Legislature(2013 - 2014)BARNES 124
01/22/2014 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Overview(s) - Department of Environmental Conservation | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
January 22, 2014
1:03 p.m.
MEMBERS PRESENT
Representative Eric Feige, Co-Chair
Representative Dan Saddler, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Mike Hawker
Representative Craig Johnson
Representative Paul Seaton
Representative Geran Tarr
Representative Chris Tuck
MEMBERS ABSENT
Representative Kurt Olson
COMMITTEE CALENDAR
OVERVIEW(S) - DEPARTMENT OF ENVIRONMENTAL CONSERVATION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
LARRY HARTIG, Commissioner
Department of Environmental Conservation (DEC)
Juneau, Alaska
POSITION STATEMENT: Provided an overview regarding DEC's Oil
and Hazardous Substance Release Prevention and Response Fund,
Section 404 primacy effort, and cruise ship wastewater discharge
general permit.
TOM CHERIAN, Director
Division of Administrative Services
Department of Environmental Conservation (DEC)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the DEC overview.
KRISTIN RYAN, Director
Division of Spill Prevention and Response
Department of Environmental Conservation (DEC)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the DEC overview.
MICHELLE BONNET HALE, Director
Division of Water
Department of Environmental Conservation (DEC)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the DEC overview.
ACTION NARRATIVE
1:03:32 PM
CO-CHAIR DAN SADDLER called the House Resources Standing
Committee meeting to order at 1:03 p.m. Representatives Seaton,
P. Wilson, Tarr, Kawasaki, Feige, and Saddler were present at
the call to order. Representatives Johnson and Hawker arrived
as the meeting was in progress.
^OVERVIEW(S) - DEPARTMENT OF ENVIRONMENTAL CONSERVATION
OVERVIEW(S) - DEPARTMENT OF ENVIRONMENTAL CONSERVATION
1:04:11 PM
CO-CHAIR SADDLER announced that the only order of business is an
overview by the Department of Environmental Conservation.
1:04:36 PM
LARRY HARTIG, Commissioner, Department of Environmental
Conservation (DEC), began by introducing DEC's senior management
personnel present for the overview: Lynn Kent, Deputy
Commissioner; Kristin Ryan, Director of the Division of Spill
Prevention & Response (SPAR); Tom Cherian, Director of Division
of Administrative Services; Michelle Bonnet Hale, Director of
Division of Water; and Brandon Brefczynski, Legislative Liaison.
He said his presentation will be focused on DEC's Oil and
Hazardous Substance Release Prevention and Response Fund,
Section 404 primacy effort, and cruise ship wastewater discharge
general permit.
1:07:22 PM
COMMISSIONER HARTIG, regarding the Oil and Hazardous Substance
Release Prevention and Response Fund ("Response Fund"), reminded
members that the intent language in last year's budget bill
directed DEC to report to the legislature, which it did on
1/21/14, regarding the status of the fund, the history of
spending from the fund, and options to make that fund
sustainable. He explained that the legislature created the
Response Fund some time ago because the state needs to have
funds available for spills because they are likely to occur
along with resource development. In addition to responding to
spills, the state also needs to have an active spill prevention
program. The Exxon Valdez oil spill underscored the need to
have a plan and to have the resources available, trained up, and
ready to go at a moment's notice.
1:08:54 PM
COMMISSIONER HARTIG noted that funding for this program comes
from a 5-cent-per-barrel surcharge on crude oil production
within Alaska, this amount being in place since the 1980s. A
predicament, however, is that less money is going into the fund
due to the production decline. He reminded members that over
the past eight years he has talked about this predicament of
declining production and being able to continue to operate SPAR
at its present level to meet the original intent.
1:10:13 PM
COMMISSIONER HARTIG, responding to Representative Seaton, stated
that the surcharge has remained at 5 cents a barrel despite
inflation. Labor costs, transportation costs, and other costs
have increased DEC's cost of doing business, yet the surcharge
has remained at a nickel. At the same time the price per barrel
has climbed from $25 to about $105.
1:11:01 PM
COMMISSIONER HARTIG, returning to his presentation, explained
that the 5 cents per barrel coming into the fund is split
between the Prevention Account (4 cents) and the Response
Account (1 cent). The Prevention Account is targeted toward
prevention, but it is also used for response elements. The 1
cent per barrel going into the Response Account is turned on and
off. A $50 million "war chest" is kept in the Response Account
so that funds are available whenever an immediate response is
needed in the field. For example, if a spill occurred today the
SPAR director would send a memo to the DEC commissioner about
the spill that includes, for the commissioner's authorization,
an estimate of the amount needed from the fund. Later, DEC
would report to the legislature for an appropriation to bring
the balance back up to $50 million, which can be done several
ways. One way is by cost recovery from the responsible party.
Once recovered, that money would be appropriated back into the
Response Account by the legislature. When the state cannot get
total cost recovery, the 1 cent per barrel surcharge is again
turned on and will stay on until the war chest is returned to
$50 million; thus, the war chest will always be there.
1:13:05 PM
COMMISSIONER HARTIG further explained that money in the
Prevention Account is appropriated into operating expenses in
DEC's Division of Spill Prevention & Response (SPAR). Today,
the main source of funding for SPAR is the Response Fund.
Bringing attention to the bar chart on the handout in the
committee packet entitled "Prevention Account Revenues,
Expenditures, and Balance Projection" for fiscal years 2010-
2022, he noted that the colors within the bars depict the fund
sources. The pink line across the top represents SPAR's
operating budget, which goes down in fiscal year 2015 and then
flattens from that year forward, indicating that flat funding is
assumed for SPAR at a little above $15 million annually. The
green color in the bars [for fiscal years 2010, 2011, 2012,
2013, and 2015] depicts the amount paid out of the Prevention
Account historically. The purple color depicts the amount of
cost recovery appropriated back into the Prevention Account by
the legislature. The large amount of recovery for fiscal year
2014 is the arbitration award from the "BP corrosion case of
2006" in which there were two corrosion incidents. About $10
million of the recovery against BP went to DEC for cost recovery
and the rest went into the constitutional budget reserve.
Commissioner Hartig pointed out that from fiscal year 2016
onward, general funds (blue color within the bars) will replace
use of the fund balance (green color) because there will not be
enough production to keep SPAR going through use of the
Prevention Account, given that [revenue] is declining $6 million
annually.
1:15:43 PM
COMMISSIONER HARTIG noted that, with the help of the legislature
and the governor's office, DEC has tried to make the account
sustainable. Referring to committee packet handouts ["Oil &
Hazardous Substance Release Prevention and Response Fund" and
"2014 Report on Financing and Managing the Prevention Account of
the Oil & Hazardous Substance Release Prevention & Response
Fund" dated 1/21/14], he said the list of changes is incomplete
but includes most of the larger items. The largest change, and
one that really helped, was made about four ago when the formula
was changed from 3 cents into the Prevention Account to 4 cents,
and from 2 cents into the Response Account to 1 cent. Another
change made some time ago was when DEC stopped using the
Prevention Account to pay for state owned or state managed
contaminated sites, even though that was wholly legal within the
statutory authority and that passed audit. Those things were
drawing down the fund and did not seem to be as tied to the core
mission of the fund. As a result, the legislature began seeing
a capital request from the department on a nearly annual basis
of usually around $3 million. Funding out of the Response Fund
to other agencies, such as the Department of Transportation &
Public Facilities and Department of Military & Veterans'
Affairs, for spill response related activities was also stopped
about five or eight years ago. It is "down to the bare bones of
operating expense for SPAR," he added.
1:17:50 PM
COMMISSIONER HARTIG emphasized that even with all of the paring
back and switching to the 4-1 split, it has reached a point
where production is down such that there are no other options to
extend the fund. Other options that have been looked at include
increasing the surcharge. Then the question, which is outside
of DEC's purview, is whether increasing the surcharge would
discourage production or discourage new fields and whether an
increase is appropriate given that SPAR's activities cover much
more than crude oil. In looking at the number of spills in the
state and what is spilled, crude oil does not even make the top
five - at the top by far is diesel fuel. By industry sector,
oil and gas is not even near the top, yet the surcharge goes on
crude oil to pay for SPAR. Considering whether to put more of a
burden on the oil and gas industry is a policy question.
1:19:14 PM
COMMISSIONER HARTIG, responding to Co-Chair Feige about whether
DEC can provide a breakdown by industry sector of where the
expenses go out, first said that of the volumes spilled and the
industry sectors responsible for the spills, crude oil is not
near the top. However, he clarified, in terms of agency
attention that does not necessarily mean that they are not near
the top. For example, DEC has lots of oil spill contingency
plans for the oil and gas industry, including for the tanks and
pipelines. Those plans are periodically updated and this
updating requires review of all of the new technology. He
agreed to provide estimates of a breakdown by sector, but said
DEC would have to use some judgment in how that is allocated.
The number of spills and volume of spills are not an indication
of the time DEC spends on a particular sector, he reiterated.
1:21:17 PM
COMMISSIONER HARTIG, responding to Representative Johnson about
whether Response Funds were used for the [M/V Selendang Ayu]
that ran aground in the Aleutians [in 2004], first explained
that in addition to a cargo of soybeans the ship had its own
fuel oil on board. A large oceangoing ship, he pointed out, can
have on board a million gallons of fuel as well as lubricants.
Such ships can have a big spill despite their cargo, which is
what happened with [the M/V Selendang Ayu]. He confirmed that
the Response Fund was available for this spill and said funds
also came from a joint federal/state criminal action that was
filed. Some of that settlement money is still being used to pay
for the "Aleutian Island risk assessment" that is currently
being done. Responding further to Representative Johnson,
Commissioner Hartig brought attention to the handout entitled
"Oil & Hazardous Substance Release Prevention and Response Fund"
and elaborated that cost recovery received by the state is
deposited into the Response Mitigation Account and then there is
a legislative appropriation back into the Response Account.
1:23:37 PM
REPRESENTATIVE JOHNSON observed from the aforementioned handout
that the fines go into the Prevention [Mitigation Account]. He
asked whether those fines are available for response or whether,
as a solution for the response side, it would be appropriate for
[the legislature] "to put all those fines into the prevention
and remove the cap".
COMMISSIONER HARTIG answered by directing attention to the
handout entitled "Prevention Account Revenues, Expenditures, and
Balance Projection" and noting that the cost recovery amount
(depicted in purple within the bars) is much smaller than the
general funds amount (depicted in blue). Thus, he said, the
estimated amount of future cost recovery will not be nearly
enough. Additionally, because it is money in/money out, it is
not a replacement for declining production.
1:25:15 PM
COMMISSIONER HARTIG, answering Representative Johnson about
whether the Respond Fund paid for the response to an overturned
fishing vessel in a river near Naknek, said he is unsure whether
the fund was used for the initial response and will have to get
an answer to the committee. However, he continued, often in
those cases that need an immediate response, DEC will tap the
Response Fund and then DEC will negotiate with the responsible
party to have that party start paying DEC's bills in order to
avoid a cost recovery and so that payment does not have to be
drawn from the Response Fund. At some point DEC will ask for
the amount that was [initially] drawn from the Response Fund.
Usually it is voluntary and usually it has worked out, he added.
1:26:43 PM
COMMISSIONER HARTIG, replying to Representative Feige about
whether $50 million in the Response Account is adequate, given
the cost of initial response and the time it takes for the state
to receive recovery, related that DEC has looked at that
question and what the risks are that could result in a response
that would go over $50 million. Under both federal and state
law the person owning or operating the facility from which the
spill occurs is ultimately primarily responsible, and is also
responsible for the response itself. For example, in the [2010]
"Deepwater Horizon incident" in the Gulf of Mexico, BP was the
responsible party and it was BP's response, not the U.S. Coast
Guard's. The role of the Coast Guard, Environmental Protection
Agency (EPA), and states was the oversight to make sure that the
response was being done. Money being spent by the government
agencies was not being spent on the response itself, and that
would be the same in Alaska. If a big event occurred in Alaska,
chances are that it would be a "big player" and that big player
would have the resources to respond or would already have a
contingency plan with DEC that states how the player responds
and that, under state law, puts financial assurances in place to
back up that plan. That big player would have contracts with
oil spill response organizations that would be ready go and
those would be tied in with national response assets.
Additionally, there is the federal Oil Spill Liability Trust
Fund, which was increased by Congress after the Deepwater
Horizon. Putting all of this together, he said he feels
comfortable with the $50 million, but thinks it worth asking
that question as things move forward. At some point, but not at
this time, DEC may be back with some recommendations.
1:29:58 PM
REPRESENTATIVE SEATON inquired whether it is a statutory
requirement that the monies from fines, lawsuits, and
settlements go into the fund. He expressed his concern that if
the state is in deficit spending those monies may not be a
secure source of funding if they are voluntarily designated by
the legislature.
COMMISSIONER HARTIG responded that the legislature always has
the power of appropriation - any money spent by DEC has to be
appropriated by the legislature ultimately. In the "BP
arbitration case" the constitutional provision relating to the
constitutional budget reserve trumped everything. While there
are state statutes that may have been able to be interpreted to
say that more of that arbitration award could have gone into the
Response Fund, the call of the administration was that it was
not going to tinker with the constitution. The $10 million was
strictly cost recovery - money that had been advanced out of the
Response Fund to the Department of Law (DOL) as part of the
investigation. The safety in the Response Fund against year-to-
year budget changes or pressure is the initial intent that there
be a reserve - a surplus from which to work. Unless the
legislature was to re-appropriate what is already in the fund,
it is pretty secure. The fund will reach zero starting around
fiscal year 2015, at which point it will be appropriation only,
plus any surcharge on new production.
1:32:56 PM
COMMISSIONER HARTIG, responding to Co-Chair Saddler, clarified
it is in statute that the fines must go into the fund. However,
there is no dedicated fund that binds future legislatures to
make certain appropriations by statute. Since it is not in the
constitution it is subject to whatever the legislature wants to
do year to year.
1:33:39 PM
COMMISSIONER HARTIG, returning to his presentation, reiterated
that steps have been taken over the last 8 to 10 years to try to
sustain the fund, the biggest step being the percentage switch
from 3 cents to 4 and from 2 cents to 1, as well as not paying
for certain things out of the fund. The department has been
held at a flat level for some time. Only two [position control
numbers (PCNs)] have been added over the last ten years despite
the outer continental shelf (OCS) and other new things coming
on, the corrosion issues and cases, and upping the regulation of
flow lines. Flow lines were the main culprit in corrosion;
those lines go from the wellhead to the gathering centers where
the water and sediments are taken out before the oil goes to the
transmission lines. A lot of duties have been added to the
division, but its size and cost have been kept stable.
Efficiencies have been instituted, including efficiencies this
year in how cost recovery is tracked and collected. However, he
emphasized, these things just cannot overcome the fact of
declining production because it is too significant. Towards the
end of fiscal year 2015 the fund will be down to zero, absent
some other input that might extend it for a little bit, such as
cost recovery. It will stay at zero until there is quite a bit
more production.
1:35:48 PM
COMMISSIONER HARTIG, replying to Representative Kawasaki as to
whether increasing the surcharge has been considered by the
administration or considered in general, noted that an increase
was discussed last year in this committee, which is why he
mentioned it. Last year's intent language requested the Office
of Management & Budget (OMB) to respond to basically the same
questions, so OMB is quoted in the beginning section of this
year's intent language. The administration's proposal is that
it be "pay as you go" - that the year-to-year gap be filled by
appropriations from the general fund. Spreading the surcharge
to refined products has also been looked at, he continued, but
that gets into how far down the chain to go, how much money gets
spent on instituting the program, and how painful it is to the
consumer for what is received. Thus, it gets into policy
questions. Up until this production issue, the system has been
pretty straight forward, although in the minds of some people it
is not fair to the oil and gas industry because that industry is
paying for everything.
1:37:29 PM
COMMISSIONER HARTIG, in answer to Representative Kawasaki about
the department's success in its changes to cost recovery, stated
he will provide the committee with the department's annual
report of actual percentages, but he believes the success rate
is in the high 90s. He cautioned that there are practicalities
to this issue however. People go bankrupt when the spill
outstrips their ability to pay even if they would want to pay.
There is the mom-and-pop situation where, unbeknownst to them,
the home heating fuel tank is corroded and creates a $100,000
mess. The statute language says the commissioner "shall"
recover, but DEC has interpreted this to mean being able to work
with the Department of Law, which always has the authority to
look at the particular circumstances of the state's claim and
make adjustments; for example, if it looks like DEC is chasing
somebody who is bankrupt or cannot pay and it is not worth the
effort. In further response he offered his belief that the 90
percent relates to the dollar amount, but advised it is not an
opportunity to get the fund back up to a sustainable level.
1:39:44 PM
COMMISSIONER HARTIG, responding to Representative P. Wilson
about whether the legislature has or has not always appropriated
money to the fund, replied that to his knowledge the legislature
has always provided that appropriation. Some years, in response
to the intent language, the legislature has even provided
capital infusions to try to bring the fund back up. He said he
cannot think of any instance where the legislature has taken
funds out or not directed funds back into the fund.
1:40:42 PM
COMMISSIONER HARTIG, responding to Co-Chair Saddler regarding
the bar chart, explained that a general fund increment is not
included in the bar depicting fiscal year 2015 because a balance
is still in the Reserve Fund for that fiscal year. Over 10
years ago some adjustments were made that resulted in a surplus
in the Response Fund. When the surcharge was unable to keep up
with ongoing SPAR expenses, DEC started going into that reserve.
Due to the BP award the reserve balance was bumped up by $10
million in fiscal year 2015, but by fiscal year 2016 the balance
will go to zero. Because there will be no money in fiscal year
2016 to be transferred from the Response Fund, it will have to
be the money that is collected from the declining production
that year plus a backfill from appropriation.
1:42:27 PM
COMMISSIONER HARTIG, replying to Representative Seaton about
whether DEC's calculations include cost inflation over the time
period depicted in the bar chart, explained it depends on what
level of service DEC is going to be providing - with inflation
and labor costs it will not be the same level of service. The
chart is illustrative to show that, even with flat funding, a
general fund increment will still need to be added.
1:43:34 PM
REPRESENTATIVE SEATON posited that the purpose of the chart is
not that it is real, but that the assumption projections include
an inflation of zero over the next ten years. Therefore, the
situation is probably worse if the state is going to maintain
the same services that it is currently providing. He then
expressed his concern about smaller operators in Cook Inlet and
other places and the potential for bankruptcies. He asked what
the bond requirements are for oil and gas operators and whether
the state has increased the bonding requirements, as has the
federal government, so as not to have to worry as much about
somebody being unable to meet response costs or going bankrupt.
COMMISSIONER HARTIG recalled that about a dozen contingency
plans are currently in place in Cook Inlet. A number of them
are for new operators conducting gas and crude exploration and
all of them are required to have financial assurances to support
their plans. He said DEC has not done anything new in terms of
upping those requirements, nor has it lowered the bar. The
expectation is that somebody new to the state is going to be
able to perform at the same level as those who have been here
for 40 years and will be backed up with financial assurances.
The bonding requirements imposed by federal land managers might
be a bit different. He explained that DEC only looks at
response plans and the financial ability to perform that plan,
whereas the Department of Natural Resources and others look at
damage to resources and other things in terms of the bonding.
1:46:17 PM
REPRESENTATIVE SEATON requested the committee be provided with
further information regarding oil and gas development and spill
response, given the number of new smaller players.
COMMISSIONER HARTIG added that [land managers] have looked at
DEC's contingency plan requirements for the new players, the
types of activities they are engaged in, and what the state
learned from the [Gulf of Mexico Deepwater Horizon] experience.
Besides financial assurances, DEC looks at other aspects to
contingency plans. It is a challenge for DEC when new players
and companies come in that are unfamiliar to Alaska - DEC does
not know them and they do not know DEC and the working
environment in Alaska. Cook Inlet is unique in that it has the
second highest tides in North America, ice, volcanoes, seismic
activity, derricks, shipping traffic to and from Anchorage, and
a world class fishery on the Kenai. The department is very
aware that it is a challenging area for a new operator and looks
at that in its contingency plans.
1:48:26 PM
COMMISSIONER HARTIG, responding to Co-Chair Saddler regarding
cleanup of sites under federal jurisdiction, said federal
cleanup continues to be a challenge as approximately 2,000 new
spills are reported in Alaska each year, of which approximately
24 rise to the level of agency response. However, many of the
2,000 sites are left over from the federal government's past
presence in Alaska. For example, about 138 legacy well sites
are still left to be addressed. Many federal sites need
attention, but there are questions regarding federal primacy,
sovereign immunity, appropriations from Washington, DC, and
higher national priorities. Although it has been a struggle,
more progress has been made over the last year. This year,
DEC's budget includes an increment for federal receipts for SPAR
and the department anticipates an increase of about $900,000 in
federal funds for contaminated sites.
1:50:54 PM
CO-CHAIR SADDLER asked what the total amount would be including
the anticipated $900,000 increase.
TOM CHERIAN, Director, Division of Administrative Services,
Department of Environmental Conservation (DEC), replied that he
did not have the answer.
COMMISSIONER HARTIG advised he would get the answer and that it
is federal receipt authority to be used by SPAR for federal
contaminated sites.
1:51:55 PM
REPRESENTATIVE TARR, referring to the table entitled "Department
of Environmental Conservation Prevention Account Revenues,
Expenditures, and Balance Projection", inquired as to the point
at which the department would predict an increase in the amount
being received on the per barrel surcharge related to new oil
development, given that some projects underway now and in the
near future will bring new oil online. She further asked
whether the department knew what it would mean to "turn the
curve" in thousands of barrels.
COMMISSIONER HARTIG responded that DEC does not do its own
projections and relies on the Department of Revenue's
projections. There are current exploration activities, such as
on the outer continental shelf (OCS), but the OCS is in federal
waters. The projection in the table had to be new production on
state lands or state waters and DEC does not see assurance that
that is within 10 years.
1:53:41 PM
COMMISSIONER HARTIG, replying to Co-Chair Saddler, agreed that
1.01 million barrels a year, which is the number in the response
to intent language, would generate enough revenue for each
fiscal year.
1:53:51 PM
REPRESENTATIVE JOHNSON, recalling earlier testimony that the oil
industry is a small portion of DEC's total response, asked
whether other industries, such as the fishing industry, have to
post the same kind of bonds as an oil company.
COMMISSIONER HARTIG responded that some types of operations
facilities must have contingency plans and financial assurances.
The mining industry may also have to have reclamation
requirements with both the Department of Natural Resources (DNR)
and DEC. Fishing vessels and other industries do not pay a
surcharge on what is produced; however, there may be financial
assurance requirements for contingency plan performance.
1:55:23 PM
REPRESENTATIVE SEATON inquired as to whether DEC is receiving
contingency plans electronically and posting them online since
they are public documents.
COMMISSIONER HARTIG deferred to SPAR director Kristin Ryan to
provide the latest information in this regard.
1:57:23 PM
KRISTIN RYAN, Director, Division of Spill Prevention and
Response, Department of Environmental Conservation (DEC),
advised that the one problem with posting contingency plans
online is that, for most companies, a large portion of the
contingency plan is confidential. Often a company requires DEC
to come to its location to review the contingency plans because
the company knows if it provides the contingency plans to DEC it
becomes public. Therefore, DEC does not have hard copies of all
the information in the contingency plan; DEC reviews it and
ascertains whether the information is there. The information
companies give DEC is made public. She offered to review the
process for putting the information on line, as DEC is updating
its data base that stores information to make the information
more easily usable for DEC staff and the public. However, she
noted, there will always be restricted portions.
REPRESENTATIVE SEATON recalled that in the past, people
interested in reviewing plans had to go DEC's office during
working hours to do so. Posting the public documents on line,
he opined, would allow the public to review plans in a way that
would help the state ensure there are no holes in the documents.
1:58:30 PM
COMMISSIONER HARTIG added it is not necessarily confidential
business information, but rather it is Homeland Security type
information. Therefore, it is a work in progress regarding
where to draw the line between confidential and public. The
companies are constrained by security issues and yet the state
has a strong interest in full public access. He related that
posting information online is the direction DEC wants to go, but
it is a question of resources as some of these plans consist of
multiple volumes.
REPRESENTATIVE SEATON said the reason for public disclosures is
because people in the various industries are probably more in
tune to making sure that the contingency plans will be
fulfilled. While DEC's people are good, they do not have the
same expertise as marine pilots who would realize when there is
something in a contingency plan that does not make sense. The
state is protected by these plans only if they are functional
plans. If there are portions of the contingency plans that must
be confidential, then those areas can be redacted and labeled as
to why they need to be confidential and not available for public
review.
MS. RYAN informed the committee that DEC is proposing some
regulation changes in the next few weeks to allow electronic
submittal of information for contingency plans, which it
currently does not allow. These regulation changes are expected
to be available for public comment in the next two months or so.
2:02:04 PM
COMMISSIONER HARTIG, responding to Representative Johnson,
agreed to provide a breakdown by industry sector of the
proportion of response and the cost.
2:03:20 PM
MS. RYAN, addressing Representative Kawasaki's earlier question
regarding percentage of cost recovery, stated it is difficult to
have a clear idea of the cost recovery as DEC is revamping its
cost recovery system, but she hoped to have that answer soon.
2:03:51 PM
REPRESENTATIVE SEATON, regarding cost sharing by the other
industries or the state's citizens, asked whether, when taxing
oil on profit, that [5 cents per barrel surcharge] comes off as
an expense to the participants such that the people of the state
actually pay 35 percent.
COMMISSIONER HARTIG replied he does not know and deferred to the
Department of Revenue.
2:05:43 PM
COMMISSIONER HARTIG, addressing Representative Johnson's earlier
request, informed the committee that in 2013, 344 spills into
water and 1,430 onto land were reported to DEC. In terms of
volume, 69 percent of the spills were diesel fuel, 13 percent
aviation fuel, 7 percent hydraulic oil, 3 percent engine lube
oil, 3 percent gasoline, and 6 percent other. He guessed that
"other" would be produced water associated with mining or
another industry's operation, which would also include crude.
Responding further to Representative Johnson as well as Co-Chair
Saddler, Commissioner Hartig explained that those are all
refined products other than the "other" category which is more
than crude oil. Therefore, the crude oil production is not the
big player in terms of recent spills. He then agreed to provide
the committee with a breakdown by industry sector.
2:07:44 PM
COMMISSIONER HARTIG, returning to his presentation, directed
attention to two status reports, and said Section 404 of the
"Clean Water Act, Wetlands Primacy" provides that people wanting
to place fill material into waters of the United States must
apply for a permit from the U.S. Army Corps of Engineers
(Corps). The Corps then reviews the federal statutes, including
regulations that the Environmental Protection Agency (EPA)
approves. Under the Clean Water Act, the state has the ability
to take primacy of Section 404 permitting and thus a state or
agency within the state would issue the permit, rather than the
Corps. He reminded committee members that about six years ago
DEC obtained full primacy from the EPA for Section 402, the
wastewater discharge permitting program. Commissioner Hartig
explained that the legislature authorized DEC and DNR to work
together to evaluate the pros and cons of the state taking
primacy of the Section 404 program. The aforementioned made
sense because the majority of wetlands are in Alaska and most
large projects involve wetlands. The DEC already oversees
ground quality as well as surface water quality with the
National Pollutant Discharge Elimination System (NPDES) program
and DNR oversees water quantity. With the Section 404 program,
the state could have an integrated approach to water management
and permitting in the state.
2:10:01 PM
COMMISSIONER HARTIG explained that DEC and DNR have formed a
team from each agency to work on the issue of whether the state
should take primacy. The departments are working closely with
New Jersey and Michigan that already have Section 404 primacy.
There have also been a lot of discussions with Oregon, which is
further along with primacy and is within Region 10 of the EPA.
The EPA is the entity that approves an application for primacy.
He related that DEC is very engaged with EPA Region 10 and
Oregon regarding the rules to get primacy, the expectations,
[the deliverables], [the structure], the costs, and the staff it
would take. He reported that DEC is receiving good information
from the other states and good cooperation from the Corps and
EPA. In fact, DEC has entered into a Memorandum of
Understanding (MOU) regarding the collaboration and sharing of
information, investigation of the pros and cons, and evaluation
of the results. "They see the utility in the state taking
primacy ... so I think they are fully behind us evaluating
this," he opined. Commissioner Hartig then reported that DEC
has been to EPA headquarters and spent time with the Corps, in
Washington DC regarding the federal requirements. He further
reported that the Department of Law (DOL) has developed a
working draft of the regulations because an application has to
include the regulations, statutes, staff organization, and
budget before the EPA will consider it. Developing regulations
provides an idea of the requirements and whether efficiencies
and improvements to the federal program may be achieved.
2:12: 16 PM
COMMISSIONER HARTIG highlighted that DEC, with DNR's assistance,
is reviewing whether there can be more flexibility in terms of
wetlands mitigation. If someone disturbs or converts a wetland
in Alaska, under the federal rule it must be replaced with other
wetlands. The replacement is not just one for one as it
requires more wetland restoration than was lost. He questioned
whether that remedy makes sense in a state with so many
wetlands. In a case in which 100 square feet of wetland on the
North Slope is disturbed, he questioned whether it would make
more sense to restore other wetlands on the North Slope or
address a legacy well because in the state's mind there may be
other environmental and water quality issues with a higher
priority. He then related that the department is considering
mitigation banking in-lieu of fee programs. Since there are so
few wetlands to restore in Alaska when there is not a
restoration project ready to go but mitigation has to be done,
the question of what DEC should do arises. Therefore, DEC is
looking into whether funds can be banked and how the funds would
be managed and executed. If the ultimate recommendation of the
legislature is not to pursue this avenue, hopefully DEC can work
with the Corps to create a better program in Alaska. To that
end, discussions continue and DEC plans to submit a full report
to the legislature in 2015.
2:14:08 PM
COMMISSIONER HARTIG, responding to Co-Chair Saddler, clarified
that DEC is considering mitigation banking in-lieu [fee]
programs. The EPA and the Corps are collectively reviewing on a
national level, rulemaking that would interpret the waters of
the United States language in the Clean Water Act. Therefore,
DEC is reviewing closely how that might impact what Alaska would
receive in terms of primacy. The DEC is also reviewing how the
new rule would impact the waters of the United States definition
and what flexibility the state might receive under the
mitigation national rule and how that might change in Alaska if
Alaska has the program.
2:14:57 PM
COMMISSIONER HARTIG, responding to Co-Chair Saddler about
whether any federal agencies, such as the EPA, are sharing the
costs of the primacy study, advised that DEC applied for and
received some grant money, but said he does not recall the
amount.
2:15:29 PM
REPRESENTATIVE TARR recalled that last year's legislation
included funding to perform the entire review process. She
asked whether there is another request in this year's budget for
those staff.
COMMISSIONER HARTIG answered that DEC received some position
control numbers (PCNs) and increments for them. There was money
for DEC and a pass-through for DNR that was not PCNs but some
money for law. All of the money is being used for what was in
the original appropriation. Although DEC did not receive the
appropriation that would carry the program all the way to
implementation, DEC is not requesting any new funds and will
probably use the FY14 funds and not use the funds in the FY15
budget as part of the tightening environment since DEC is set up
well with what it has for the next year or two.
2:16:50 PM
CO-CHAIR SADDLER asked whether the legislature or DEC makes the
administrative decision as to whether the state should proceed
to apply for primacy.
COMMISSIONER HARTIG responded that the legislature will receive
a preliminary report and then a final report with a
recommendation. Although the original legislation contained an
authorization if the administration went forward with an
application, the legislature is the gatekeeper and has to
appropriate the money. Therefore, DEC could apply for the
permit, but it would not be accepted because EPA requires that a
state have the staff hired and the program ready to implement
before it will consider an application.
2:18:10 PM
COMMISSIONER HARTIG, responding to Representative Seaton, stated
that 14 employees were hired for the Section 402 wastewater
program. However, at the time DEC had an existing program under
Section 402 and issued state wastewater discharge permits under
a separate state requirement, and thus [Section 402] started
with a higher number of employees than would be the case with
Section 404 employees. Therefore, Sections 402 and 404 are not
good comparisons. In further response to Representative Seaton,
Commissioner Hartig presumed that the Section 404 program would
require fewer staff than the Section 402 program, but said the
department is analyzing that now.
2:19:19 PM
COMMISSIONER HARTIG moved to his status report on the cruise
ship wastewater discharge general permit. He reminded the
committee that passage of HB 80 changed state law to extend the
general permit that existed at the time to 2015 and provided DEC
the authority to allow cruise ships to apply to DEC for mixing
zones, assuming the application met DEC's mixing zone
requirements. The department is in the final process of
developing a new general permit under the authorization it
received from HB 80. The legislation did not change the
application of mixing zone regulations and state water quality
standards. Therefore, DEC's standards and regulations will be
applied to cruise ships the same as to land-based facilities
requesting a permit. The draft general permit is in internal
departmental review and upon completion of that review DEC will
issue the permit in draft form for public review. After an
extensive public review of the draft general permit, DEC will
take the public's comments under consideration, finalize the
permit, and issue the general permit. Commissioner Hartig noted
his preference to issue the permit during the 2014 season, but
acknowledged it is a tight timeframe and if it is not issued,
the existing general permit is still in place to 2015.
2:22:02 PM
COMMISSIONER HARTIG, responding to Co-Chair Saddler, informed
the committee that there are approximately 17 different
conditions within DEC's regulations that must be met in order to
authorize a mixing zone. The conditions include no bio-
accumulation, no lethality to passing fish, and no loss of
designated uses for the water body. A mixing zone, he
explained, is limited spatially in terms of where the discharge
meets the receiving water to allow some mixing there to meet
water quality standards. The water restrictions require
entities to do the maximum possible to limit their discharge and
to limit the size of the mixing zone to make it as small as
practical. Entities must also protect all the surrounding areas
so there are no unintended consequences outside that limited
area. Commissioner Hartig reiterated that within HB 80 there
were no changes to the water quality standards or the mixing
zone requirements. However, HB 80 did place cruise ships under
the purview of DEC's water quality standards.
2:23:46 PM
CO-CHAIR SADDLER asked whether there have been any technological
advances over the last year that would allow for more stringent
discharge standards.
COMMISSIONER HARTIG said within the last year DEC has not
prepared a full review of available technology, although a
science advisory panel did meet for a couple of years leading up
to the bill. As with oil and gas, DEC will periodically review
best available technology and it will be part of the permitting
process when DEC reviews the specific ships.
2:24:50 PM
REPRESENTATIVE TARR referred to the letter from Michelle Bonnet
Hale dated January 22, 2014, contained within the committee
packet, and requested information regarding the various
communities' responses and comments during the summer meetings
that took place regarding the new general permit.
MICHELLE BONNET HALE, Director, Division of Water, Department of
Environmental Conservation, informed the committee she traveled
to Ketchikan, Sitka, and Juneau and tailored her talks to what
was going on in the different communities. The communities were
given an idea of what the discharges were and their
characteristics. Communities were advised that the discharges
were not as extreme as previously believed and the community
response was positive.
2:26:11 PM
REPRESENTATIVE SEATON related that DEC requires mariculture
farmers, shell fish farmers, in Kachemak Bay to sample water not
at their site but at 9 points around Kachemak Bay and send the
samples to DEC within 12 hours. He questioned from where the
authority for this requirement came.
COMMISSIONER HARTIG clarified that that is required through the
Food Safety & Sanitation Program in the Division of
Environmental Health, which oversees safety concerns with the
mariculture program. He offered to provide Representative
Seaton with the full answer to the purpose of that sampling,
which he surmised is probably unique to that particular harvest
area and stems from a food safety requirement.
2:27:55 PM
REPRESENTATIVE TARR recalled the House Finance Subcommittee on
DEC discussing intent language that would make information
available to the public regarding the cruise ship routes. She
asked whether that occurred and has been presented to the public
in that manner.
MS. BONNET HALE explained that although the presentations were
not that comprehensive, DEC has responded to that intent
language. The department is providing more information on the
web as it receives it. However, DEC is not at the point where
it can show the route of the cruise ships and what is being
discharged at any location. The department has a page on its
web site that is updated with information as it is available
including information on mixing zones.
2:29:31 PM
COMMISSIONER HARTIG, in closing, advised he would follow-up on
all of the questions and would provide that information to the
committee.
2:29:43 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:30 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| OHSRPRF Chart Revised 11 1 2010 with deposit suspended $50 million.pdf |
HRES 1/22/2014 1:00:00 PM |
|
| RF Chart History Projection FY2013 - FY2022 FINAL (2).pdf |
HRES 1/22/2014 1:00:00 PM |
|
| SPAR Intent Language Response FINAL 1.21.2014.pdf |
HRES 1/22/2014 1:00:00 PM |
|
| Cruise Ship Update Letter - House Resource 1 22 14.pdf |
HRES 1/22/2014 1:00:00 PM |