Legislature(2001 - 2002)
05/07/2002 03:04 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ 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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