There was no objection and it was so
ordered.
4:29:53 PM at ease 4:31:12 PM
CSHB 484(FSH)-FISHERY ASSOCIATION REIMBURSEMENT
CHAIR WAGONER announced HB 484 to be up for consideration.
PEGGY WILSON, sponsor of HB 484, introduced Linda Miller.
LINDA MILLER, staff to Representative Peggy Wilson, explained
that in 2002 the Alaska Legislature created salmon fishery
associations to encourage fleet reduction. She said associations
may be formed throughout the state to facilitate a permit buy-
back program, which allows a group of fishermen to buy back
permits in a particular fishery. The Southeast Alaska Seiners
formed an association for that purpose, and then asked about a
reimbursement provision if the Commercial Fisheries Entry
Commission (CFEC) were to re-issue permits the association had
previously bought back.
MS. MILLER said CSHB 484(FSH) makes it clear that in the
unlikely event that the CFEC sells permits that an association
previously purchased, the legislature may appropriate money back
to the association. The change from the original version makes
it clear that the association that actually did the buy-back is
the one that may receive the payback. She said that the state
has a responsibility to monitor each limited entry fishery. In
the event that more permits are needed through a CFEC
determination or a court action, the provisions of HB 484 would
apply.
4:34:36 PM
SENATOR STEDMAN asked for clarification that the market value of
the permit would go to the association and not the purchase
price.
MS. MILLER said her understanding is that the money that the
association expended originally would be returned.
SENATOR RALPH SEEKINS noted that the word "may" on line 9 is
permissive so it is at the will of the legislature.
4:36:30 PM
SENATOR SEEKINS moved to pass CSHB 484(FSH) from committee with
individual recommendations and attached fiscal note(s). There
being no objection, it was so ordered.
4:37:14 PM at ease 4:38:19 PM
^BP North Slope Oil Spills - Update
CHAIR THOMAS WAGONER announced the next order of business was a
North Slope Oil Spill update.
LARRY DIETRICK, Director, Division of Spill Prevention and
Response, Department of Environmental Conservation (DEC),
reported that the GC-2 oil spill cleanup is essentially
completed and that includes the revegetation process. He said
the environmental impacts have been minimal and there are no
wildlife impacts. DEC will be monitoring the recovery during and
post spring break-up, he said.
4:39:35 PM
The bypass line from GC-2 is still in use and yesterday
production was back to 87,000 barrels per day. The corroded 34-
inch line is still out of service and the assessment and testing
on it will continue for a matter of weeks before delivery
through it resumes.
The final BP investigation report is out and currently under
independent review by outside engineering consultants. Once the
review is complete the state will determine corrective action.
The federal Office of Pipeline Safety also issued an order of
corrective action and meetings between that office, the state,
and BP are ongoing to respond to the federal corrective action
request.
MR. DIETRICK noted that DEC is making arrangements to hold the
Arctic Pipeline Integrity Conference that Governor Murkowski
called for. Corrosion experts from around the world will be
brought to Alaska to consult and give advice on corrosion
management. The target date for completion is prior to October
1.
4:41:40 PM
The governor also announced the formation of the Arctic Pipeline
Technology Team, which includes the Department of Environmental
Conservation, the Alaska Oil and Gas Conservation Commission,
and the Department of Natural Resources. It will be a standing
body that pools the state's pipeline expertise to address the
issues that may arise. The work group will bring in academia,
other federal agencies, industry and private expertise.
4:42:41 PM
SENATOR FRED DYSON asked where the hole was located in the pipe.
MR. DIETRICK replied it was in the six o'clock position.
SENATOR DYSON asked if the hole was near a bend in the line.
MR. DIETRICK responded the BP investigation report attributes
the hole to internal corrosion and it occurred at a caribou
crossing. He elaborated that the line is elevated but it drops
at caribou crossings and goes through what is essentially a
gravel covered culvert. It provides a ramp for the caribou to
cross.
SENATOR DYSON asked if the hole was near one of the turns at
either end.
MR. DIETRICK replied it was located in a straight section a
number of feet inside either end of the culvert.
SENATOR KIM ELTON noted that the evidence shows bacterial growth
in GC-2. He also noted that a change in the emulsion breaking
chemicals in the pipeline appears to coincide with the period of
increased corrosion. He asked if the company adjusted the
chemicals it uses or if the state or federal government asked BP
to adjust them.
MR. DIETRICK replied a number of issues potentially contributed
to the corrosion. One suggestion in the report is that the
interaction between the emulsion breaker and the corrosion
inhibitor contributed to the problem. BP is continuing to
analyze that possibility but the most recent information does
not indicate that the interaction of the two agents cancels the
effectiveness of the corrosion inhibitor. The state will also
review that issue independently, he said.
SENATOR ELTON asked if that same mix is used in other pipelines
or just in this one.
MR. DIETRICK recalled the report said the emulsion breaker was
used at just GC-2, but the corrosion inhibitor is used field
wide.
4:47:37 PM
CHAIR WAGONER asked Ms. Wilson to review the Department of
Revenue report dated April 10, 2006.
ROBYNN WILSON, Director, Tax Division, Department of Revenue,
reported that the revenue impact is estimated to be $27 million
through April 10, 2006 and assumes 77,000 barrels of deferred
production for 33 days and then 36,000 barrels for 6 days.
She understands that a bypass line was installed April 3, 2006
and as a result, the production is backup to about 75 percent of
what the main line would have been.
CHAIR WAGONER said he understands that if an oil spill is
determined to be catastrophic, which is interpreted to be any
spill that is greater than 100,000 gallons, then the company
would not be able to use the PPT credits for clean-up costs
associated with the spill. He asked if that is correct.
MS. WILSON read AS 46.04.900 that defines a catastrophic oil
spill. The definition requires that it be an oil discharge of
100,000 barrels or that it is a spill that presents a grave and
substantial threat. She noted that oil is required in the first
criteria but it doesn't say that in the second criteria.
Under the PPT bill that that passed the Senate yesterday,
deductions are denied for expenditures incurred to clean up
catastrophic oil spills. That language is specific to oil spills
that affect inland waters, but it doesn't necessarily address
oil spills on land.
4:53:17 PM
Neither the House Resource Committee CS nor the governor's bill,
as originally drafted, have any language about an oil spill.
That means it could be interpreted that a deduction is not
precluded if it happens on a lease. If a spill happens on the
lease, it would be upstream and would fall under the general
basket of lease expenditures, which makes it deductible.
However, expenditures incurred as a result of negligence are not
deductible. Ms. Wilson suggested that that possibility would
elicit litigious discussion.
Ms. Wilson explained that for a typical business facility
repairs are deductible, but a major overhaul that extends the
life of the asset is capitalized. The difference in PPT is that
if the expenditure is currently expensed, then it would be
available for a deduction. If the expenditure is a major
overhaul that extended the life of the pipeline or asset, then
it would be capitalized. That means that it would be both
deducted and then subject to a credit.
CHAIR WAGONER remarked as it stands now, the state would pay
about 47.5 percent.
MS. WILSON replied if it was a capitalized expenditure that
extended the life of the pipeline under discussion then the
answer is yes. It would enjoy a 22.5 percent tax reduction rate
plus the credit rate of 25 percent.
4:56:04 PM
MS. DENISE HAWS, Economist, Tax Division, Department of Revenue
(DOR), reviewed the DOR FY 2006 Revenue Sensitivity Matrix for
Lost ANS Production. She reported that the April 1-25, 2006 ANS
price is $67.47. The average oil production for the same dates
is 819 million barrels per day. Based on 33 days of loss
production in March and 6 days of loss production in April, the
revenue impact is about $26 million.
MS. WILSON said she would provide the committee with updated
reports that would include the amounts that Ms. Haws mentioned.
MS HAWS advised that the fiscal year-to-date price is $60.01,
which is $1.29 over the spring forecast.
There being no further business to come before the committee,
Chair Wagoner adjourned the meeting at 4:59:14 PM.
| Document Name | Date/Time | Subjects |
|---|