Legislature(1997 - 1998)

01/23/1997 10:02 AM House O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
             HOUSE SPECIAL COMMITTEE ON OIL AND GAS                            
                        January 23, 1997                                       
                           10:02 a.m.                                          
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Mark Hodgins, Chairman                                         
 Representative Scott Ogan                                                     
 Representative Norman Rokeberg                                                
 Representative Joe Ryan                                                       
 Representative Con Bunde                                                      
 Representative Tom Brice                                                      
 Representative J. Allen Kemplen                                               
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 All members present                                                           
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 *HOUSE JOINT RESOLUTION NO. 12                                                
 Urging the Secretary of the Interior to conduct competitive oil and           
 gas lease sales within the National Petroleum Reserve in Alaska.              
                                                                               
      - MOVED HJR 12 OUT OF COMMITTEE                                          
                                                                               
 *HOUSE BILL NO. 51                                                            
 "An Act relating to the Department of Environmental Conservation."            
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 (* First public hearing)                                                      
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  HJR 12                                                               
 SHORT TITLE: LEASES IN NATL PETROLEUM RESERVE                                 
 SPONSOR(S): REPRESENTATIVE(S) GREEN,Hodgins                                   
                                                                               
 JRN-DATE     JRN-PAGE                ACTION                                   
 01/15/97        66    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/15/97        66    (H)   OIL & GAS, RESOURCES                              
 01/23/97              (H)   O&G AT 10:00 AM CAPITOL 124                       
                                                                               
 BILL:  HB  51                                                               
 SHORT TITLE: REGULATIONS OF DEPT OF ENV. CONSERVATION                         
 SPONSOR(S): REPRESENTATIVE(S) ROKEBERG, KELLY, Foster                         
                                                                               
 JRN-DATE     JRN-PAGE                ACTION                                   
 01/13/97        41    (H)   PREFILE RELEASED 1/10/97                          
 01/13/97        41    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/13/97        41    (H)   OIL & GAS, FINANCE                                
 01/22/97       125    (H)   COSPONSOR(S): FOSTER                              
 01/23/97              (H)   O&G AT 10:00 AM CAPITOL 124                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 REPRESENTATIVE JOE GREEN                                                      
 Alaska State Legislature                                                      
 Capitol Building, Room 118                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-4931                                                    
 POSITION STATEMENT:  Sponsor of HJR 12.                                       
                                                                               
 REPRESENTATIVE NORMAN ROKEBERG                                                
 Alaska State Legislature                                                      
 Capitol Building, Room 24                                                     
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 465-4954                                                    
 POSITION STATEMENT:  Sponsor of HB 51.                                        
                                                                               
 BECKY GAY, Executive Director                                                 
 Resource Development Council                                                  
 121 West Fireweed, Suite 250                                                  
 Anchorage, Alaska  99503                                                      
 Telephone:  (907) 276-0700                                                    
 POSITION STATEMENT:  Testified on HB 51.                                      
                                                                               
 MARILYN CROCKETT, Assistant Executive Director                                
 Alaska Oil and Gas Association                                                
 121 West Fireweed, Suite 207                                                  
 Anchorage, Alaska  99503                                                      
 Telephone:  (907) 272-1481                                                    
 POSITION STATEMENT:  Testified on HB 51.                                      
                                                                               
 JANICE ADAIR, Director                                                        
 Division of Environmental Health;                                             
 Legislative Liaison                                                           
 Department of Environmental Conservation                                      
 555 Cordova Street                                                            
 Anchorage, Alaska 99501                                                       
 POSITION STATEMENT:  Testified on HB 51.                                      
                                                                               
 MICHAEL CONWAY, Acting Director                                               
 Division of Air and Water Quality                                             
 Department of Environmental Conservation                                      
 410 Willoughby Avenue, Suite 105                                              
 Juneau, Alaska 99801-1795                                                     
 Telephone:  (907) 465-5337                                                    
 POSITION STATEMENT:  Answered questions regarding HB 51.                      
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 97-1, SIDE A                                                             
 Number 001                                                                    
                                                                               
 CHAIRMAN MARK HODGINS called the House Special Committee on Oil and           
 Gas to order at 10:02 a.m.  Members present at the call to order              
 were Representatives Hodgins, Ogan, Rokeberg, Brice, Ryan and                 
 Kemplen.  Representative Bunde arrived at 10:07 p.m.                          
                                                                               
 Number 090                                                                    
                                                                               
 CHAIRMAN HODGINS explained he hopes to use the House Special                  
 Committee on Oil and Gas as a point on lease sales where the                  
 committee gets out and conducts hearings for the lease sales coming           
 up in Cook Inlet and on the North Slope.  This is to give                     
 information and to give citizens an extra opportunity to testify              
 and to possibly forestall some of the negative reactions we have to           
 some of our lease sales because of inaccurate information.  He said           
 one thing he would like to do with the committee is to become a               
 liaison between government and industry.  If somebody in government           
 doesn't understand public policy, it is the intention of the                  
 committee to question them at how they arrived at their public                
 policy and to make sure government is adhering to good public                 
 policy as prescribed by the Administration and the legislature.  He           
 asked the committee members to consider a vice chairman for the               
 committee.                                                                    
                                                                               
 Number 259                                                                    
                                                                               
 REPRESENTATIVE SCOTT OGAN said he would nominate Representative               
 Rokeberg.                                                                     
                                                                               
 CHAIRMAN HODGINS said the issue would be brought up at another                
 time.                                                                         
                                                                               
 HJR 12 - LEASES IN NATL PETROLEUM RESERVE                                   
                                                                               
 Number 291                                                                    
                                                                               
 CHAIRMAN HODGINS announced the committee would address HJR 12,                
 "Urging the Secretary of the Interior to conduct competitive oil              
 and gas lease sales within the National Petroleum Reserve in                  
 Alaska."                                                                      
                                                                               
 CHAIRMAN HODGINS called a recess to await the arrival of the                  
 sponsor of HJR 12 at 10:05 a.m.  The meeting was called back to               
 order at 10:07 p.m.  Chairman Hodgins noted Representative Bunde              
 had joined the meeting.                                                       
                                                                               
 Number 430                                                                    
                                                                               
 REPRESENTATIVE JOE GREEN, sponsor of HJR 12, came before the                  
 committee to explain the resolution.  He indicated there is                   
 information in the committee file pertaining to the issue.  He                
 stated, "The NPRA (National Petroleum Reserve Alaska) as it's                 
 called now since the mid 80s was prior, so that there won't be any            
 confusion, NPR 4 which at that time was established as a Naval                
 Petroleum Reserve Number 4, by Warren G. Harding, 1923.  The others           
 are in California and Wyoming and they were established originally            
 as a place to find oil that would supply our naval forces.  And so            
 from early inception, dating clear back to the 1800s with oil seeps           
 located up near the top if you look at Barrow and then go over                
 where it says Dease Inlet.  Simpson Lagoon is an area there that              
 actually shows a name Sinclair.  Well, it's about in that area and            
 there is in your packet a xerox copy."                                        
                                                                               
 REPRESENTATIVE GREEN informed the committee members there have been           
 natural seeps in the NPRA.  Because of that, there was some                   
 interest exhibited early on.  There was a United States Geological            
 Survey (USGS) made indicating the potential that the source rock              
 and types of reservoirs, etc., were available and that was part of            
 the greater study that covered the entire North Slope.  What came             
 from that was the discovery of Prudhoe Bay in 1968.  Representative           
 Green explained that prior to that, there had been two or three               
 (indisc.) curves of interest in NPRA.  He referred to a 1901 study            
 by Mr. Brooks, published in 1903, which indicated that this was a             
 geological providence capable containing hydrocarbons.  The USGS              
 published another issue in 1909.  He referred to Mr. Leffingwell              
 and said that name is a cherished name in Alaska because of all the           
 geological work he did which had to do with the North Slope and the           
 NPRA.                                                                         
                                                                               
 REPRESENTATIVE GREEN said in the early 1920s, there was renewed               
 interest in the petroleum reserve.  There was a flurry of                     
 excitement for about three years.  Some discoveries were made, but            
 nothing of commercial venture.  Then there was kind of a hiatus.              
 We had abundant oil reserves produced in the Lower 48 and it didn't           
 appear that would be a necessity as there was plenty of oil for the           
 Navy as well as the rest of the nation.  In 1943, during World War            
 II, there was a renewed interest because of its strategic location            
 as well as the fact that some of the supplies of petroleum were               
 interrupted by the war effort.                                                
                                                                               
 Number 728                                                                    
                                                                               
 REPRESENTATIVE GREEN explained that after World War II, there was             
 continued interest and over the next seven years there were 45                
 shallow wells drilled.  There was discovery in three different                
 areas of oil as well as three separate areas from that of gas, none           
 of which appeared to be commercial.  He said interest waned.  There           
 was another renewed interest with the discovery of Prudhoe Bay.               
 Husky Oil Company was commandeered to continue looking.  He                   
 continued to explain maps the committee members had in their                  
 committee file.  He said there is a dirth (sp.) along the Eastern             
 boarder of the petroleum reserve which is the Colville River.  That           
 is where the renewed interest currently is because of the Alpine              
 discovery from Arco and the development program they had discussed            
 publicly.  The potential exists for that discovery or another                 
 discovery because the best place to find oil is near an oil field.            
 There is a discovery there that will be developed and there will              
 certainly be, in all likelihood, more oil right across the boundary           
 from the delta which is the Colville River.                                   
                                                                               
 Number 845                                                                    
                                                                               
 REPRESENTATIVE GREEN said there is no requirement for any                     
 environmental studies.  There is nothing that has to be done from             
 a federal government standpoint.  The reserve is available for                
 leasing, it's just that there hasn't been an expressed interest in            
 it or if the interest has been expressed, the federal government              
 has not seen fit to renew leasing there.  He explained the                    
 resolution would send some support to our federal legislative triad           
 that we would like to see a renewed interest and perhaps allow for            
 leasing at least along the eastern boarder of the petroleum                   
 reserve, but there are other areas as well.  He said the same                 
 problem occurs in the Arctic National Wildlife Refuge (ANWR) that             
 if there is leasing from that period to the time of development it            
 would take considerable time.  This would be a little less because            
 the infrastructure would be preceded in effect by the development             
 of Alpine.  He said things could happen a little faster.  He stated           
 this is not a replacement for ANWR, it is in addition to ANWR.                
                                                                               
 REPRESENTATIVE GREEN said by agreement, the oil would be shared               
 50/50 with the federal government.  That is a preexisting agreement           
 to development NPRA as opposed to ANWR where there is still                   
 controversy whether it would be a 90/10.                                      
                                                                               
 Number 1032                                                                   
                                                                               
 REPRESENTATIVE NORMAN ROKEBERG indicated he had the opportunity to            
 work with Husky Oil when they had a contract with the Navy.  He               
 asked Representative Green if he recalls the time period of the               
 Husky contract and noted they drilled about 15 wells.                         
                                                                               
 REPRESENTATIVE GREEN responded that would have been in the late               
 1970s, early 1980s.                                                           
                                                                               
 REPRESENTATIVE ROKEBERG asked if some of the wells were                       
 stratigraphic wells which were intended not to strike oil.                    
                                                                               
 REPRESENTATIVE GREEN explained quite often, the program has been to           
 drill an information well or a cost well.  It is an off structure             
 attempt to find out the geology, but not necessarily to discover              
 anything of a hydrocarbon nature preparatory to leasing.                      
 Representative Green said that it just says, "Alright, you've done            
 your seismic work and this is a truth - ground truth, in the strat            
 column, that you can then apply whatever you want to do - whatever            
 your particular company may want to do as far speed of reflections            
 delineating any kind of structural traps."  Representative Green              
 noted that some of the wells that Husky Oil drilled were not                  
 actually intentionally looking for oil, they were looking for                 
 geological information.                                                       
                                                                               
 REPRESENTATIVE ROKEBERG asked if some of the earlier wells were               
 shallow.                                                                      
                                                                               
 REPRESENTATIVE GREEN indicated they were very shallow.                        
                                                                               
 REPRESENTATIVE ROKEBERG asked if it would be a fair statement to              
 say, "They really weren't wells in the sense that we would be                 
 (indisc.) and exploring for today."                                           
                                                                               
 REPRESENTATIVE GREEN said that is true.  He noted there had been              
 earlier non-commercial wells drilled in the Colville Delta.  It was           
 only later when they drilled deeper that they found the Alpine                
 discovery.  That is not an uncommon phenomena both in Alaska and in           
 the Lower 48 that the early development was too shallow to actually           
 find the mother load.                                                         
                                                                               
 Number 1154                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG referred to page 3, line 4, "to take                  
 immediate action to conduct competitive lease sales within the                
 National Petroleum Reserve in Alaska..." and said he took note in             
 the Governor's State of the State speech that he had talked to the            
 President and he felt that we would hopefully be able to open up              
 the NPR by working very hard within 18 months to get a leasing                
 program going.  Representative Rokeberg stated he had thought the             
 petroleum reserve was already open for leasing.                               
                                                                               
 REPRESENTATIVE GREEN indicated Representative Rokeberg is right and           
 to him, that is sub profuse.  He said he believes that speaks to              
 the fact that the Administration does not share the urgency that              
 most of Alaskans do.  It is available for leasing and there isn't             
 a reason for an 18 month delay.  He stated that they may want to              
 determine which areas they would want to lease and that would                 
 probably take maybe a couple of months.                                       
                                                                               
 Number 1274                                                                   
                                                                               
 REPRESENTATIVE CON BUNDE questioned what the time line would be if            
 there is a lease and if they find commercially viable structures              
 that includes oil.  He noted he heard in the ANWR debate that the             
 date they granted the lease to when the first revenues go into the            
 general fund would be about ten years.                                        
                                                                               
 REPRESENTATIVE GREEN stated it is his opinion that the time line              
 could be cut in half and depending on the aggressiveness of their             
 desire, it could be less.  He noted several of the issues that                
 would confront us in opening ANWR have already been done here.  The           
 area has already been drilled as there are over 80 wells.  There              
 would be infrastructure, especially of they were to lease and                 
 discover adjacent to Alpine.  That development will probably be on            
 stream, under the current schedule, sometime around the turn of the           
 century.  If so, there would be an umbilical cord for development             
 in the NPRA area to tie into that near the village of Nuiqsut.  As            
 the pipeline, as it is currently envisioned, would come from the              
 development area, the two drill sights, south and then cut across             
 and join a Kuparuk drill sight on the west side of that                       
 development.  The ability to drill, find the oil and then transport           
 it to a pipeline is significantly ahead of what would have to                 
 happen from the east side.  He noted there would have to be a                 
 pipeline corridor established which would delay to a number of                
 months or years.                                                              
                                                                               
 Number 1399                                                                   
                                                                               
 REPRESENTATIVE BUNDE referred to Representative Green saying that             
 an environmental impact statement would not be required, but there            
 would be construction of a additional umbilical pipeline.  He said            
 he is sure there would be significant environmental oversight as              
 that is attempted to be put in place.                                         
                                                                               
 REPRESENTATIVE GREEN said he would be a little remise if he lead              
 the committee to believe there absolutely wouldn't be an                      
 environmental impact statement involved.  He said it is quite                 
 doubtful that it would be necessary, more in the line of an                   
 assessment than an evaluation.  The time line, instead of three to            
 five years might be one to two years.  He said he thinks that is              
 what Arco fells about the Alpine development in that there wouldn't           
 be the need for a full environmental impact statement, but more of            
 an environmental statement.  Representative Green noted that as you           
 move towards some of the bays, it would take a full environmental             
 impact statement.                                                             
                                                                               
 Number 1473                                                                   
                                                                               
 REPRESENTATIVE BUNDE referred to the 50/50 deal with the federal              
 government and said the oil would be transported by the trans                 
 Alaska pipeline system (TAPS).  He asked if this offers any                   
 obstacles - the fact that this is a change in percentage instead of           
 the 90/10.                                                                    
                                                                               
 REPRESENTATIVE GREEN indicated he wouldn't think so because that              
 agreement has been struck.  This is just another issue where the              
 state of Alaska is honoring a prior agreement.  Representative                
 Green said it is the federal government who is impacting prior                
 agreements.                                                                   
                                                                               
 Number 1523                                                                   
 REPRESENTATIVE OGAN asked what the advantages are to keeping oil              
 flowing through the pipeline in regards to how it affects the                 
 royalty that the state receives.                                              
                                                                               
 REPRESENTATIVE GREEN said there is a minimum volume for a pipeline            
 that is 48 inches in diameter can efficiently transmit.  If it gets           
 down to numbers in the neighborhood of 200,000 to 300,000 barrels             
 a day, your flow rate is so low that you can't efficiently continue           
 to operate.  He noted we are currently well above that, but there             
 is a point at which production starts to decline from a field and             
 Prudhoe is on that skid at about 10 percent to 12 percent per year.           
 When you talk about a 900,000 barrel a day filed, that is almost an           
 oil field a year decline.  Representative Green referred to the               
 Alpine development which would be about 60,000 barrels a day and              
 said that does not off-set the decline from Prudhoe Bay.  It helps,           
 but it doesn't off-set it.  He said the more of the small pods that           
 we can get on, the longer we can continue to produce those areas              
 that actually return the state more money.                                    
                                                                               
 REPRESENTATIVE OGAN asked if it not true that the state's royalty             
 share is based after transportation costs.  The more oil we have              
 going through, the more royalty we get per barrel because of                  
 transportation costs.                                                         
                                                                               
 REPRESENTATIVE GREEN explained the amount of royalty is established           
 by contractual agreement, so when the barrel is produced there is             
 that subject to royalty.  He said, "Now, what I think you may be              
 referring to is that there is a reduction since we take our oil in            
 value rather than in kind - we don't actually take ownership of the           
 oil in more cases.  There have been some contracts to where we                
 have, but right now we're taking our oil in value - so much                   
 dollars.  Well, there is a transportation and a cleaning dehi (sp.)           
 cost that is subtracted before we get our money.  So we still get             
 our full one-eighth or whatever one-fifth at Milne Point, whatever            
 the agreement has been, but the value that we get then is                     
 diminished by certain costs."                                                 
                                                                               
 Number 1706                                                                   
                                                                               
 CHAIRMAN HODGINS noted that when the pipeline shuts down, it has to           
 be removed.  It is important to continue finding sources of oil to            
 keep the pipeline going.                                                      
                                                                               
 Number 1717                                                                   
                                                                               
 REPRESENTATIVE TOM BRICE asked why there is currently renewed                 
 interest in the NPR.                                                          
                                                                               
 REPRESENTATIVE GREEN explained the major interest is that there has           
 been a commercial discovery right next to it.  In the past, that              
 wasn't true.  The Kuparuk River development ended, so there wasn't            
 anything that would necessarily indicate that there was anything of           
 value in the NPR area across the river.  With this discovery in the           
 delta, it really spurs interest saying that there is a good                   
 likelihood that either the existing Alpine field or an adjacent               
 field might be found.  He said, "Since now you've got the                     
 infrastructure, what would have maybe required a 60,000 to 100,000            
 barrel a day discovery, a field of magnitude to be able to produce            
 that now may be a 30,000 barrel discovery over there would be                 
 economic because it has such a short pipeline to go."                         
                                                                               
 REPRESENTATIVE BRICE asked if it is based upon the Alpine                     
 discoveries.                                                                  
                                                                               
 REPRESENTATIVE GREEN answered in the affirmative.  He noted there             
 have been two or three different time periods where there has been            
 an interest and this is probably about the fourth one.                        
                                                                               
 Number 1791                                                                   
                                                                               
 REPRESENTATIVE ALLEN KEMPLEN asked if the President and the                   
 Governor have already agreed to a leasing program.                            
                                                                               
 REPRESENTATIVE GREEN answered in the affirmative saying that is               
 what we have been told and there is no reason to doubt that.  He              
 said the thing that was brought up in earlier discussion is that              
 maybe within 18 months we can do something or perhaps this is a               
 good idea.  He stated those kind of "dodge the bullet type words"             
 bother him.  It seems that the job expands to the time allotted and           
 if we automatically say it's going to take 18 months and that then            
 gets extended, it could be two or three years under the agreement             
 that has been reached between the Governor and President.                     
 Representative Green said his position is that we need to keep the            
 fires turned up and see if that time frame can be shortened.  He              
 asked why would it take 18 months.                                            
                                                                               
 Number 1869                                                                   
                                                                               
 REPRESENTATIVE JOE RYAN said he understands that the pools of oil             
 don't recognize any particular manmade boundaries.  He said he also           
 understands the oil industry has good abilities to drill diagonally           
 as well as other methods.  He asked if it wouldn't be feasible to             
 do some claim jumping and drill from our area down into the pool on           
 a slant and realize some benefits from that sort of exploration.              
                                                                               
 REPRESENTATIVE GREEN responded it would be possible.  He discussed            
 the history of the East Texas Field where several years ago there             
 was a rash of well plugging going on.  He said there are "no nos"             
 about going across lease lines with a directional well as you would           
 actually be in trespass.  He noted one of the Conservation                    
 Commission's major functions is the policemen of the oil industry.            
 They have a duty to protect correlative rights - the boundaries of            
 their leases as well as prevention of waste from the reservoir                
 itself, the wasting of hydrocarbon.                                           
 Number 1974                                                                   
                                                                               
 CHAIRMAN HODGINS indicated there were no further witnesses to                 
 testify on HJR 12.                                                            
                                                                               
 REPRESENTATIVE ROKEBERG indicated he will be requesting to be added           
 as a cosponsor of HJR 12.                                                     
                                                                               
 Number 2025                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG made a motion to move HJR 12 out of                   
 committee with individual recommendations and with the attached               
 zero fiscal note.  Hearing no objection, HJR 12 moved out of the              
 House Special Committee on Oil and Gas.                                       
                                                                               
 HB 51 - REGULATIONS OF DEPT OF ENV. CONSERVATION                            
                                                                               
 Number 2060                                                                   
                                                                               
 CHAIRMAN HODGINS announced the next order of business would be HB
 51, "An Act relating to the Department of Environmental                       
 Conservation."                                                                
                                                                               
 Number 2213                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG, sponsor of HB 51, thanked Chairman Hodgins           
 for scheduling the bill in a timely manner.  He said it is                    
 unfortunate he has to be before the committee one more time as the            
 bill had been reviewed last session.  House Bill 51 is a                      
 permutation and a slight adjustment from what was HB 342 which was            
 vetoed by the Governor last session.  Hopefully, with some minor              
 revisions the bill will proceed and gain the support of the                   
 Administration.  He said HB 51 is an important piece of economic              
 development legislation and regulatory reform.  Representative                
 Rokeberg said it was the centerpiece of regulatory reform in the              
 Nineteenth Legislature and, hopefully, will be the first of several           
 major pieces of legislation regarding regulatory reform in the                
 Twentieth Legislature.  The intent of HB 51 is to foster resource             
 development within the state by endeavoring to simplify the                   
 regulatory process.  Under the Department of Environmental                    
 Conservation's (DEC) current regulatory system, adoption of federal           
 changes in regulation can take a considerable length of time.                 
 Representative Rokeberg pointed out that there isn't a mandate in             
 statutes that requires a repeal of regulations if there is a change           
 in federal regulations.  That is one of the primary intents of the            
 bill which is to more closely track the Environmental Protection              
 Agency (EPA) as the baseline because of the primacy of federal law            
 that the state deals with.  Representative Rokeberg stated we may             
 not need any more stringent restrictive requirements than what is             
 allowed by federal law which we are required to follow anyway.                
 However, the bill does make provisions for deviating from federal             
 EPA standards and placing more restrictive, less restrictive or               
 other standards within the body of water quality standards within             
 the state of Alaska.  There is substantial flexibility if the                 
 situation requires or warrants the more stringent standards.                  
                                                                               
 REPRESENTATIVE ROKEBERG said during last session there was an                 
 estimate between six and eight regulations that were more stringent           
 or deviated from the EPA requirements.  Hopefully, there will be a            
 better count on that.  He said the bill is supported by the 18                
 member Alaska Oil and Gas Association, the Resource Development               
 Council, a number of small placer miners as well as the Alaska                
 Mining Association.                                                           
                                                                               
 REPRESENTATIVE ROKEBERG explained the first portion of the bill is            
 the intent section which is to provide the DEC with a view of the             
 legislature.  One reason he introduced the bill last session was              
 that the prior Administration had promulgated regulations and had             
 hoped to have them adopted.  When the present Administration came             
 into office, and on the protest of a environmental legal group,               
 they stopped the promulgation of those regulations and went into              
 meeting on various issues on the regulations.  Over a period of               
 approximately 1.5 years there were what he considers closed door              
 meetings between members of the Resource Development Council, the             
 Sierra Club Legal Defense Fund and the Administration.  They came             
 up with some changes to those regulations and also agreements to              
 further examine some regulations.  Representative Rokeberg said his           
 feeling for the proper form for establishing state policy is the              
 legislature whereas the public has the right and ability to testify           
 before a committee expressing their views about state policy should           
 be formulated.  He said he thinks decisions should be made with               
 full public input.                                                            
                                                                               
 Number 2381                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG informed the committee the bill which lists           
 a number of water quality standards and measurements the must be              
 taken into account when proposing, adopting and implying water                
 quality standards in this state.  The bill provides that after                
 receiving a request from a permit application that the DEC shall,             
 within 90 days or another mutually agreeable time, change the                 
 regulations in the state to conform with federal legislation or               
 propose new state regulations which my be more stringent, but they            
 must go through the procedure as outlined in the bill.                        
                                                                               
 REPRESENTATIVE ROKEBERG said he believes that testimony on HB 342             
 is evidenced by a letter of testimony which was given to the                  
 committee from the environmental community indicates a lack of                
 understanding on the part of a number of people as to what the bill           
 does.  Everybody seems to think on first reading of the statutory             
 language that the DEC must make this change within 90 days and they           
 only have this very short period of time to do this when a                    
 petitioner comes in and asks for a change.  He stated that is not             
 the case.  The 90 day window is for them to take action, but that             
 action can be either to simply adopt the federal regulation, which            
 they have statutory authority to do under the bill, or propose a              
 new regulation.  If they do so, they have to go through the                   
 standard Administrative Procedures Act which can be quite lengthy             
 and provides for maximum public input.  If there is a change, they            
 drop into the process provided under the bill.  They would have to            
 go through the public process, have public hearings, look at the              
 various criterion and standards set up in the bill to make a more             
 restrictive standard if it's warranted.  Representative Rokeberg              
 said this could take a period of well over a year.  There is a                
 great misconception of what the 90-day language means.                        
                                                                               
 Number 2381                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG explained that the bill establishes that              
 water quality criteria and measurements that must be made by the              
 federal EPA methods or allows for a substantially equivalent                  
 methods to be used by the DEC.  The bill also authorizes the                  
 commissioner to establish a discharge standard of sediments and               
 establishes the volumetric Imhoff Cone method as the measurement              
 for settleable solids in discharged water.  Representative Rokeberg           
 indicated last session this was a highly controversial item, but a            
 report that was issued in July, 1996, did adopt the EPA standard              
 for measurement of settleable solids of the volumetric Imhoff Cone.           
 He pointed out HB 51 reflects the now adopted standard.                       
                                                                               
 REPRESENTATIVE ROKEBERG said the main element of the bill                     
 establishes a process for the DEC to use when they propose                    
 regulations.  It allows the DEC to adopt regulations that are more            
 restrictive than the federal criteria going through procedures as             
 outlined in the bill.  Secondly, it allows the DEC to establish a             
 water quality standard for which there is no corresponding federal            
 standard.  In other words, they're authorized if there is a                   
 believed need and a unique situation at stake that they have the              
 authority to go ahead and do that.  Representative Rokeberg stated            
 the bill also allows the DEC to establish a state water quality               
 measurement different from the measurement than the EPA recommends.           
 Lastly, the bill sets up a transitional review of the state water             
 quality regulations that coincides with the department's triennial            
 review process.  In other words, every three years the department,            
 by the Federal Water Quality Act, is supposed to review their                 
 existing regulations.  Currently, under statute, they are given               
 four years because they are a little bit behind in that process.              
                                                                               
 TAPE 97-1, SIDE B                                                             
 Number 001                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG referred the committee to page 2, Section             
 3, and said he had understood that the DEC wanted to take over the            
 task of the permitting process of the National Pollutant Discharge            
 Elimination System (NPDES) in the state.  He said if the committee            
 would review the fiscal note, apparently the DEC may want to do               
 this but it would be rather costly and there is $3.2 million                  
 addition to the fiscal note for the undertaking of this process.              
 Representative Rokeberg noted after public testimony is taken, he             
 will be bringing forth an amendment to delete that section from the           
 bill.  He also pointed out that Representative Pete Kelly is also             
 a sponsor of the legislation.                                                 
                                                                               
 REPRESENTATIVE ROKEBERG noted the proposed committee substitute in            
 the committee member's file reflects some changes since the                   
 original submitted draft.                                                     
                                                                               
 Number 133                                                                    
                                                                               
 REPRESENTATIVE BUNDE moved to adopt the referenced committee                  
 substitute, Version (F), as the committee's working document.                 
 Hearing no objection, it was so ordered.                                      
                                                                               
 Number 158                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG stated that these changes were the result             
 of discussions with staff, along with input from DEC.  On page 1,             
 line 13, the following words were added, "the department considers            
 whether compliance with regulations are economically feasible..."             
 He explained that they tried to do is lessen the impact, especially           
 a financial one, by allowing the department to consider this rather           
 than mandate a specific use.  Also, on line 15, the word "science"            
 replaced the phrase "scientifically measurable criteria," in order            
 to make a strong point that the regulation is based on science.  He           
 stated that this seemed like a simple notion, but that it had                 
 caused some difficulty in the past.                                           
                                                                               
 REPRESENTATIVE ROKEBERG continued, "On page 2, line 16, we've                 
 changed the word (indisc.) "background condition."  And there is a            
 long history (indisc.-paper shuffling) and there is a long history            
 (indisc.-paper shuffling) believe this more properly serves the               
 vernacular and terms of art used within water quality standard                
 criteria language.  Mr. Chairman, unfortunately my involvement --             
 I know more about these things which are very very complex than I             
 care to know - but - and I still have and I know nothing."                    
                                                                               
 CHAIRMAN HODGINS indicated confusion and asked Representative                 
 Rokeberg if he was referring to line 16.                                      
                                                                               
 REPRESENTATIVE ROKEBERG indicated for clarification purposes that             
 he mistakenly referenced the wrong version of this legislation.  He           
 indicated he should be speaking to the new CS, line 26, Section               
 46.03.085. Water Quality Standards on page 2, line 21.  He                    
 proceeded to outline the specific changes to this section by                  
 referencing the previous version of this legislation instead.                 
                                                                               
 REPRESENTATIVE ROKEBERG noted that on page 2, line 18 of the                  
 original bill that the words "and," and "criteria" were deleted.              
 Under this same section, subsection 5 the words, "procedures," and            
 "permitting" were added.  An "s" was added to the word "regulation"           
 to read "regulations," as well.  Also, on page 3, line 6 of the               
 original legislation (indisc.-paper shuffling on the microphone).             
 Additionally, on page 3, line 13 (indisc.-paper shuffling on the              
 microphone), he continued to explain the inclusion of the word                
 "initiate," change was related to the 90 day period allowed under             
 this section.                                                                 
                                                                               
 Number 321                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG continued that on page 2 of the CS                    
 regarding the language which defines "background condition" a new             
 subsection was added.  He said he would probably bring an amendment           
 to this section of the legislation as well.                                   
                                                                               
 Number 395                                                                    
                                                                               
 REPRESENTATIVE BUNDE asked for clarification about the federal                
 regulations and whether or not they have supremacy over state                 
 regulations.  He said he also thought Representative Rokeberg had             
 stated that this legislation would allow the state to establish its           
 standards, the same as, more stringent than or less stringent than            
 the federal regulations.                                                      
                                                                               
 REPRESENTATIVE ROKEBERG responded that under this form of the bill            
 "less" has been taken out, but "historically, there has been                  
 situations, particularly like we're currently having a battle over            
 arsenic where there's a differential or a difference between the              
 federal government, the scientific community, the mining community            
 and the DEC.  So there's an on-going controversy.                             
                                                                               
 REPRESENTATIVE BUNDE noted that the purpose of his question was not           
 that he had all that much confidence in the federal standards, it's           
 just if the federal government will have supremacy and the                    
 legislature encourages a lower standard.  He indicated concern for            
 more lawsuits.                                                                
                                                                               
 Number 447                                                                    
                                                                               
 REPRESENTATIVE RYAN referenced the economic feasibility of the                
 regulations and said the department's fiscal note was $297,600 to             
 justify the hiring of three economists, two full-time and one part-           
 time to ascertain economic feasibility.  He referred to                       
 Representative Rokeberg's testimony where he mentioned that on page           
 1, line 15, and said this was a regulation based on science as a              
 concept for the department.  He asked if Representative Rokeberg              
 had consulted with the department about how much it was going to              
 cost to hire the scientists necessary to ascertain whether or not             
 this is reasonable.                                                           
                                                                               
 REPRESENTATIVE ROKEBERG responded that he had not consulted with              
 the department concerning this issue.  He said that this question             
 would be better directed to the department.                                   
                                                                               
 Number 499                                                                    
                                                                               
 REPRESENTATIVE KEMPLEN referred to the fiscal note and said he had            
 understood that Representative Rokeberg would be introducing an               
 amendment to this legislation regarding the substantial costs                 
 identified by the department in relation to the NPDES.  He asked              
 Representative Rokeberg to address some of the other costs                    
 identified by the department, such as legal and regulation costs.             
 He asked if those are accurate assessments in his mind.                       
                                                                               
 REPRESENTATIVE ROKEBERG answered, "No."  He believed that there               
 would be further discussion on this issue.  Representative Rokeberg           
 felt that the existing department budgets, personnel and so forth,            
 in a large part can accomplish a substantial (indisc.).  There may            
 be some relatively modest costs to go through the regulatory                  
 procedures which would result under the Administrative Procedures             
 Act from implementation of the statute.  As to the fact, for                  
 example, the need for a full-time attorney, he doesn't agree with             
 that.                                                                         
                                                                               
 Number 576                                                                    
                                                                               
 REPRESENTATIVE KEMPLEN stated that he attended the Resource                   
 Development Conference held recently in Anchorage.  A                         
 representative from the mining community mentioned that the efforts           
 to reduce the available resources to the DEC could be significantly           
 detrimental to the mining industry because of their ability to get            
 permits through the system.  This gentleman's suggestion was that             
 be very careful about reducing the budget of this department.  He             
 noted Representative Rokeberg's statement about these costs                   
 associated with this new legislation could be absorbed by the                 
 department seems to run contrary to the statement which he had                
 heard early.  He said he'd like to be assured that industry will              
 not be negatively affected because of the governmental                        
 Administration is burdened with too many responsibilities and not             
 enough resources.                                                             
                                                                               
 REPRESENTATIVE ROKEBERG responded that he appreciated and shared              
 these same concerns.  It is not the intention of this bill in any             
 way to have a negative impact on the ability of the department to             
 meet the needs of the private sector when they come forward for               
 their permitting process.  He continued that the committee members,           
 Chairman Hodgins and Representative Kemplen, should find after a              
 longer tenure with the legislature that there seems to be a desire            
 on the part of bureaucracy to find rationales and abilities to                
 increase their monetary income which is only a natural function of            
 any bureaucratic organization.  The ability of the department to              
 act properly is a case to be made before their budget subcommittee.           
 He said he would like the chair to know that fundamentally the same           
 bill with the exception of NPDES permitting section left the Senate           
 Finance Committee or was waived by Senate Resource Committee with             
 its fiscal of $60,000 last session.  This argument about fiscal               
 impact will go on during the course of this bill.                             
                                                                               
 Number 726                                                                    
                                                                               
 BECKY GAY, Executive Director, Resource Development Council (RDC),            
 testified by teleconference from Anchorage.  She explained that the           
 RDC is a federally funded, non-profit statewide organization which            
 works on resource issues of all kinds.  Ms. Gay referred to the               
 position statement which was submitted to the committee and agreed            
 with Representative Rokeberg that over the interim, since the                 
 former bill HB 342, which was the water quality bill that passed              
 last year and was vetoed, that they have been working closely                 
 (indisc.) RDC as a regulating community, as well as with other                
 agencies and other segments of the public to address what perceived           
 short comings there were in the bill.  To the extent that the                 
 parties were able to agree, changes were made.                                
                                                                               
 MS. GAY added that she hoped the legislature understood that much             
 of the work on this legislation is in response to the decline in              
 budget revenues and not just to the DEC, but to the whole state.              
 Although RDC works primarily on the revenue side of the budget,               
 such as promoting more industry in Alaska, they are not shy in                
 mentioning where costs can be cut.  In the regulatory arena, the              
 RDC believes that some of this cost cutting can be useful, but also           
 painful.  They are here to help guide the way through these rocky             
 seas, hopefully with the legislature, the Administration and the              
 regulating communities being able to come to some agreement.  She             
 said she feels there needs to be more congruence in the state about           
 what we're going to do with regards to use and protection of water            
 in particular.                                                                
                                                                               
 MS. GAY said that this would minimize a lot of wasted effort from             
 all parties and it will strengthen the agency's internal resolve to           
 do what is necessary and mandated.  This type of congruence will              
 also show a united front to the EPA and perhaps reduce some of the            
 lawsuits which are always threatened because of vagueness and                 
 ambiguity in direction from the legislature, from which these                 
 regulations are promulgated.  Currently, there is no state                    
 adjustment policy, as Representative Rokeberg pointed out, on                 
 regulations.  The legislature needs to decide what this policy will           
 is.  She felt as though a policy is clearly stated in this bill               
 because the federal requirement is merely to adjust upward if they            
 become more restrictive.  This is a one way street for a state and            
 if the regulations change at the federal level there is no similar            
 requirement to somehow adjust downward when the federal government            
 determines one of their criteria are lacking.                                 
                                                                               
 MS. GAY continued she believes that this would become useful if and           
 when the Clean Water Act is changed.  However, this is just an                
 adjustment policy.  They believe that the legislature is the right            
 place to debate what this policy will be and determine that fact.             
 Also, HB 51 requires the DEC to set standards which are                       
 scientifically supportable.  She said they cannot stress how                  
 important this is in order to be consistent with federal existing             
 standards in conjunction with what is reasonable for Alaska.  Ms.             
 Gay noted that this is where the background language comes into               
 play.  This is the type of thing which will "Alaskanize" our                  
 regulations, which is what the Clean Water Act has asked each state           
 to do.                                                                        
                                                                               
 MS. GAY stated that where possible, HB 51 also gives statutory                
 backing for efforts by the DEC that are already underway.  The new            
 fiscal note on NPDES has not been discussed legislatively enough,             
 but she understood that it was the DEC's intent to take over NPDES.           
 Ms. Gay said she knew that it is Region 10's intent to give it to             
 the state if they want it.  She thought this would be a useful                
 debate.  She didn't want them to scrap it too soon and suggested              
 toning down the language such that they don't have to take it over            
 for whatever reason.  She felt it was useful to have in the bill              
 for dialogue because the DEC keeps using this as a ultimate goal              
 for other things.                                                             
                                                                               
 MS. GAY pointed out that the bill does specifically allow in two              
 places for the state to have a stricter standard than the federal             
 government.  This is what the opposition seems to make the most               
 noise about.  If the DEC can prove scientifically that there is a             
 reason to have stricter standards, then indeed they can have them.            
 She noted that there is a process laid out by which to do so which            
 is quite clear in her opinion.  This also allows the DEC to have a            
 standard which is not in law and this was their language.  The DEC            
 suggested that there should be such a thing.  The council                     
 acquiesced to this last session.  She wasn't sure why they were               
 doing this already, but the council does not have a problem with              
 them doing this if they can prove that they should.  Ms. Gay said             
 the bill also allows discharge water language to match the quality            
 of the receiving waters.  She said she believes that there has been           
 a change in the CS, but would like to offer an additional change              
 which would be a statutory mandate for mixing zones.  She said the            
 state is currently trying to promulgate regulations on mixing                 
 zones, but they don't really have clear statutory backing to do so.           
                                                                               
 Number 1039                                                                   
                                                                               
 MS. GAY referred to the CS, page 1, Section 2, and said the RDC has           
 been wishing the DEC would hire an economist.  She said the                   
 economic argument is lost many times in the regulatory arena and              
 that it is a real important aspect.  She noted she doesn't think              
 the department's fiscal note for hiring three economists is unreal.           
                                                                               
 MS. GAY referred to page 2, Section 2, relating the "background               
 condition," and said she believes this is good.  She indicated she            
 isn't sure what the last sentence means relating to "you can use a            
 similar watershed."  She noted she thinks it is important to come             
 up with a definition for "background."                                        
                                                                               
 Number 1159                                                                   
                                                                               
 MS. GAY referred to the addition of Section 3 to NPDES and said it            
 is her understanding that it is the DEC's intent to take over NPDES           
 at some point in time.  She said she doesn't think the fiscal note            
 is realistic in the sense it is one sided.  It doesn't show any               
 program receipts which they are supposed to get if they take over             
 the NPDES program and it doesn't show any federal funds that might            
 be associated with it.  She noted she believes it would take                  
 statutory language to take over the program and legislative backing           
 to give the department the money to do it.                                    
                                                                               
 MS. GAY referred to page 2, line 22, "Clean Water Act," and said              
 that was added because the DEC and (indisc.) made comments that it            
 wasn't being referred to in that section.  Now it's in there.                 
                                                                               
 Number 1233                                                                   
                                                                               
 MS. GAY referred to page 2, line 30 and 31.  She said the concept             
 of receiving water is still not in that message.  The committee               
 might want to add language that says, "receiving water."  Ms. Gay             
 said it is not just the water received by the user.                           
                                                                               
 MS. GAY referred to page 3, and said it includes mixing zones.  She           
 said lines 3, 4 and 5, is an example where the state is going to be           
 stricter than the federal government.  That was requested by the              
 Alaska Department of Fish and Game (ADF&G) last year.  They have              
 pointed out that they are always stricter on shellfish beds.  She             
 referred to line 9 and said the 90 days was a number presented by             
 the DEC.  They don't necessarily want to defend that number now,              
 but they did come up with the number themselves.  She pointed out             
 that the Administrative Procedures Act (APA) only has a 30-day time           
 limit.  Ms. Gay referred to wording on line 21 "approved in                   
 writing," and said she has read a letter from the EPA and they                
 recommended deleting the wording "in writing."  The EPA doesn't               
 like to approve things in writing.  She indicated she has a problem           
 with deleting that wording.  It would make more work for the EPA              
 and they didn't like that.  Ms. Gay referred to page 3, line 26,              
 and said the Imhoff come method has been bought into by the state             
 and their own studies.  That is a moot point, but she wanted to               
 noted the DEC brought that amendment forward last year.                       
                                                                               
 Number 1369                                                                   
                                                                               
 MS. GAY referred to page 4, and said the reference to being less              
 restrictive was specifically taken out because the DEC couldn't and           
 wouldn't defend it at the Governor's level in particular.  If the             
 DEC wants to be less restrictive than the federal government,                 
 they're going to have to come back and seek legislative approval on           
 their own if they want to.  Ms. Gay referred to wording on page 4             
 regarding transitional review and the triennial review.  She said,            
 "This was the DEC's change last year because when we came in with             
 this bill we asked for a review of all regulations, historic and              
 any ones they were in the middle of.  DEC complained that would               
 cost too much money and a long long fight over that during last               
 session was (indisc.).  What happened when we actually asked to               
 their request to do it within the triennial review process, knowing           
 full well that a triennial review, although that means three years,           
 really takes about six years and sometimes maybe longer.  So we               
 feel we gave a lot on that issue already - the triennial review               
 process.  At least there will be (indisc.) in place now."  Ms. Gay            
 thanked the committee for listening to her.                                   
                                                                               
 Number 1520                                                                   
                                                                               
 MARILYN CROCKETT, Assistant Executive Director, Alaska Oil and Gas            
 Association (AOGA), testified via teleconference from Anchorage.              
 She explained AOGA is a trade association of 18 member companies              
 who account for the majority of the oil and gas exploration                   
 production transportation of marketing activity in the state of               
 Alaska.  Ms. Crockett noted AOGA worked on the legislation last               
 session.  She stated AOGA continues to support the goal of HB 51 to           
 establish reasonable and economically achievable and scientifically           
 based state water quality standards that are no more stringent than           
 the federal regulations, unless on a case-by-case basis there is              
 evidence that justifies the more restrictive regulations.                     
 Specifically, they support legislation that would provide for state           
 regulations and standards to be consistent with the federal                   
 requirements.  If circumstances warrant a different standard at the           
 state level than at the federal level, there should be some process           
 in place that allows for consideration of science and economics in            
 the demonstration of that more restrictive requirement.  Ms.                  
 Crockett said she would point to the section that talks about the             
 review that would undertaken for a standard that would be more                
 restrictive than the federal regulations.  She stated that section            
 was crafted using language from the Alaska statute authorizing                
 state assumption of the Title 5 Air Program.  That legislation was            
 drafted by a work group, prior to submittal by the Governor to the            
 legislature, that reached consensus on the point that the                     
 regulations at the state level should be (indisc.) with the federal           
 level.  However, there may be situations where you may want to have           
 a more restrictive regulation for whatever purpose.  In those cases           
 you have to go through a demonstration process.  Ms. Crockett said            
 there should be an official way to amend state regulations to match           
 old regulations when they change.  She said AOGA supports                     
 regulations that (indisc.) only EPA approved measurements.  She               
 said currently the state is required only to amend its regulations            
 when changes to the federal regulations result in a more                      
 restrictive standard than we have at the state level.  The state              
 should ensure there is consistency with the federal requirements              
 and the state should also be required to amend (indisc.) when                 
 changes occur to the federal standards which result in a less                 
 restrictive (indisc.) or when provisions are deleted from the                 
 federal regulations.  Ms. Crockett stated federal regulations                 
 should be the basis as well as the boundaries for state                       
 regulations.  If there is (indisc.) for more restrictive standards,           
 then a process should be in place to ensure that (indisc.)                    
 economics are considered a part of that process.  Ms. Crockett said           
 HB 51 provides an appeal process which she believes is important to           
 effect changes to the state requirements when changes to (indisc.)            
 requirements are inaccurate.                                                  
                                                                               
 Number 1755                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG asked Ms. Crockett if she knows of any                
 debate going on in Washington regarding the revisions of the Clean            
 Water Act.                                                                    
                                                                               
 MS. CROCKETT said she isn't aware of what congressional activity is           
 under way today on the Clean Water Act.                                       
                                                                               
 Number 1799                                                                   
                                                                               
 REPRESENTATIVE KEMPLEN referred to the economic analysis that is to           
 be performed and asked Ms. Crockett if she thinks a couple of                 
 courses in economics at the undergraduate level would be sufficient           
 to provide an accurate assessment of the economic viability of the            
 regulations.  He asked her if she feels a trained economist is                
 necessary.                                                                    
                                                                               
 MS. CROCKETT said she doesn't feel she is qualified to answer the             
 question as she isn't an economist herself.  She noted at the EPA             
 level and in other agencies there are requirements for                        
 consideration of economics and the economic impacts from                      
 regulations.  Ms. Crockett said she believes guidance documents               
 could be prepared which would spell specifically what must be                 
 considered as part of the regulatory development process.                     
                                                                               
 Number 1911                                                                   
                                                                               
 JANICE ADAIR, Director, Division of Environmental Health;                     
 Legislative Liaison, Department of Environmental Conservation, came           
 forward to address HB 51.  She said she would like to assure the              
 committee that the DEC certainly agrees that it is the role of the            
 legislature to set policy.  The DEC sees the bill as being                    
 significantly different than HB 342 in two regards.  The first is             
 Section 2 which sets out the economic feasibility based on science.           
 She said they agree that science is an important basis for any                
 environmental regulation and Section 2 does apply to all                      
 regulations of the DEC, not just water quality but drinking water,            
 pesticides, solid waste, contingency plans, oil transportation,               
 contaminated sites, the entire gamut of environmental regulations             
 adopted by the DEC.  The primary basis of environmental regulation            
 is protection of public health and no where in HB 51 is that                  
 concept included.  Ms. Adair said when you have a choice between              
 economic feasibility, particularly in some of the program areas               
 like drinking water or protecting public health, they read Section            
 2 as always deferring to the economic feasibilities and that is of            
 great concern.  She said we know that led in drinking water is a              
 health problem for children and there is the requirement that there           
 be no led pipes, no led solder.  That may not be economically                 
 feasible for the people being regulated, but she thinks it is an              
 important health protection.  She said cripto sporidium (sp.)                 
 exists in our surface sources in the state and we know cripto                 
 sporidium killed 100 in Milwaukee in 1993.  The department requires           
 this for filtration.  It is expensive, but they think it is worth             
 it.  Their are choices that society makes about the protections of            
 their environment and mixing zones is a perfect example.  She said            
 mixing zones are not a scientifically created entity.  It is a                
 societal choice.  It is something that we have said, as Alaskans,             
 we're willing to have a water body, have a single user - the person           
 discharging into the mixing zone and preclude other uses of that              
 waterbody for fishing, shellfish growing, swimming, et cetera.  Ms.           
 Adair said those are important concepts for them and things that              
 they try to balance between when they go out with a regulatory                
 proposal.                                                                     
                                                                               
 Number 2135                                                                   
                                                                               
 MS. ADAIR referred to the NPDES delegation language in Section 3              
 and said the DEC thinks that NPDES run by the state would be good             
 for the state, but because it is expensive they haven't done it.              
 She said the fiscal note is their honest assessment of what they              
 think it would take and that is why they don't do it.  It is very             
 expensive.  She said the fiscal note doesn't reflect any federal              
 grants because typically, there are no federal grants for running             
 the program.  The fiscal note also doesn't reflect any program                
 receipts because the department doesn't have any program receipt              
 authority for it nor does the legislation propose that, so they had           
 to go with what was written which would all come from general                 
 funds.  She informed the committee members the DEC is going out               
 with a contract to have a look at what it would really take to have           
 NPDES.  Ms. Adair noted the fiscal note reflects the department's             
 best estimate, but she thinks it is a few years old as she recalls.           
 The department needs to get a handle on it because there is a lot             
 of interest in having the state run NPDES.  Ms. Adair said the                
 fiscal note should not be read as an indication from the department           
 that they don't want it.                                                      
                                                                               
 MS. ADAIR explained the bill says that water quality standards                
 shall protect human health and the propagation of fish, but the               
 Clean Water Act requires that water be protected for a variety of             
 other uses.  The department doesn't see those uses in the bill and            
 that is a concern.  She questioned that if they were to try to                
 obtain delegation of the NPDES program, would they actually be able           
 to do it if HB 51 were to become law.  Ms. Adair explained the                
 Clean Water Act requires that water be protective of wildlife,                
 recreation, domestic water supplies, drinking water, agricultural,            
 industrial and navigational uses.  She noted those are all the                
 things that must be considered when adopting water quality                    
 standards.  The Act also says that the discharged water can't be of           
 higher quality than the background condition of the receiving water           
 and the DEC thinks that is probably okay, but this is something               
 that needs to be clarified with the EPA and they haven't had the              
 opportunity to do so yet.  Ms. Adair explained that in some cases,            
 the EPA requires a technology based limitations on the affluent and           
 without regard to the receiving waters.  So that could be a problem           
 and it is something the DEC would need to look into.  Ms. Adair               
 said it requires that standards be reliably measured.  In theory,             
 that is sound, but we do have narrative standards.  They're not a             
 measurement, it is not a numeric standard.  It is color, taste,               
 it's aesthetics.  She pointed out there are some standards that go            
 to non-detect.  Ms. Adair explained personally she thinks you could           
 reliably measure non-detect, but she isn't sure if the Attorney               
 General's office would agree with her.  She noted they haven't had            
 the opportunity to their review.                                              
                                                                               
 MS. ADAIR explained it is correct that the DEC has adopted within             
 their regulations the requirement that settleable solids be                   
 measured with the Imhoff Cone method, but one of the reasons the              
 department likes to have specific requirements in the regulations             
 is because if somebody comes up with a better mouse trap or for               
 some reason if somebody wants to do something different, their                
 hands are tied if it is in statute.                                           
                                                                               
 TAPE 97-2, SIDE A                                                             
 Number 001                                                                    
                                                                               
 MS. ADAIR informed the committee members that there is currently in           
 the Administrative Procedures Act a methodology for people to come            
 forward and ask the DEC to change their regulations.  She stated it           
 was through the Administrative Procedures Act that Trustees for               
 Alaska - the Sierra Club Defense Fund came forward and challenged             
 the state's water quality regulations.  It was a result of the                
 former Commissioner Burden put together a group to look at the                
 water quality standards, see what the issues were and how they                
 could be addressed.  Ms. Adair referred to the Administrative                 
 Procedures Act and said the person making the petition has to give            
 the DEC the information they need to evaluate the petition.  In HB
 51 there is no such requirement.  So any of the scientific data,              
 any of the technical information, any of the research would have to           
 be done by the department and they are not funded to do that kind             
 of work.                                                                      
                                                                               
 MS. ADAIR said she would also like to point out that the state                
 water quality regulations also give people the ability to come in             
 and petition for a lower standard where the background is lower               
 than the federal or state standard.  So there is currently the                
 ability for people to come in and get some different standard based           
 on what they're actually finding in their waterbody.  Ms. Adair               
 said those are some of the problems the DEC sees with HB 51, and to           
 the extent the legislation is unclear, it's is hard for the                   
 department to make specific recommendations on how to fix it.  She            
 said to the extent that unclear legislation becomes unclear                   
 statutes, it increases the cost for implementing for everybody                
 including the permittees who have to go through the process.  So              
 rather than improving anything, it just adds confusion and                    
 inefficiencies reducing the DEC's ability to be responsive and                
 effective.  The bill is also very process oriented, it creates                
 duplicative processes over and above the Administrative Procedures            
 Act.  Ms. Adair said the DEC sees the bill coming with more process           
 and more costs and they are not sure of the value of either since             
 they are not certain of the intent of the sponsor.                            
                                                                               
 Number 255                                                                    
                                                                               
 REPRESENTATIVE KEMPLEN referred to the issue of whether or not                
 sufficient resources exist in the DEC to adequately administer the            
 regulations.  There is a perception that there is slack in the                
 department and they could absorb additional responsibilities and              
 additional process.  He questioned whether industry or members of             
 the public have come forward to express concern that the department           
 is not meeting its charge because of inadequate funding or                    
 inadequate resources.                                                         
                                                                               
 Number 337                                                                    
                                                                               
 MS. ADAIR said, "Yes and no.  Of course to some extent people think           
 it's a matter of how we set our priorities and if we did just what            
 they wanted us to do, then we would have enough money, but then               
 there would be someone else whose priority would not be ours and              
 they would have a similar concern.  I don't think that across the             
 board the department -- I think that we're able to meet out charge            
 in many areas.  There are some of particular concern and this                 
 particular program area, water quality, is one of those."                     
                                                                               
 MS. ADAIR explained she used to work on the department's budget and           
 it was the target of reductions for several years in a row.  She              
 said she really isn't sure why except that there has been a lot of            
 dissatisfaction with how it operates in the state.  She said the              
 DEC could not absorb the running of this program the way it is                
 established in HB 51.  It would be impossible.  Ms. Adair said she            
 doesn't think that anybody in attendance wants to set the public up           
 for expectations that can't be realized and she would hope that               
 they wouldn't want to set the department up for failure as well.              
                                                                               
 Number 443                                                                    
 REPRESENTATIVE KEMPLEN explained one of the things that the                   
 legislature is working very hard at doing is getting economic                 
 development to occur in the state, particularly the natural gas               
 pipeline which is a multi-billion dollar project.  If we are                  
 successful that is going to produce a lot of growth and development           
 throughout the state.  If such growth and development begins to               
 occur, it will produce additional demands on the DEC to handle the            
 permits, economic analysis, et cetera.  Typically, when economic              
 growth occurs it occurs fairly quickly.  Representative Kemplen               
 question how quickly the DEC could respond to adding the additional           
 resources to meet that growth.                                                
                                                                               
 Number 535                                                                    
                                                                               
 MS. ADAIR explained they see themselves as a partner in the                   
 economic development of the state.  She said whether the state has            
 the DEC or not, there are laws on the books about necessary permits           
 or approvals from the state that are required before a variety of             
 things can be done, most of which are associated with some kind of            
 economic development.  If those programs were gone, then people               
 would simply be dealing with the federal government, the EPA out of           
 Seattle and in some cases out of Washington, D.C.  She said it                
 really depends on the area you're looking at.  She said they would            
 see themselves as having a role to play in that economic                      
 development.                                                                  
                                                                               
 REPRESENTATIVE KEMPLEN stated he and his constituents would not               
 want to see environmental quality is sacrificed during periods of             
 rapid economic growth because the DEC doesn't have the ability to             
 monitor that economic growth.                                                 
                                                                               
 Number 744                                                                    
                                                                               
 REPRESENTATIVE BUNDE referred to Ms. Adair expressing some concern            
 about the concept of receiving water and how it is something that             
 needed to be looked at more thoroughly and said he needs more                 
 education.                                                                    
                                                                               
 MS. ADAIR explained HB 51 says that the state could not require the           
 discharge of water to be of a higher standard than the receiving              
 water.  She said the point of her concern is that the EPA, in its             
 water quality standards, often sets technology based limits.  It              
 doesn't really matter what the receiving water is, but technology             
 exists to clean that discharge up to a higher level.  The standard            
 is set based on that technology that exists rather than looking at            
 the water that the discharge is going into.                                   
                                                                               
 Number 744                                                                    
                                                                               
 REPRESENTATIVE BUNDE said, "I suppose that this is an extension of            
 garbage in, garbage out kind of thing.  If you've got a polluted              
 water source that you're using in your industry, you're saying then           
 that industry should in effect clean up the pollution that they've            
 received as well as whatever they create."                                    
                                                                               
 MS. ADAIR explained the way she thinks of it is that it's an                  
 opportunity to use technology to improve a waterbody as opposed to            
 retaining a waterbody that may have pollutants.                               
                                                                               
 Number 798                                                                    
                                                                               
 REPRESENTATIVE OGAN referred to page 1, line 11 through 13, Section           
 2, "The department may not adopt a regulation under this sections             
 unless the department considers whether compliance with the                   
 regulation is economically feasible for the person governed by the            
 regulation;".  He said, "I put myself in your shoes for a little              
 bit and I tried to figure out how the heck you would determine,               
 `Well, can we adopt a regulation on this?  It might not be                    
 economically feasible for you.'"  Representative Ogan said it is              
 pretty subjective criteria for writing regulations.  He said what             
 is economically feasible for a multi-million dollar international             
 mining company might not be economically feasible for "Joe six-pack           
 placer miner."  He asked how that determination is made.  He also             
 asked Ms. Adair if she sees this as a major obstacle in being able            
 to write a regulation.                                                        
                                                                               
 MS. ADAIR said, "Yes indeed, and beyond that we have no ability to            
 obtain any kind of economic data from companies that we're                    
 regulating or if we did, the ability to keep it confidential - it             
 would become a public record upon their giving it to us.  And so I            
 wouldn't give it to a state agency to have it become a public                 
 record if it was my financial data about my company."                         
                                                                               
 MS. ADAIR explained the DEC regulates municipal drinking water                
 systems whether it is in Tuntutuliak or in Anchorage.  She noted              
 there are vast differences in the resources of those communities.             
 The department regulates solid waste facilities across the state.             
 She said, "Do we look to the state then and say the state can                 
 afford this, therefore, a municipality can?"  She said she wouldn't           
 know how to approach it.                                                      
                                                                               
 Number 944                                                                    
                                                                               
 REPRESENTATIVE BRICE questioned how may other states have primacy             
 over their NPDES program.                                                     
                                                                               
 Number 959                                                                    
                                                                               
 MICHAEL CONWAY, Acting Director, Division of Air and Water Quality            
 Department of Environmental Conservation, indicated he would get              
 the information for the committee.  He added most state have NPDES            
 primacy and there are only a few that don't.                                  
                                                                               
 REPRESENTATIVE BRICE also requested some background as to what it             
 cost those states to run the program.  He noted he was also                   
 bothered by the fiscal note and asked why there wouldn't be program           
 receipts.                                                                     
                                                                               
 Number 998                                                                    
                                                                               
 MS. ADAIR responded that the department doesn't have statutory                
 authority for program receipts for NPDES.  She said it would have             
 to be added to their authority.                                               
                                                                               
 REPRESENTATIVE BRICE said he thinks what the bill is trying to get            
 at is to merge state and federal programs and not have duel                   
 programs.  He asked what the department is doing regarding this.              
                                                                               
 MS. ADAIR explained the only way to merge is to delegation of                 
 NPDES.  She noted the Air and Water Quality Division is going out             
 with a contract to try and summarize all of the issues that would             
 be necessary for the department to address to develop a plan to see           
 if it's feasible to have the delegation of the program.  She said             
 the DEC believes it to be an expensive program and there may not be           
 the will to have it once the cost is determined.  The EPA does have           
 certain criteria that they use before they'll delegate a program to           
 any state.  She said we need to look at what their criteria is and            
 see where there are matches and then make a plan to bring those               
 things into alignment.                                                        
                                                                               
 Number 1095                                                                   
                                                                               
 REPRESENTATIVE RYAN referred to a couple of instances he knows of             
 regarding mining operations in the Interior.  On Ester Dome the               
 naturally occurring runoff was 10,000 times of arsenic, the EPA               
 minimum.  That was allowed to occur and go into the (Indisc.) River           
 because obviously it was an Act of God, but if it were a miner were           
 to take that same water and use it to wash out (indisc.) mill                 
 products then they have to clean that water up to a drinking water            
 standard before they could put it back into the system.  Other                
 miners, using water that came from glacial fed streams and rivers             
 had to go with the requirements.  He asked if the DEC would                   
 consider the criteria for the run of water discharged from a mining           
 operation to be that what occurred naturally if you're taking in              
 the background consideration or would they still have to meet the             
 21 turbidity units for a criteria for drinking water quality before           
 it could be put back into the watershed.                                      
                                                                               
 MR. CONWAY explained they have been able to work out through the              
 placer mine general permit the ability to go to the background                
 level.  It's the reading that's taken above where there has been a            
 disturbance.  This was negotiated with the EPA by the DEC and the             
 Alaska Miners Association.  He said arsenic brings up one of the              
 rules where the department's commission is now trying to petition             
 the EPA, in an interim period while additional studies are done, to           
 be able to use the DEC's numbers.  Mr. Conway stated this is a case           
 where the DEC's standard would be less than what the EPA standard             
 current is.  He noted they are bound by the national toxins rule to           
 have those lower standards, but they have the ability through the             
 EPA permit.  Mr. Conway explained currently the EPA issues the                
 NPDES permit.  The state certifies that permit, so we have the                
 ability to negotiate with the EPA and the applicant things like the           
 background levels and what is economically feasible, et cetera.               
                                                                               
 Number 1247                                                                   
                                                                               
 REPRESENTATIVE OGAN referred to the fiscal note and asked if he is            
 correct in noting that there is an error in decimal points.                   
                                                                               
 MS. ADAIR indicated he was correct and stated the DEC has put out             
 a corrected one.                                                              
                                                                               
 Number 1264                                                                   
                                                                               
 REPRESENTATIVE BUNDE said, "Brings me back to my earlier in                   
 receiving, Representative Ryan's question, that - Ms. Adair I                 
 thought I heard you say that the water coming in, we have the                 
 technology to clean it up - whoever uses is now responsible for               
 cleaning it up, but yet you're telling me that if it's coming in              
 naturally polluted, I guess would be the term I would use, then               
 they only need to bring it back up to the receiving level.  Is                
 that...."                                                                     
                                                                               
 MS. ADAIR explained she only meant to indicate that there are some            
 water quality standards that are technology based, not all of them.           
 In this case, it was a negotiated agreement through using the                 
 permit to go to background.  It is not just one way or the other.             
                                                                               
 REPRESENTATIVE BUNDE said it would depend on the EPA's judgement as           
 to whether the user of the water would be required to bring water             
 that they receive up to a higher standard if the technology                   
 existed.                                                                      
                                                                               
 MS. ADAIR said she thinks those are actually established as a                 
 regulation.  She said she doesn't think it is at their whim.  Ms.             
 Adair said she would get him more details and let him know.                   
                                                                               
 Number 1335                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG said, "I am very disappointed to hear that            
 the department doesn't, after of over a year of struggle,                     
 understand what the intention - my intention is in this bill and I            
 am also concerned that the testimony is that the implementation of            
 the bill would potentially paralyze the department and not allow it           
 to do it's work.  I mean that's certainly my intention nor is it              
 the intention of the the vast number of people in the state that              
 supports this legislation.  Just on the contrary, it is not.  So              
 let me just ask the Chairman if we could ask of the Department of             
 Environmental Conservation to submit in writing to this committee             
 and to the sponsor any of your concerns you expressed in your                 
 testimony today, and to do so as rapidly as possible, and hopefully           
 before we have the hearing next Tuesday - continue the hearing on             
 the bill."                                                                    
                                                                               
 CHAIRMAN HODGINS noted the committee would address the issue the              
 following Thursday, January 30.                                               
                                                                               
 REPRESENTATIVE ROKEBERG continued, "Next Thursday.  At that time              
 that will I think enable us to respond to any problems that are               
 exhibited by your testimony.  And also if in part and parcel of               
 that, if after this length of time has your department been able to           
 identify how many regulations exist in the Alaska regulatory scheme           
 that are more restrictive than the EPA requirements."                         
                                                                               
 Number 1436                                                                   
                                                                               
 MS. ADAIR responded, "Mr. Chairman, Representative Rokeberg, we               
 will get you that information by the thirtieth and I will defer to            
 Mike on the water quality standard comparison.  I know they were              
 working on it."                                                               
                                                                               
 MR. CONWAY indicated he would make that part of the report.                   
                                                                               
 CHAIRMAN HODGINS announced HB 51 would be addressed again on                  
 January 30.                                                                   
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 CHAIRMAN HODGINS adjourned the House Special Committee on Oil and             
 Gas meeting at 12:01 p.m.                                                     
                                                                               

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