Legislature(2001 - 2002)

05/07/2002 03:04 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 07, 2002                                                                                            
                          3:04 PM                                                                                               
                                                                                                                                
TAPE HFC 02 - 104, Side A                                                                                                       
TAPE HFC 02 - 104, Side B                                                                                                       
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 3:04 PM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Con Bunde, Vice-Chair                                                                                            
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative John Harris                                                                                                      
Representative Bill Hudson                                                                                                      
Representative Ken Lancaster                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Eldon Mulder, Co-Chair                                                                                           
Representative Bill Williams, Co-Chair                                                                                          
Representative John Davies                                                                                                      
Representative Carl Moses                                                                                                       
Representative Jim Whitaker                                                                                                     
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Zach  Warwick,   Staff,  Senator  Therriault;   Tom  Chapple,                                                                   
Director, Division  of Air and  Water Quality,  Department of                                                                   
Environmental   Conservation;   Sally  Saddler,   Legislative                                                                   
Liaison, Department  of Community  and Economic  Development;                                                                   
Darwin  Peterson,  Staff,  Senator  Torgerson;  Will  Abbott,                                                                   
Regulatory Commission  of Alaska; Chip Dennerlein,  Director,                                                                   
Division of Habitat, Department of Fish and Game                                                                                
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Keith Bayha, Alaska Public Water Coalition, Anchorage.                                                                          
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
CSSB 140(FIN)                                                                                                                   
          "An Act relating to regulation and licensing of                                                                       
          certain water-power development projects; and                                                                         
          providing for an effective date."                                                                                     
                                                                                                                                
          HCS  CSSB 140(FIN)  was REPORTED  out of  Committee                                                                   
          with  a "do  pass"  recommendation  and with  three                                                                   
          previously  published fiscal notes: DCED  - #1, DNR                                                                   
          - #2, and DFG - #3.                                                                                                   
                                                                                                                                
CSSB 326(FIN)                                                                                                                   
          "An Act relating to  evaluating state assumption of                                                                   
          the wastewater discharge  program under the federal                                                                   
          Clean  Water Act;  and providing  for an  effective                                                                   
          date."                                                                                                                
                                                                                                                                
          CSSB 326(FIN) was REPORTED  out of Committee with a                                                                   
          "do  pass" recommendation  and  with  a new  fiscal                                                                   
          impact  note  by the  Department  of  Environmental                                                                   
          Conservation.                                                                                                         
CS FOR SENATE BILL NO. 326(FIN)                                                                                               
                                                                                                                                
     "An Act relating to evaluating state assumption of the                                                                     
     wastewater discharge program under the federal Clean                                                                       
     Water Act; and providing for an effective date."                                                                           
                                                                                                                                
ZACH  WARWICK,   STAFF,  SENATOR  THERRIAULT,   testified  in                                                                   
support  of the legislation.  He  observed that  SB 326  is a                                                                   
companion bill to  HB 503. The effective date  was changed to                                                                   
January 1, 2003 and the fiscal  note was reduced accordingly.                                                                   
The Department  of Environmental Conservation  indicated that                                                                   
the fiscal note  would not be sufficient to  run the program.                                                                   
They have applied for additional  federal funding. If federal                                                                   
funding is not received the new  administration would have to                                                                   
decided if  the project can be  done within the  general fund                                                                   
appropriation.                                                                                                                  
                                                                                                                                
TOM CHAPPLE,  DIRECTOR,  DIVISION OF AIR  AND WATER  QUALITY,                                                                   
DEPARTMENT  OF  ENVIRONMENTAL   CONSERVATION,  testified  via                                                                   
teleconference.  The Department does  not object  to changing                                                                   
the duration of the project from  18 to 12 months. He did not                                                                   
think that  that the project  could be successfully  executed                                                                   
with the funding contained in  the current fiscal note, which                                                                   
was reduced by two-thirds. The  question is whether the state                                                                   
should  assume  primacy  and  operate  the  federal  National                                                                   
Pollutant   Discharge   Elimination    System   program.   He                                                                   
recommended  a fiscal  note of $315  thousand dollars,  which                                                                   
would be achieved  by adding $63 thousand dollars  in federal                                                                   
funds for  FY03 and $46 thousand  dollars in FY04.  The state                                                                   
would know by September if the  federal funds were available.                                                                   
                                                                                                                                
Representative Foster MOVED to  report CSSB 326 (FIN)) out of                                                                   
Committee with  the accompanying fiscal note.  There being NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
CSSB 326(FIN) was REPORTED out  of Committee with a "do pass"                                                                   
recommendation  and with  a  new fiscal  impact  note by  the                                                                   
Department of Environmental Conservation.                                                                                       
CS SENATE BILL NO. 140(FIN)                                                                                                   
                                                                                                                                
     "An Act relating to regulation and licensing of certain                                                                    
     water-power development projects; and providing for an                                                                     
     effective date."                                                                                                           
                                                                                                                                
DARWIN  PETERSON,  STAFF,  SENATOR  TORGERSON,  testified  in                                                                   
support  of  the  legislation.  Senator  Murkowski  sponsored                                                                   
federal legislation, which amended  the Federal Energy Policy                                                                   
and  Conservation Act.  Title V  of this  Act provides  state                                                                   
jurisdiction   over   small   hydroelectric   projects.   The                                                                   
legislation  transferred  federal  licensing  and  regulatory                                                                   
authority   over  hydroelectric   projects  that  are   5,000                                                                   
kilowatts (5 megawatts) or less.  He maintained that bringing                                                                   
this regulatory  authority  closer to  home would reduce  the                                                                   
time  and  expense  associated  with  federal  licensing  and                                                                   
regulation    of   small    hydro    projects   in    Alaska.                                                                   
The  time  and  money  required   for  federal  licensing  is                                                                   
virtually  prohibitive  for  some   small  utility  projects.                                                                   
Before  Alaska  can acquire  jurisdiction  from  the  federal                                                                   
Energy  Regulatory Commission  the  legislature must  approve                                                                   
the  legislation  and  the Governor  must  submit  a  program                                                                   
satisfying the Federal Energy  Regulatory Commission's (FERC)                                                                   
regulatory requirements. The Regulatory  Commission of Alaska                                                                   
(RCA)  would be  the regulatory  agency  responsible and  all                                                                   
current  environmental protections  under  federal law  would                                                                   
still apply and could not be pre-empted by the legislation.                                                                     
                                                                                                                                
Vice-Chair Bunde  clarified that the authority  emanates from                                                                   
the FERC.  Mr. Peterson  explained that  FERC would  have the                                                                   
ultimate  veto   over  whether  or  not  the   state  program                                                                   
satisfies  all of  their requirements.  Representative  Bunde                                                                   
questioned  if  federal  funding would  accompany  the  state                                                                   
assumption  of the  work. Mr.  Peterson  explained that  user                                                                   
fees  from the  utilities support  the  federal program.  The                                                                   
program would need  initial start up support  from the state.                                                                   
Once the  program is running it  would be paid by  user fees.                                                                   
He did not  know if the  user fees would reimburse  the start                                                                   
up costs.                                                                                                                       
                                                                                                                                
Representative  Croft  questioned if  federal  fees were  too                                                                   
high for  some individuals. Mr.  Peterson clarified  that the                                                                   
issue centers  on the  time that FERC  takes to regulate  and                                                                   
license small hydro  projects. He assumed that  the state run                                                                   
program would be cheaper.                                                                                                       
                                                                                                                                
Representative  Croft   referred  to  the  fiscal   note.  He                                                                   
observed that  the legislation directs the department  to set                                                                   
up regulations to implement the  program. Mr. Peterson agreed                                                                   
that  federal law  directs  the state  to  establish its  own                                                                   
program.                                                                                                                        
                                                                                                                                
Representative  Lancaster   questioned  why   the  Regulatory                                                                   
Commission of  Alaska was chosen  to oversee the  program. He                                                                   
noted that  there is a backlog  at the Regulatory  Commission                                                                   
of Alaska and  questioned if they should be  given additional                                                                   
work.  Mr. Peterson  explained  that after  discussions  with                                                                   
involved entities  it was decided that RCA would  be the best                                                                   
entity [to oversee the program].                                                                                                
                                                                                                                                
WILL ABBOTT,  REGULATORY COMMISSION OF ALASKA,  testified via                                                                   
teleconference.  He stressed that  RCA would be  an objective                                                                   
entity. The  FERC operates as  a mediator to decide  if there                                                                   
is conflict  between agencies and  the applicant. He  did not                                                                   
anticipate  that RCA  would  write the  environmental  impact                                                                   
statement (EIS).  The Regulatory  Commission of  Alaska would                                                                   
contract for the EIS or it would  be written by the applicant                                                                   
and modify  by the Regulatory  Commission of Alaska.  A state                                                                   
program  would be  submitted to  FERC.  He expressed  concern                                                                   
that it  would take  longer than  a year  to get through  the                                                                   
regulatory  process. He did  not know  what the actual  costs                                                                   
would  be. Hydro  projects reimburse  FERC  by the  kilowatt-                                                                   
hour. Therefore  funds  are not received  until projects  are                                                                   
operational.  The Regulatory Commission  of Alaska  would not                                                                   
receive  funds immediately.  He  assumed  that the  licensees                                                                   
would pay money  back to the Regulatory Commission  of Alaska                                                                   
to fund the process.                                                                                                            
                                                                                                                                
Vice-Chair  Bunde questioned  if it  would be  the intent  to                                                                   
recapture  startup  costs  when  utilities go  on  line.  Mr.                                                                   
Abbott affirmed.                                                                                                                
                                                                                                                                
KEITH  BAYHA, ALASKA  PUBLIC WATER  COALITION, testified  via                                                                   
teleconference  in opposition  to  the legislation.  He  felt                                                                   
that the  proposal  was a poor  investment  for the state  of                                                                   
Alaska.                                                                                                                         
                                                                                                                                
SALLY SADDLER,  LEGISLATIVE LIAISON, DEPARTMENT  OF COMMUNITY                                                                   
AND  ECONOMIC   DEVELOPMENT,  provided  information   on  the                                                                   
legislation.  She noted that  the Administration  convened an                                                                   
interagency  team including  members from  the Department  of                                                                   
Natural Resources, Department  of Fish and Game, Coastal Zone                                                                   
Management, Regulatory  Commission of Alaska,  and Department                                                                   
of Community  and Economic Development  to analyze  the bill.                                                                   
The Administration  believes that development of  small hydro                                                                   
projects would  support economic development and  improve the                                                                   
availability/cost of  power to rural Alaska.  They understand                                                                   
that a state program may have  advantages in allowing them to                                                                   
focus the process on issues pertinent to Alaska.                                                                                
                                                                                                                                
Ms. Saddler  explained  that in response  to pending  federal                                                                   
legislation,  the Governor  drafted a  letter of support  for                                                                   
Alaska jurisdiction over the FERC  process. At the same time,                                                                   
the Governor  recognized that  this is a complex  undertaking                                                                   
and  that the  state  must be  sure  that the  state  program                                                                   
results in proper design and construction  of the dams, while                                                                   
protecting   fish,   wildlife   and   the   environment,   as                                                                   
rigorously,  as does  FERC.  The Governor  also  acknowledged                                                                   
that  it is  important to  establish  an appropriate  funding                                                                   
mechanism.  The  Regulatory Commission  of  Alaska  currently                                                                   
finances  itself  through  the regulatory  cost  charge.  The                                                                   
Regulatory Commission  of Alaska  is coming up  against their                                                                   
cost charge  cap. It  will be  important to  look at  ways to                                                                   
recoup costs,  whether it is through direct  appropriation or                                                                   
a user fee system.                                                                                                              
                                                                                                                                
Ms. Saddler observed that agencies  understand their existing                                                                   
role with the FERC process but  the Administration expects to                                                                   
outline  additional statutes  and  regulatory authority  that                                                                   
they  might  have  in  place.  She  observed  that  FERC  has                                                                   
jurisdiction over entire watersheds,  while the Department of                                                                   
Fish and Game currently only has oversight of streambeds.                                                                       
                                                                                                                                
Ms.  Saddler noted  that  it would  be  prudent  to have  the                                                                   
Regulatory Commission  of Alaska and departments  report back                                                                   
to the legislature  with the results of the  first two years,                                                                   
which  would be  spent  establishing the  regulations  before                                                                   
they go to FERC. The report would  address the impacts on the                                                                   
operating budget, funding mechanisms,  staffing requirements,                                                                   
additional statutory timelines and the public process.                                                                          
                                                                                                                                
Representative  Lancaster  questioned  if the  Department  of                                                                   
Community and  Economic Development  would be a  partner. Ms.                                                                   
Saddler noted  that RCA would  take the lead.  The Department                                                                   
of  Community  and  Economic   Development  has  acted  as  a                                                                   
coordinator.                                                                                                                    
                                                                                                                                
Representative   Croft   questioned   if   addition   receipt                                                                   
authority  would be needed  to charge  for the services.  Ms.                                                                   
Saddler deferred the question for later testimony.                                                                              
                                                                                                                                
Representative Hudson spoke in  support of state primacy, but                                                                   
wanted to  be assured that the  state is not taking  over the                                                                   
work of the  federal government without  additional resources                                                                   
or an  assessment of how the  process would be  expedited. He                                                                   
questioned  what kind of  resources FERC  has used  in Alaska                                                                   
over the past few years to process  claims and the basic cost                                                                   
to the applicants. He wanted to  know that the state could do                                                                   
the  work faster,  cheaper  and better  and  ensure that  the                                                                   
state is not  taking over federal responsibilities  that will                                                                   
need additional state  support. He did not want  to take over                                                                   
federal responsibilities  that  require budget increases.  He                                                                   
asked how the state could reduce expenses.                                                                                      
                                                                                                                                
Ms. Saddler  agreed and added  that it was not  clear whether                                                                   
the federal  government would  continue environmental  impact                                                                   
statements or  if the  state would take  over all  aspects of                                                                   
the work. The Department of Fish  and Game and the Department                                                                   
of Natural Resources are also involved.                                                                                         
                                                                                                                                
CHIP DENNERLEIN,  DIRECTOR, DIVISION  OF HABITAT,  DEPARTMENT                                                                   
OF FISH  AND GAME, provided  information on the  legislation.                                                                   
The department supports the legislation  with the caveat that                                                                   
it provides  the same level  of fish and wildlife  protection                                                                   
as provided by FERC. He noted  that the proposal would result                                                                   
in  small hydro  projects in  and  around rural  communities,                                                                   
which  would  be  on streams  and  valleys  already  used  by                                                                   
residents  for sport and  subsistence  activities.  The  FERC                                                                   
allows  the Department  of Fish  and  Game to  work with  the                                                                   
issues  on a  watershed basis.  He observed  that the  Alaska                                                                   
Coastal Management Plan process  allows the state to step out                                                                   
of the stream  bank, where the state authority  lies, to deal                                                                   
with  the  issue  of salmon  production  in  the  surrounding                                                                   
wetlands. He added  that FERC allowed a creative  solution to                                                                   
Brown Bears in the Kodiak area.                                                                                                 
                                                                                                                                
Mr. Dennerlein  reiterated the department's concern  that the                                                                   
authority or ability  to work effectively with  the real fish                                                                   
and  wildlife issues  in watershed  areas  [not be  adversely                                                                   
affected]. He pointed  out that FERC is like  an agent, which                                                                   
deals with threshold economic  analysis similar to the Alaska                                                                   
Industrial Development and Export  Authority (AIDEA) process.                                                                   
They  have  staff  of  hydrologists,   engineers,  biological                                                                   
resources and  project managers. When the Department  of Fish                                                                   
and Game  needs information  FERC can broker  to get  it from                                                                   
the applicant or other places.                                                                                                  
                                                                                                                                
Mr.   Dennerlein  continued   expressing   concerns  by   the                                                                   
department and  questioned where the funding  would come from                                                                   
and  noted  that   FERC  has  a  congressional   budget  with                                                                   
permanent staff.  The Department of  Fish and Game has  a $12                                                                   
million dollar  budget with less  than $2 million  dollars in                                                                   
general  fund. He  stressed  the need  for  a stable  funding                                                                   
source  and  noted  that  the  federal budget  is  now  in  a                                                                   
deficient  and  questioned  what   would  happen  to  federal                                                                   
funding  if  the  state  of Alaska  loses  its  seniority  in                                                                   
Congress.  The Federal Energy  Regulatory Commission  handles                                                                   
the on-going responsibilities  of damn safety, monitoring and                                                                   
re-licensing.  The  Department  of  Fish  and  Game  strongly                                                                   
supports  the amendment  [offered  by Representative  Croft.]                                                                   
He stressed  that if a damn is  going to be built  in a rural                                                                   
area where  people are hunting  and fishing someone  is going                                                                   
to have a problem. To be able  to broker the problem, to have                                                                   
a program, pay  for it and to do it right  is very important.                                                                   
The FERC process can be arduous.  There have been no licenses                                                                   
denied in  Alaska. He observed  that the False  Creek project                                                                   
in  Gustavus, which  is  in a  national  park in  wilderness,                                                                   
would  probably  get a  license  because  FERC worked  out  a                                                                   
creative  solution  on  a land  exchange.  He  stressed  that                                                                   
"before launching"  the state  of Alaska  should have  one of                                                                   
the  keys. He  acknowledged that  local concerns  could be  a                                                                   
little better [addressed through state primacy].                                                                                
                                                                                                                                
Representative Hudson  questioned where FERC is  located. Mr.                                                                   
Dennerlein  clarified that  there is  an office in  Anchorage                                                                   
and staff is brought up from outside of the state.                                                                              
                                                                                                                                
Representative Hudson  questioned if the state  would be held                                                                   
liable for authorizations that  go sour. Mr. Dennerlein noted                                                                   
that   FERC  has   liability,  but   emphasized  that   their                                                                   
experience  and  regulations minimizes  their  liability.  He                                                                   
anticipated that  there would  be issues surrounding  the re-                                                                   
licensing  process.   He  reviewed  issues   surrounding  the                                                                   
Gustavus project  and observed that the issues  were centered                                                                   
on local access and use. He emphasized  that the process must                                                                   
be clear and noted that Alaskans  can tie themselves in knots                                                                   
around  the  high  stake  issues that  surround  the  use  of                                                                   
productive valleys and streams.  The industry has been pretty                                                                   
silent on the bill. He advocated  that the state goes in with                                                                   
their  eyes open.  The Federal  Energy Regulatory  Commission                                                                   
does not  have to approve the  program; the program  could be                                                                   
adopted by default.                                                                                                             
                                                                                                                                
Representative Croft MOVED to ADOPT Amendment 1:                                                                                
                                                                                                                                
     Add:                                                                                                                       
                                                                                                                                
     The  Regulatory Commission  of  Alaska, in  consultation                                                                   
     with DNR, DCED and DF&G,  will report to the legislature                                                                   
     by February   th 2003 with  their assessment of  how the                                                                   
                  15                                                                                                            
     licensing and  oversight of hydroelectric projects  of 5                                                                   
     megawatts  or  less  by  the  State  of  Alaska  may  be                                                                   
     accomplished.   This  report   will  include   budgetary                                                                   
     impacts,   funding   mechanisms,   staff   requirements,                                                                   
     potential  statutory  changes,   timelines,  the  public                                                                   
     process  for  developing  regulations, and  other  items                                                                   
     deemed important by the administration.                                                                                    
                                                                                                                                
Co-Chair  Williams OBJECTED.  Representative Croft  explained                                                                   
that the amendment would require  a report to the legislature                                                                   
by February  15, 2003. He  acknowledged that the  state might                                                                   
want to  implement state primacy,  but emphasized  that there                                                                   
is insufficient information to make the decision.                                                                               
                                                                                                                                
Mr.  Abbott spoke  in  support of  the  amendment. He  echoed                                                                   
concerns  of the previous  speakers. He  emphasized that  the                                                                   
Regulatory  Commission   of  Alaska   would  be   before  the                                                                   
legislature   with   statutory  recommendations   and   other                                                                   
concerns.                                                                                                                       
                                                                                                                                
Vice-Chair  Bunde questioned  if the  February 15, 2003  date                                                                   
was a realistic timeline.                                                                                                       
                                                                                                                                
Mr. Abbott  felt that  the date  was realistic. He  suggested                                                                   
that a  target is needed  and would allow  them to  work with                                                                   
other state agencies and FERC.                                                                                                  
                                                                                                                                
Mr.  Peterson   noted  that  the   sponsor  objects   to  the                                                                   
amendment.  He pointed out  that FERC  would be the  ultimate                                                                   
voice  in deciding  if the  project is  carried forward.  The                                                                   
effective date is January 1, 2003.                                                                                              
                                                                                                                                
Mr. Abbott stressed  that the amendment formalizes  what they                                                                   
anticipate is going to happen.                                                                                                  
                                                                                                                                
TAPE HFC 02 - 104, Side B                                                                                                     
                                                                                                                                
Vice-Chair Bunde suggested that  a January 31, 2003 effective                                                                   
date would allow  the legislature to make a  preempted strike                                                                   
if there were problems.                                                                                                         
                                                                                                                                
Mr.  Peterson  agreed  that  could  be  a  consideration.  He                                                                   
anticipated  that  the  Administration  would  need  to  make                                                                   
statutory  changes to  assist in regulating  the project  and                                                                   
licensing.                                                                                                                      
                                                                                                                                
Mr. Peterson reiterated that the  sponsor would not object to                                                                   
moving  the effective  date to  January 31,  2003, but  would                                                                   
object to the date contained in the amendment.                                                                                  
                                                                                                                                
Representative  Croft  reiterated  that the  report  requires                                                                   
budgetary  impacts,  funding mechanisms,  staff  requirements                                                                   
and  potential statutory  changes. He  emphasized that  these                                                                   
requirements  are  unknown.  The   Regulatory  Commission  of                                                                   
Alaska cap might need to be changed.                                                                                            
                                                                                                                                
Co-Chair  Williams stressed  that  [primacy]  should stay  in                                                                   
state of Alaska.                                                                                                                
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Croft,                                                                                                                
OPPOSED:  Bunde, Foster, Harris,  Hudson, Lancaster, Williams                                                                   
                                                                                                                                
Co-Chair  Mulder   and  Representatives  Davies,   Moses  and                                                                   
Whitaker were absent from the vote.                                                                                             
                                                                                                                                
Vice-Chair Bunde MOVED to ADOPT  an effective date of January                                                                   
31, 2003  on page 4,  line 20. There  being NO OBJECTION,  it                                                                   
was so ordered.                                                                                                                 
                                                                                                                                
Representative Foster  MOVED to report HCS CSSB  140 (FIN)out                                                                   
of Committee with the accompanying fiscal note                                                                                  
                                                                                                                                
HCS CSSB  140(FIN) was REPORTED  out of Committee with  a "do                                                                   
pass"  recommendation  and with  three  previously  published                                                                   
fiscal notes: DCED - #1, DNR - #2, and DFG - #3.                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 3:58 PM                                                                                            

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