Legislature(1993 - 1994)
04/22/1994 08:15 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE April 22, 1994 8:15 a.m. MEMBERS PRESENT Representative Bill Williams, Chairman Representative Bill Hudson, Vice Chairman Representative Con Bunde Representative Pat Carney Representative John Davies Representative David Finkelstein Representative Joe Green Representative Jeannette James Representative Eldon Mulder MEMBERS ABSENT None OTHER LEGISLATORS PRESENT Senator Mike Miller COMMITTEE CALENDAR SB 215: "An Act relating to oil and hazardous substances; redesignating the oil and hazardous substance release response fund and relating to it; repealing the Citizens' Oversight Council on Oil and Other Hazardous Substances and the authority in law by which marine highway vessels may be designed and constructed to aid in oil and hazardous substance spill cleanup in state marine water using money in the oil and hazardous substance release response fund and repealing the authority of the Department of Environmental Conservation to levy and collect fees for review of certain submissions related to oil; altering requirements applicable to liens for recovery of state expenditures related to oil or hazardous substances; terminating the nickel-per-barrel oil conservation surcharge; levying and collecting two new oil surcharges; and providing for the suspension and reimposition of one of the new surcharges." HCS CSSB 215(RES) MOVED OUT OF COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS SB 310: "An Act relating to the management and sale of state timber and relating to the administration of forest land." HEARD AND HELD FOR FURTHER CONSIDERATION WITNESS REGISTER SENATOR MIKE MILLER State Capitol, Room 423 Juneau, Alaska 99801-1182 Phone: 465-4976 POSITION STATEMENT: Prime Sponsor SB 215 DAVID ROGERS, Special Counsel Senate Finance Committee P.O. Box 33932 Juneau, Alaska 99803 Phone: 586-1107 POSITION STATEMENT: Answered questions on SB 215 BOB POE, Director Division of Information and Administrative Services Department of Environmental Conservation 410 Willoughby Avenue, Ste. 105 Juneau, Alaska 99801-1795 Phone: 465-5010 POSITION STATEMENT: Answered questions on SB 215 MIKE CONWAY, Director Division of Spill Prevention and Response Department of Environmental Conservation 410 Willoughby Avenue, Ste. 105 Juneau, Alaska 99801-1795 Phone: 465-5250 POSITION STATEMENT: Answered questions on SB 215 RICK SOLIE, Aide Senator Steve Frank State Capitol, Room 518 Juneau, Alaska 99801-1182 Phone: 465-3709 POSITION STATEMENT: Answered questions on SB 310 CHRIS GATES, Director Division of Economic Development Department of Commerce and Economic Development P.O. Box 110804 Juneau, Alaska 99811-0804 Phone: 465-2017 POSITION STATEMENT: Answered questions on SB 310 PREVIOUS ACTION BILL: SB 215 SHORT TITLE: OIL/HAZARDOUS SUBS. RELEASE RESPONSE FUND SPONSOR(S): SENATOR(S) MILLER,Kelly JRN-DATE JRN-PG ACTION 05/08/93 2207 (S) READ THE FIRST TIME/REFERRAL(S) 05/08/93 2207 (S) RESOURCES, FINANCE 11/19/93 (S) MINUTE(RES) 01/19/94 (S) RES AT 3:30 PM BUTROVICH RM 205 01/19/94 (S) MINUTE(RES) 01/25/94 (S) RES AT 02:00 PM BELTZ ROOM 211 01/26/94 (S) RES AT 3:30 PM BUTROVICH RM 205 01/27/94 (S) RES AT 3:30 PM BUTROVICH RM 205 01/31/94 (S) RES AT 3:30 PM BUTROVICH RM 205 02/03/94 (S) RES AT 3:30 PM BUTROVICH RM 205 02/07/94 (S) RES AT 3:30 PM BUTROVICH RM 205 02/07/94 (S) MINUTE(RES) 02/11/94 (S) RES AT 3:30 PM BUTROVICH RM 205 02/16/94 (S) RES AT 3:30 PM BUTROVICH RM 205 02/16/94 (S) MINUTE(RES) 02/22/94 (S) RES AT 12:00 PM BUTRVICH RM 205 02/22/94 (S) MINUTE(RES) 02/28/94 2987 (S) RES RPT CS 4DP 2NR NEW TITLE 02/28/94 2988 (S) FISCAL NOTE TO SB PUBLISHED (DEC) 02/28/94 2988 (S) FISCAL NOTE TO CS PUBLISHED (DEC) 03/01/94 (S) FIN AT 09:00 AM SENATE FIN 518 03/01/94 (S) MINUTE(FIN) 03/03/94 (S) FIN AT 09:00 AM SENATE FIN 518 03/22/94 (S) FIN AT 09:00 AM SENATE FIN 518 03/25/94 (S) FIN AT 09:00 AM SENATE FIN 518 04/07/94 (S) FIN AT 08:00 AM SENATE FIN 518 04/07/94 (S) FIN AT 05:00 PM SENATE FIN 518 04/08/94 3521 (S) FIN RPT CS 5DP 1NR NEW TITLE 04/08/94 3522 (S) ZERO FN TO SB & CS PUBLISHED (DPS) 04/08/94 3522 (S) ZERO FN TO CS PUBLISHED (DEC) 04/11/94 (S) RLS AT 00:00 AM FAHRENKAMP ROOM 203 04/12/94 3587 (S) ZERO FN TO SB & CS PUBLISHED (ADM) 04/12/94 3587 (S) ZERO FN TO CS PUBLISHED (REV) 04/12/94 3587 (S) FN TO SB & CS PUBLISHED (LAW) 04/12/94 3586 (S) RULES RPT 3CAL 1NR 1DNP 4/12/94 04/12/94 3590 (S) READ THE SECOND TIME 04/12/94 3590 (S) FIN CS ADOPTED UNAN CONSENT 04/12/94 3591 (S) AM NO 1 MOVED BY KERTTULA 04/12/94 3592 (S) AM NO 1 FAILED Y9 N11 04/12/94 3592 (S) AM NO 2 MOVED BY KERTTULA 04/12/94 3592 (S) AM NO 2 FAILED Y8 N12 04/12/94 3594 (S) AM NO 3 MOVED BY LINCOLN 04/12/94 3594 (S) AM NO 3 FAILED Y9 N11 04/12/94 3595 (S) AM NO 4 MOVED BY ADAMS 04/12/94 3595 (S) AM NO 4 FAILED Y9 N11 04/12/94 3595 (S) AM NO 5 MOVED BY ADAMS 04/12/94 3598 (S) AM NO 5 FAILED Y9 N11 04/12/94 3599 (S) AM NO 6 MOVED BY ZHAROFF 04/12/94 3599 (S) AM NO 6 FAILED Y10 N10 04/12/94 3599 (S) AM NO 7 BY ZHAROFF/WITHDRAWN 04/12/94 3599 (S) MTN TO ADVANCE TO 3RD READING 04/12/94 3600 (S) ADVANCE MOTION WITHDRAWN 04/12/94 3600 (S) AM NO 8 MOVED BY MILLER 04/12/94 3600 (S) AM NO 8 ADOPTED UNAN CONSENT 04/12/94 3601 (S) AM NO 9 MOVED BY SALO 04/12/94 3601 (S) AM NO 9 FAILED Y9 N10 A1 04/12/94 3602 (S) ADVANCE TO THIRD READING FLD Y10 N9 A1 04/12/94 3602 (S) THIRD READING 4/13 CALENDAR 04/13/94 3641 (S) ZERO FN TO CS PUBLISHED(LAW) REPLACES #6 04/13/94 3641 (S) READ THE THIRD TIME CSSB 215(FIN) AM 04/13/94 3641 (S) FAILED PASSAGE Y10 N9 A1 04/13/94 3641 (S) Miller NOTICE OF RECONSIDERATION 04/14/94 3672 (S) RECON TAKEN UP/IN THIRD READING 04/14/94 3673 (S) PASSED ON RECONSIDERATION Y11 N8 E1 04/14/94 3674 (S) EFFECTIVE DATES FAILED Y13 N6 E1 04/14/94 3689 (S) TRANSMITTED TO (H) 04/15/94 3457 (H) READ THE FIRST TIME/REFERRAL(S) 04/15/94 3458 (H) RESOURCES,STATE AFFAIRS,FINANCE 04/22/94 (H) RES AT 08:15 AM CAPITOL 124 BILL: SB 310 SHORT TITLE: STATE/PRIVATE/MUNI TIMBER OPERATION/SALE SPONSOR(S): SENATOR(S)FRANK,Taylor,Pearce,Sharp, Miller,Kelly,Halford; REPRESENTATIVE(S) Olberg JRN-DATE JRN-PG ACTION 02/14/94 2829 (S) READ THE FIRST TIME/REFERRAL(S) 02/14/94 2829 (S) RESOURCES 03/02/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/02/94 (S) MINUTE(RES) 03/05/94 (H) MINUTE(ECO) 03/16/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/16/94 (S) MINUTE(RES) 03/22/94 (S) RES AT 1:30 PM BUTROVICH RM 205 03/24/94 (S) RES AT 03:30 PM FAHRENKAMP ROOM 203 03/28/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/30/94 3406 (S) RES RPT CS 4DP 1DNP NEW TITLE 03/30/94 3407 (S) ZERO FN TO SB & CS PUBLISHED (DNR) 03/30/94 (S) RLS AT 11:35 AM FAHRENKAMP ROOM 203 03/30/94 (S) MINUTE(RLS) 04/05/94 3448 (S) RULES RPT 3CAL 2NR 4/5/94 04/05/94 3449 (S) HELD TO 4/6/94 04/06/94 3476 (S) READ THE SECOND TIME 04/06/94 3477 (S) RES CS ADOPTED UNAN CONSENT 04/06/94 3477 (S) AM NO 1 MOVED BY LITTLE 04/06/94 3478 (S) AM NO 1 FAILED Y9 N11 04/06/94 3478 (S) AM NO 2 MOVED BY LITTLE 04/06/94 3479 (S) AM NO 2 FAILED Y9 N11 04/06/94 3479 (S) AM NO 3 NOT OFFERED 04/06/94 3479 (S) AM NO 4 MOVED BY LITTLE 04/06/94 3479 (S) AM NO 4 FAILED Y9 N11 04/06/94 3480 (S) AM NO 5 MOVED BY DUNCAN 04/06/94 3480 (S) AM NO 5 FAILED Y8 N12 04/06/94 3480 (S) AM NO 6 MOVED BY DUNCAN 04/06/94 3481 (S) AM NO 6 FAILED Y9 N11 04/06/94 3481 (S) AM NO 7 MOVED BY DUNCAN 04/06/94 3482 (S) AM NO 7 FAILED Y9 N11 04/06/94 3482 (S) AM NO 8 MOVED BY DUNCAN 04/06/94 3482 (S) AM NO 8 FAILED Y9 N11 04/06/94 3483 (S) AM NO 9 MOVED BY LINCOLN 04/06/94 3483 (S) AM NO 9 FAILED Y9 N11 04/06/94 3483 (S) AM NO 10 MOVED BY ZHAROFF 04/06/94 3484 (S) AM NO 10 FAILED Y9 N11 04/06/94 3484 (S) AM NO 11 MOVED BY ZHAROFF 04/06/94 3484 (S) AM NO 11 FAILED Y9 N11 04/06/94 3485 (S) AM NO 12 MOVED BY LINCOLN 04/06/94 3485 (S) AM NO 12 FAILED Y10 N10 04/06/94 3486 (S) AM NO 13 MOVED BY ZHAROFF 04/06/94 3486 (S) AM NO 13 FAILED Y9 N11 04/06/94 3486 (S) AM NO 14 MOVED BY ADAMS 04/06/94 3487 (S) AM NO 14 FAILED Y8 N12 04/06/94 3487 (S) ADVANCE TO THIRD READING FLD Y11 N9 04/06/94 3487 (S) THIRD READING 4/7 CALENDAR 04/07/94 3506 (S) READ THE THIRD TIME CSSB 310(RES) 04/07/94 3506 (S) PASSED Y11 N8 E1 04/07/94 3506 (S) Adams NOTICE OF RECONSIDERATION 04/08/94 3527 (S) RECON TAKEN UP/IN THIRD READING 04/08/94 3527 (S) PASSED ON RECONSIDERATION Y11 N7 E2 04/08/94 3531 (S) TRANSMITTED TO (H) 04/08/94 3212 (H) READ THE FIRST TIME/REFERRAL(S) 04/08/94 3212 (H) RESOURCES 04/08/94 3220 (H) CROSS SPONSOR(S): OLBERG 04/15/94 3526 (H) FIN REFERRAL ADDED 04/15/94 (H) RES AT 08:15 AM CAPITOL 124 04/15/94 (H) MINUTE(RES) 04/20/94 (H) RES AT 08:15 AM CAPITOL 124 04/20/94 (H) MINUTE(RES) 04/22/94 (H) RES AT 08:15 AM CAPITOL 124 ACTION NARRATIVE TAPE 94-60, SIDE A Number 000 The House Resources Committee was called to order by Chairman Bill Williams at 8:30 a.m. Members present at the call to order were Representatives Williams, Hudson, Bunde, Finkelstein, Green, James, and Mulder. Members absent were Representatives Carney and Davies. CHAIRMAN BILL WILLIAMS announced there is a quorum present. He stated the meeting is on listen only teleconference with Anchorage, Cordova, Fairbanks, and Kenai/Soldotna. He said the committee will hear SB 215 for the first time. The committee has held seven hearings on HB 238 regarding the same subject. He felt since the committee has had so many hearings on HB 238 and has taken so many hours of public testimony, the committee members should be very familiar with the issues and the public and industry sentiments on the issues. CHAIRMAN WILLIAMS told committee members contained in their folders are copies of several amendments which the Department of Law (DOL) and the Department of Environmental Conservation (DEC) propose and two amendments he proposes. He requested that if committee members have additional amendments, they should get the amendments to staff in time to fax them to the teleconference sites. SB 215 - OIL/HAZARDOUS SUBS. RELEASE RESPONSE FUND SENATOR MIKE MILLER, PRIME SPONSOR, stated he will give a history on SB 215 and what has occurred on the 470 fund since the nickel a barrel tax was instituted. He said the tax was voted on because there was a desire to build up a $50 million fund for the purpose of having an amount of money available for responding in case of another disaster. At that time, it was felt that once the $50 million was reached, the tax would go away. He noted over the years, the tax has never gone away because of the accounting mechanism used. He added that over $100 million has been collected through the nickel a barrel tax. SENATOR MILLER said he decided last year to rectify the problem. He saw the need for an ongoing maintenance of prevention but at the same time, saw the need to build up the $50 million fund. He stated the original bill he introduced in the Senate had 2 cents going into the spill prevention account and 3 cents going into the response account. DEC, at that time, said they did not want the nickel split. A number of hearings were then held in the Senate Resources Committee and the bill which came out of that committee provided for a 2.5 cents/2.5 cents split. He noted at that time, DEC came back with a proposal of splitting the nickel 3 cents/2 cents. SENATOR MILLER stated the bill then went to Senate Finance where several hearings were held and a compromise was reached. He said industry is not totally happy with the compromise but he and the department are both satisfied with the compromise. He explained the current version of SB 215 provides for 3 cents going to the prevention side, 2 cents going to the response side, and the $37 million which has been collected going into the response side. He noted there have been arguments that the $37 million should be split. He felt the counter-argument is that the split is in fact a 60/40 split, since over $100 million has been collected in nickels and 40 percent of $100 million is $40 million. Number 088 REPRESENTATIVE BILL HUDSON said he was at the table throughout the entire deliberations on the establishment of the 470 fund and noted there are different recollections of how the fund developed. REPRESENTATIVE JOHN DAVIES noted there are 17 specific enactments which relate to the issue and all of those need to be looked at together to understand the current situation. DAVID ROGERS, SPECIAL COUNSEL, SENATE FINANCE COMMITTEE, told committee members they have a sectional analysis in their folders and he will highlight a few of the sections. He stated Section 2 adds school districts to existing law authorizing municipal and village assistance for spill related expenses and limits the applicability of this section to sudden releases. Section 3 retains the existing 2,500 barrel (or hazardous substance equivalent) threshold for grant eligibility but eliminates a related requirement for a declaration of a disaster emergency and certain findings by the Governor; grant money could come from either the response or prevention account depending on the type of spill; and also makes technical, conforming changes. MR. ROGERS stated Section 13 creates a new section which levies a 2 cent per barrel surcharge. Section 14 authorizes the legislature to appropriate that surcharge into the response account. Section 15 sets up the accounting mechanics, similar to HB 238. Section 16 provides that the surcharge not be levied during any fiscal year for which the legislature fails to appropriate the required amounts to the response account or the appropriation is vetoed or reduced by the Governor. He said Article 2A authorizes a second surcharge of 3 cents per barrel that can be appropriated into the prevention account. Section 21 revises existing law to reflect the new names: oil and hazardous substance release prevention and response fund and the two accounts-- the oil and hazardous substance release prevention account and the oil and hazardous substance release response account. Number 136 MR. ROGERS said Section 23 deletes reference to a provision that currently allows the commissioner to transfer fund money to the Department of Transportation (DOT) for purposes of constructing or refurbishing ferries that can respond to spills but adds two exceptions to the general rule that the fund cannot be used for capital improvements: 1) response depot equipments and 2) the acquisition, repair, or improvement of assets to be used as preparedness measures for oil and hazardous substance releases. He stated Section 24 provides for the financing of the prevention account. The legislature is authorized to appropriate money from the following sources into the prevention account: Applicable surcharge proceeds; money from other state, federal, and private sources; money recovered for reimbursement of expenditures made out of the prevention account; and all fines, penalties, damages and interest earned on the various accounts. MR. ROGERS stated Section 25 provides for the financing of the response account. The response account includes surcharge proceeds; money from other state, federal and private sources; and money recovered from parties that was initially paid out of the current fund or the new response account. Section 26 rewrites existing law to establish the allowed uses for money in the response and prevention accounts. Response account uses include: To investigate, evaluate, contain and clean up and take other necessary action to address a release or threatened release of oil and hazardous substances described in Section 29; to provide certain matching funds in connection with a Section 29 release; and to pay for the costs to the state, municipality, village or school district for cost recovery efforts relating to money that was expended from the response account. MR. ROGERS explained the prevention account can be used to: Investigate, evaluate, contain and clean up and take other necessary action regarding releases not described in Section 29; pay all costs to establish and maintain the response office, response corps, and response depots; pay all costs to review contingency plans, conduct training, inspections, tests and take other action to verify or establish preparedness for oil and hazardous substance releases, and to establish proof of financial responsibility; pay documented expenses incurred by the Alaska State Emergency Response Commission for staff and response and restoration support activities; pay all costs incurred to acquire, repair or improve an asset to be used as an emergency preparedness measure relating to releases of oil or a hazardous substance; pay the costs, approved by the commissioner, incurred by the local emergency planning committees; provide certain matching funds; provide money to the storage tank assistance fund; pay for cost recovery efforts relating to money expended from the prevention account; prepare, revise and review the master and regional prevention and contingency plans; and to pay for restoration efforts. Number 181 MR. ROGERS stated Section 28 limits the expenditures for local emergency planning committees to not more than three percent of the estimated balance of the prevention account. Section 29 provides that money from the response account can be used for disaster emergencies relating to oil and hazardous substance releases and other oil and hazardous releases. In the latter case, the commissioner has to report the situation to the Governor and the Legislative Budget and Audit Committee within 120 hours. The Governor may at any time approve, disapprove or modify. If no action is taken by the Governor, the commissioner may continue to use the account. MR. ROGERS said Sections 30-34 implement the legislative auditor's recommendations. Section 42 contains repealers of note: Repeals existing surcharge; repeals departments user fee authority for contingency plan and financial responsibility reviews; repeals provisions relating to construction of ferries; repeals all provisions regarding Citizens Oversight Council on Oil and other Hazardous Substances. He stated Section 44 suspends the response account surcharge for the next fiscal year if the unexpended and unobligated balance of the former oil and hazardous substance release response fund as of June 30, 1994, is not appropriated to the newly-created response account this session or the appropriation is vetoed or reduced by the Governor. Number 210 REPRESENTATIVE ELDON MULDER referring to Section 26, asked what the definition of a "threatened release" is. MR. ROGERS replied "threatened release" is defined on page 25, Section 39 of the bill. He said it is an existing definition which has been revised. He explained a threatened release means it is imminent and a release is imminent if it is impending or on the point of happening or in the judgment of the commissioner, while it is not impending, it may be reasonably be expected to culminate in an actual release and the actual release may reasonably be expected to cause personal injury, other injury to life, or loss of or damage to property, including the environment. REPRESENTATIVE MULDER felt without an enhanced definition as just described, the word threatened could be very open- ended. REPRESENTATIVE MULDER referring to the end of Section 26, noted the prevention account is allowed to pay for restoration efforts. He asked if restoration efforts are provided for in the prevention account because of the funds coming in from the federal Exxon receipts. MR. ROGERS responded it is existing law. BOB POE, DIRECTOR, DIVISION OF INFORMATION AND ADMINISTRATIVE SERVICES, DEC, stated there is a fine line between cleanup and restoration--when does cleanup stop and restoration begin. By including restoration, a full cleanup effort is allowed. REPRESENTATIVE MULDER asked if there is any definition provided for restoration. MR. POE stated there is no definition but rather there is a reliance on the history demonstrated thus far and the department has not had to abuse the use of the word. Number 258 REPRESENTATIVE HUDSON asked how SB 215 provides for response depots and corps. He also wondered where the funding comes from. MR. ROGERS replied the funding aspect for response depots and corps is on page 19, line 26 on down and added that the funding comes from the prevention account in the fund. REPRESENTATIVE HUDSON clarified the funding will come from the 3 cents. MR. ROGERS responded that is correct. SENATOR MILLER interjected not only will the 3 cents be coming in but also the money from the Exxon Valdez settlement will be coming in. He added there is also a mechanism which provides that the interest from the $50 million fund can be appropriated into the prevention account. He felt the 3 cents is somewhat misleading because there are other avenues to get additional funds into the prevention side. REPRESENTATIVE HUDSON wondered how much the 3 cents will add up to in the next couple of years. Number 286 SENATOR MILLER replied for fiscal year 1995, the 3 cents will provide approximately $15.6 million and in fiscal year 1999, it will provide $11.34 million, assuming there is no additional production coming on line. He said the numbers he mentioned will probably go up because there are indications that additional production will come on line. REPRESENTATIVE HUDSON asked if the $15.6 million includes interest. SENATOR MILLER said the $15.6 million does not include interest. He stated the interest on $50 million at 5 percent would be $2.5 million and on the mitigation account approximately $5.7 million. REPRESENTATIVE HUDSON wondered if DEC has estimated when the response depots and corps monies will be needed and how much is needed. SENATOR MILLER said the department should answer that question. He believed there is a real dedication in the department to ensure the response depots and corps happen. CHAIRMAN WILLIAMS asked where does the money come from for the mitigation account. MR. ROGERS replied the money comes from fines, penalties, damages, cost recovery moneys, and interest. CHAIRMAN WILLIAMS asked if the $5.7 million includes the Exxon Valdez settlement of $28 million, which will be paid back by the year 2001. SENATOR MILLER stated that is correct. CHAIRMAN WILLIAMS asked if the $28 million paid up-front by the state came from the general fund. SENATOR MILLER replied the money was up-fronted out of general fund money. He felt an argument can be made that many of the prevention efforts are things which should have done before and should have been funded out of general fund moneys. Number 337 REPRESENTATIVE DAVIES recalled it was mentioned earlier that there are other funds available for prevention and he wondered if there was a characterization of what the order of magnitude might be. He also asked about the policy in the bill which will put the entire $37 million into the response account. He wondered what the estimated loss of revenues to the state will be in regard to the 2 cents. SENATOR MILLER stated it is a philosophical argument. He said if the original concept would have taken effect, the nickel tax would have been gone by now. He said it could be argued the 3 cents is a surplus revenue coming to the state. REPRESENTATIVE DAVIES asked how much less money will come into the state as a result of taking that out. SENATOR MILLER replied the department will have to give that estimate. He has heard numbers from $38 million to $50 million over the next five years. Number 366 REPRESENTATIVE DAVID FINKELSTEIN asked where the reference to restoration is contained in SB 215. MR. ROGERS replied on page 21, lines 8-9. REPRESENTATIVE FINKELSTEIN said the previous discussion implied restoration funding comes from the response account. MR. ROGERS responded that is incorrect. He said there may be a question of what is cleanup and what is restoration. Cleanup can be paid for from either account, depending on the kind of spill involved and Section 29 delineates the response account type of spill. He stated there is a very fine line between cleanup and restoration. He stressed SB 215 and existing law clearly provides for restoration. Restoration has been plugged into the prevention account under the new scheme. REPRESENTATIVE FINKELSTEIN felt restoration should not be a part of prevention, because restoration is an outcome of response not prevention. MR. ROGERS reminded the committee that response can be paid for out of either account. He stated there is not a clear dichotomy between response and prevention. REPRESENTATIVE FINKELSTEIN stated if that approach was being used, there would not be a plan to split the nickel. He felt there is a clear differentiation between response and prevention being made. There have been many discussions about when cleanup ends and restoration begins but he has never seen a case being made that restoration is a subset of prevention. SENATOR MILLER replied he would need to go back through his original records to respond. Number 415 REPRESENTATIVE FINKELSTEIN clarified there was a reference to a blackmail provision which says that if the money is not appropriated, the surcharge stops. MR. ROGERS replied that provision is in Sections 16 and 44. REPRESENTATIVE FINKELSTEIN clarified Section 44 provides that the legislature has to separately appropriate the money and if that does not occur, the 2 cents surcharge stops. MR. ROGERS stated the 2 cents surcharge is suspended for one year. REPRESENTATIVE FINKELSTEIN clarified Section 16 provides that the surcharge stops for any year in which any of the conditions listed are not met. MR. ROGERS stated the surcharge stops if the legislature does not appropriate the money or the Governor vetoes or reduces the appropriation. He said the amount is described in (b), and includes the surcharge and the portion of the mitigation account relating to cost recovery money. Number 455 REPRESENTATIVE FINKELSTEIN asked why the provision only applies to the response account and not the prevention account. SENATOR MILLER replied the response account is accumulating. He said he prefers to call the provision an incentive clause. He stated the 3 cents surcharge is never going to shut off and therefore, the legislature does not need a tool to deal with it. REPRESENTATIVE FINKELSTEIN asked where in SB 215 is there a provision for the funds coming in from interest. MR. ROGERS replied that provision is on page 16, lines 12 - 19, which outlines the funding sources for the prevention account and includes the interest on all of the accounts, including the surcharge account, which sits in the general fund for appropriation. REPRESENTATIVE FINKELSTEIN asked if the legislature has ever made these appropriations in the past. SENATOR MILLER responded the legislature has never appropriated the interest before because the account was never set up in this manner. He felt in next year's budget negotiations, there will be strong lobbying for the legislature to appropriate the interest to the prevention account. Number 508 REPRESENTATIVE FINKELSTEIN stated the legislature has always had the ability to spend the money and there has always been a need for the money. He felt the demands on money in the future are going to be so extreme that there will be a battle over all interest, even from the small accounts. SENATOR MILLER agreed that the legislature may or may not appropriate the interest but the law clearly indicates the legislature should appropriate the money into the prevention account. REPRESENTATIVE PAT CARNEY felt Section 16 puts a lot of power in the hands of the Governor to stop the surcharge. He wondered what the amount will be if the surcharge is stopped for one year. MR. POE responded it will amount to $10,500,000. REPRESENTATIVE CARNEY said there may be a situation where just the Governor can trigger the shutting off of the surcharge by vetoing one dollar of the appropriation, causing the loss of potential income. Number 554 REPRESENTATIVE MULDER, referring to Section 24, asked if the Senate felt there was not a dedication of funds but rather a moral commitment by the legislature. SENATOR MILLER said that is correct. He felt anytime something is put in statute, there is a moral commitment. CHAIRMAN WILLIAMS clarified the $2.5 million received in interest will not necessarily go into the prevention account. SENATOR MILLER replied the interest will have to be appropriated into the prevention account by the legislature. REPRESENTATIVE JOE GREEN commented if the 5 cents surcharge is not collected for a year, the amount not coming in will be over $25 million, not $10.5 million. REPRESENTATIVE MULDER said the trigger only pertains to the response side not the prevention side. Therefore, the $10.5 million is correct. REPRESENTATIVE DAVIES felt an alternative approach can be taken in regard to the interest. He said it could be set up so the commissioner of the Department of Revenue deposits the interest directly into the prevention accounts, which can be justified because the legislature still has to appropriate the money out of the accounts, similar to the royalty income. SENATOR MILLER responded that approach was not discussed. MR. ROGERS added that the money does go into a mitigation account so it is identified. REPRESENTATIVE DAVIES asked which repealer in SB 215 addresses the Citizens' Oversight Council. MR. ROGERS replied AS 24.20.600 through AS 24.20.630. SENATOR MILLER stated there was an amendment in Senate Finance to delete the Citizens' Oversight Council and the amendment passed 5-1. MR. ROGERS added that the theory was the Council had not been funded recently and no longer served a necessary function. Number 699 CHAIRMAN WILLIAMS asked what the rationale was for placing the $27 million Exxon Valdez reimbursement moneys into the Oil and Hazardous Substance Prevention Account. SENATOR MILLER replied DEC said they needed the money to fund their ongoing programs and it was felt DEC should be able to use those funds for that purpose. REPRESENTATIVE MULDER asked if mitigation funds are used for leaking underground storage tank cleanup. SENATOR MILLER replied a portion of the funds are used for storage tank cleanup. TAPE 94-60, SIDE B Number 000 REPRESENTATIVE HUDSON asked what the source of funding for bulk field storage sites is in SB 215. SENATOR MILLER replied there is no money provided for that purpose. He said the state is under a federal mandate with the leaking underground storage tanks, unlike the bulk field storage sites. REPRESENTATIVE HUDSON asked where the leaking underground storage tanks cleanup will be funded from. MR. ROGERS replied those can be funded out of the prevention account, subject to appropriation. CHAIRMAN WILLIAMS said DEC has stressed how much money is needed to take care of the leaking underground storage tanks. He felt that need will be competing with the 470 fund. SENATOR MILLER replied there have been several discussions on how to fund the cleanup of the leaking underground storage tanks. He stressed at some point the need will have to be funded, whether the money comes from the Exxon Valdez reimbursement, general funds, etc. He said once the Exxon Valdez moneys are gone, it is felt there will be some other mechanism, such as a 1 cent gasoline tax, to supplement the funding for the cleanup of the leaking underground storage tanks. REPRESENTATIVE HUDSON asked Senator Miller to explain the addition of school districts. SENATOR MILLER replied the addition of school districts was an amendment offered in the Senate Finance Committee because it was a section of the law which had never been used. There have never been any grants issued under this section of the law. However, it was felt that in many places in rural Alaska, the school district is the government and they have more problems with leaking underground storage tanks than perhaps the city. He said the amendment provided that if there is a spill, the school district will have access to a grant to clean up the spill. REPRESENTATIVE CARNEY asked what section specifies (indiscernible). MR. ROGERS replied Section 44. REPRESENTATIVE CARNEY clarified that section does not specify an amount. MR. ROGERS said that is correct. He stated the amount is whatever the unexpended and unobligated amount is as of that date. Number 064 REPRESENTATIVE MULDER said the fiscal note for SB 215 says the beginning balance of the response account for fiscal year 1995 will be $47.7 million, which is quite different than what is being talked about in the bill. He wondered why there is a difference of approximately $10 million. MR. POE replied because of the 1994 nickels. REPRESENTATIVE MULDER said when adding the beginning balance of the response account of $47.7 million to the beginning balance of the prevention account of $15.5 million plus the total response surcharge collected in 1995 of $5.2 million, the resulting amount is about $52.9 million. He wondered why the ending balance of the response account shows $46.9 million MR. POE replied the appropriations do not occur until the beginning of the next fiscal year. REPRESENTATIVE CARNEY asked if the Administration supports SB 215 as it is currently written. MR. POE responded the Administration finds SB 215 acceptable. He stated SB 215 provides a 3 cents/2 cents split which provides adequate funding on the prevention side. He said in regard to proposed amendments on splitting the $37.4 million, the Administration is not lobbying for that change. Number 094 REPRESENTATIVE HUDSON noted that SB 215 eliminates any use of the funds for the development or purchase of new ferries. His concern for a long time has been what happens if there is a spill on the West Coast or in Southeast Alaska. He stated SB 215 does provide for moneys to come from the prevention account to be used for the creation of depots and the response capabilities on the coast, but as the bill is currently written, it precludes using any of the moneys to enhance or upgrade the communications of a marine highway vessel, which he felt might be of benefit to any kind of coastal prevention/response capability. He thought the depots and coastal response capability will lead to a collection of private operators, resulting in a consortium on the West Coast and in Southeast Alaska available to respond to a non-crude oil spill. REPRESENTATIVE HUDSON wondered if SB 215 provides for the use of any funds for whatever it takes, such as a depot in Sitka and the establishment of materials and response contracts, etc., for a coastal prevention/response capability. He asked Mr. Poe how he envisions that happening and where the funding will come from. MR. POE stated SB 215 provides that depots and corps can be funded from the prevention account. He pointed out that provision (E) on page 20, line 10 says "pay all costs incurred..." He felt a ferry is an asset with a life over one year, if the improvement was specifically justified as a preparedness measure in order to better response to, recover from, etc., and would fall under this provision. He said SB 215 precludes the new construction of a vessel but if one goes wild with this provision, a new vessel could be acquired. Number 151 MR. ROGERS said that was not the intent of the Senate. The provision was designed to cover the emergency response centers. He said the provision could be read as Mr. Poe indicated. MR. POE stated the provision does allow the state the flexibility to do what it takes to be ready. REPRESENTATIVE HUDSON stressed he is not interested in acquiring new vessels and felt the ferry system should not be turned into an oil response fleet for the state. He believed, however, that a Southeast Alaska Petroleum Response Organization (SEAPRO) type of protective system could be established in Southeast Alaska and the Alaska Marine Highway vessels, which normally transit that route, could be a part of the response. He stressed it will require the development of precise types of communications and equipment, or perhaps slight modifications in the forward section of a vessel to hold boom materials that will be carried at all times. He asked if the depots and corps and the concept just mentioned is maintained in the integrity of SB 215. Number 181 MIKE CONWAY, DIRECTOR, DIVISION OF SPILL PREVENTION AND RESPONSE, DEC, stated that Representative Hudson has specifically identified a strategy which fits into SB 215. He said the division's current capital budget request includes money to install repeaters throughout Cook Inlet, maintain repeaters already in place in Prince William Sound, and have the capability in Fairbanks. He said there is a work group working with the Alaska Marine Highway system on the design of the current vessel, to ensure that it will be able to do the things Representative Hudson mentioned. He noted the new vessel is being designed to serve as a portable depot. He felt slight modifications on the cargo capacity of the ferries could be a part of that also. REPRESENTATIVE HUDSON felt there could also be slight necessary modifications made to the ferry terminals as an integral part of the coastal protection. He stated it is important that a funding source be maintained for those types of modifications. MR. CONWAY agreed and said when the near shore demonstration projects are completed, an overall review will be done to look at where the gaps are. Number 214 REPRESENTATIVE HUDSON clarified the current version of SB 215 provides DEC the opportunity for minor acquisitions to upgrade some of the state facilities, in order to accomplish the near shore protection system. MR. CONWAY replied that is correct. REPRESENTATIVE DAVIES asked if the reason there is not an operational depots and corps system in place currently is because there has not been enough money to accomplish that. MR. CONWAY replied that is part of the reason. He said the other reason is that the initial fiscal note included about $20 million and there has only been $2 million available at the most and less than that at other times in the last four years for that system. He stated the Department of Military and Veteran Affairs (DMVA) and DEC realized there was a need for a strategic plan on what to purchase, etc. That strategic plan is coming to fruition with the near shore demonstration projects. REPRESENTATIVE DAVIES asked Mr. Conway if he is satisfied that under SB 215 and the 3 cents/2 cents split there will be enough money in the future to make significant progress on the depots and corps. MR. CONWAY said he is satisfied to an extent but it depends on how rapidly the depots and corps are to be established. He stated there is a 3 cents limit on the amount paid into the prevention account to pay for prevention programs. He noted in the letter which was sent to Representative James in regard to depots and corps, a sketch was presented on the amounts required for depots and corps. Those amounts included $6 million for barge packages, about $5 million for the high speed vessel response packages, and about $1.25 million for hazardous response teams. He stressed if there is a desire to buy all of that at once, there is not enough money to do that in SB 215. However, one package of each a year could be put in place, but it will take 10-20 years to get that accomplished or perhaps a source could be found to come up with the funds all at once. Then there would be a need to provide for operations and maintenance out of the 3 cents account. Number 258 REPRESENTATIVE DAVIES noted the total is approximately $12 million and he asked if that amount was for each center. MR. CONWAY replied the amount is statewide. He said it is felt what is not prudent public policy is to duplicate existing industry and coop capability. He stated DEC is currently negotiating with them to be able to access those resources through a contract. REPRESENTATIVE GREEN felt there are perceptions which should be clarified. He said based on the l.6 million barrels a day, the nickel surcharge represents $29.2 million and if the interest and the mitigation account is added, the result is over $27 million to a department with a $13 million budget. He felt there is already a large surplus which could be used for depots and corps. He recalled that in an earlier discussion regarding HB 238, Mr. Conway was asked about the dollars already allocated through DMVA to establish depots and corps and the problem was not funding, but rather there was no plan. He also recalled that it was mentioned that the plan will not be finished until after 1995. REPRESENTATIVE GREEN said it probably will not take many years to develop the depots and corps and there is not a desire to reinvent the wheel. Therefore, the Division is putting in some emergency response equipment in the depots but not competing with a adequate series of private cleanup and containment organizations. REPRESENTATIVE GREEN recalled there was a discussion about how effective the ferry fleet might be. He said people interested in seeing the practicality of using a ferry in responding to an oil spill, should go on one of the oil spill drills. He did not understand how a ferry going to and from Washington, with cars and people on it, will be a part of the activities of containing and cleaning up an oil spill. Number 316 CHAIRMAN WILLIAMS noted the people and cars can be taken off the ferry within an hour. MR. CONWAY said what has been designed in the new ferry is the ability to have modules with equipment already loaded and ready to go. The ferry would proceed to the nearest port practical to drop off the passengers and cars. He explained the ferry will serve as a transportation platform and take equipment out which will be deployed by other response vessels such as industry vessels, fishing vessels of opportunity, etc. He noted the other purpose the ferry will serve is as a floating hotel. REPRESENTATIVE HUDSON stated he does not envision oil sucking ferries. He felt Mr. Conway adequately described what the new vessel will provide. REPRESENTATIVE GREEN expressed concern that it may take 18 hours for a ferry to respond to a spill. He said the existing private cleanup and containment associations can be there in 12 hours. He felt the ferry might be more fringe than fact. He noted by the time the ferry gets to a spill, an incident command system will already be in place working with private equipment, and he was not sure how the ferry will fit in. Number 388 MR. POE stated SB 215 does provide that money going into the mitigation account may be appropriated by the legislature to the prevention side. He felt that is very good. He said many of the estimates on the dollar amounts seem to be high to him. The $2.5 million in interest is probably accurate. However, there is no knowledge of what the mitigation account will hold. He explained the Exxon Valdez payments which will occur between now and the year 2001 can happen in any amounts, over any period of time. Therefore, there is no assurance when that money will come into the mitigation account or in what amounts. MR. POE said estimates of having $27 million available on the prevention side in a given year are either inflated or else there will be a one year blip where all the Exxon money comes in within a two year period. REPRESENTATIVE FINKELSTEIN asked what is currently being spent on prevention activities. MR. POE responded 1994's budget is about $13.4 million. REPRESENTATIVE FINKELSTEIN asked if the surcharge is paid on the royalty oil. MR. POE replied no surcharge is paid on the royalty oil. REPRESENTATIVE FINKELSTEIN clarified there is not enough money to take care of storage tanks and the existing prevention program. MR. POE stated SB 215 puts a fair amount of pressure on the prevention side. He said it is difficult to estimate what the fiscal impact of the other demands on the prevention account will be. He said any margin may disappear very quickly. REPRESENTATIVE FINKELSTEIN clarified that for the two programs, and the amount being spent currently, there is enough money. MR. POE replied yes, if it is all spent out of the prevention side. Number 441 REPRESENTATIVE FINKELSTEIN asked Mr. Poe if restoration has ever been a part of prevention in the past. MR. POE responded no. REPRESENTATIVE FINKELSTEIN wondered if there is a big spill and a big level of restoration activities is needed, with funding coming from the 3 cents side, what will happen to the remaining prevention activities. MR. POE replied it is a very difficult dollar amount to estimate. REPRESENTATIVE FINKELSTEIN pointed out that millions could be spent in restoration on a good-sized spill. MR. POE said on a reasonable size spill, the response account could be used. REPRESENTATIVE FINKELSTEIN said restoration is only provided for in SB 215 under the prevention account. MR. POE said Mr. Rogers will offer an argument for how restoration is included in the law on the response side and DEC will also offer an amendment to provide an additional clarification. REPRESENTATIVE FINKELSTEIN clarified if there is a reasonable size spill and restoration money is spent out of the prevention account, SB 215 as currently written does not provide for enough money to fund remaining prevention activities. MR. POE said probably not. MR. ROGERS stated restoration could be funded out of the response account because of the broad wording contained in SB 215 on the bottom of page 17 and at the top of page 18. REPRESENTATIVE FINKELSTEIN disagreed. He did not feel the language provided for any restoration activities to be funded out of the response account. Number 518 REPRESENTATIVE GREEN said if restoration is an after the fact case, the spiller provides the funds. He felt there is adequate funding. REPRESENTATIVE JEANNETTE JAMES said restoration is down the road and cleanup is important. She agreed that the definition between cleanup and restoration is a fine line. She believed that by the time restoration efforts begin, money in the prevention account does not necessarily have to be available as there will be other funds coming into the mitigation account to cover those costs. She felt comfortable with the language contained in SB 215. She stressed what is not available in SB 215 is funding for continuing restoration which should be funded some other way. REPRESENTATIVE FINKELSTEIN said to achieve what Representative James suggested, funding would have to be taken out of the prevention account because it is not just in the response account, restoration has been moved to the prevention side. SENATOR MILLER stated many things happening in cleanup, some people might feel are restoration efforts but those efforts would be funded out of the response account because of the threat to public health or the environment, etc. He felt the concerns expressed are answered in SB 215. REPRESENTATIVE FINKELSTEIN noted Senator Miller's point is that restoration could be allowed under cleanup. He felt language should be added to SB 215 which says that. REPRESENTATIVE JAMES stated the response fund is to be used for response to an emergency situation before anyone else is involved. She stressed by the time restoration takes place, response has been completed. Therefore, the funding for restoration should come from a different source. REPRESENTATIVE FINKELSTEIN felt restoration should not be funded from the prevention account. REPRESENTATIVE GREEN said restoration sounds like mitigation and mitigation dollars go into the prevention account. He felt since the dollars go into the prevention account, funding for restoration should come out of the prevention account. He felt a lot of time was being wasted on debate with personal attitudes. REPRESENTATIVE CARNEY disagreed and said the committee is getting educated on SB 215. He said he would like to understand SB 215 before voting to move it out of committee. REPRESENTATIVE FINKELSTEIN challenged anyone on the committee, including himself, to describe what SB 215 actually does. Number 647 CHAIRMAN WILLIAMS said SB 215 will be heard again at 3:30 p.m. and he would like to move the bill out of committee at that time. REPRESENTATIVE FINKELSTEIN asked if he could explain his amendments so the committee can think about them. The first amendment he will be offering is to restore the Citizens' Oversight Council and the other will be on the restoration issue. CHAIRMAN WILLIAMS said DEC has several amendments they would like to discuss. TAPE 94-61, SIDE A Number 000 MR. POE said the first amendment deals with Section 19, on page 14, lines 7-16. This amendment addresses cost recovery. He explained SB 215, as currently written, provides that costs paid from the response account and are recovered should go back to the response account. The amendment provides that cost recoveries from expenditures from the fund in the past would go into the prevention mitigation account. He added that sometimes cost recoveries are mixed. He stated the second portion of the amendment says that portion which came from the prevention account would go back into the prevention account. REPRESENTATIVE CARNEY made a MOTION to AMEND CSSB 215(FIN) am (efd fld) as follows: Section 19, page 14, lines 7-16 replace with: (1) the oil and hazardous substance release response mitigation account established under AS 46.08.025(b); the amount required to be deposited under this paragraph shall represent the proportion of the expenses recovered that were originally paid for from the oil and hazardous substance release response account established under AS 46.08.010(a)(2); or (2) [A SPECIAL ACCOUNT CALLED] the ["] oil and hazardous substance release prevention mitigation account established under AS 46.08.020(b); the amount required to be deposited under this paragraph is the amount of money recovered that exceeds the amount payable to the response mitigation account under (1) of this section ["]. CHAIRMAN WILLIAMS asked if there were any objections to the motion. REPRESENTATIVE GREEN OBJECTED. He said there has been restoration ongoing since the large spill and money has come back in. While the funds may not have been appropriated to prevention, they have been returned to the state. He stated that money has either paid off or has gone a long way toward the amount of money paid by the state. He felt to now specifically say this amount of money will be allocated back to the prevention account is overfunding. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES JAMES, FINKELSTEIN, DAVIES, CARNEY, MULDER, WILLIAMS. Voting against the amendment was REPRESENTATIVE GREEN. The MOTION PASSED 6-1. Number 041 MR. POE said the second amendment is related to Section 26, page 21, line 9. This amendment was recommended by the Attorney General's office. He stated since these grants are allowed in the beginning part of the bill, they needed to be an authorized use of the prevention account. REPRESENTATIVE CARNEY made a MOTION to AMEND CSSB 215(FIN) am(efd fld) as follows: Section 26, page 21, line 9 add a new subsection L (L) pay for grants under AS 29.60.510 and impact assessments under AS 29.60.560 made by the commissioner of community and regional affairs. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. MR. POE stated the third amendment deals with Section 26, page 17, line 31, and relates to the previous debate on restoration. He said this amendment will make it clear that restoration is included in possible cleanup activities. REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 215(FIN) am(efd fld) as follows: Section 26, page 17, line 31, replace with: contain, cleanup, including restoration of the environment, and take other necessary action, such as monitoring and REPRESENTATIVE JAMES OBJECTED. She said earlier discussion on this subject made her feelings on the subject clear. REPRESENTATIVE DAVIES reiterated there is a very fine line between what is cleanup and what is restoration. He felt this amendment will allow the state to proceed to do those things which are necessary without getting hung up on the difference between the two. He agreed there will be other funds available for restoration and when those funds become available, they will be used for restoration and the logical transition from cleanup to restoration will be made. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES MULDER, GREEN, FINKELSTEIN, DAVIES, CARNEY, and WILLIAMS. Voting against the amendment was REPRESENTATIVE JAMES. Number 103 MR. POE said the fourth amendment relates to Section 31, page 23, line 4. He explained there are two kinds of cost recoveries--cost recoveries to the response account and cost recoveries to the prevention account. This amendment allows for both kinds of cost recoveries to occur. MR. ROGERS said this amendment is consistent with the intent and is truly a technical amendment. REPRESENTATIVE CARNEY made a MOTION to AMEND CSSB 215(FIN) am(efd fld) as follows: Section 31, page 23, line 4 add a new subsection (D) between "cost recoveries" and "[AS SPECIFIED...": (D) AS 46.08.020(a)(3) (cost recoveries) CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. MR. POE stated the fifth amendment deals with page 25, lines 24-25. This amendment removes the definition of catastrophic oil discharge. He said this definition is no longer needed in the bill. REPRESENTATIVE CARNEY made a MOTION to AMEND CSSB 215(FIN) am(efd fld) delete lines 24-25, page 25 and renumber remaining subsections accordingly. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. Number 154 REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 215(FIN) am(efd fld) as follows: Page 21, following line 27: Insert a new bill section to read: *Sec. 29. AS 46.08.040(d) is amended to read: (d) Upon a request from [(1)] the Alaska Legislative Council, the commissioner shall use money from the prevention account in the fund to reimburse the Alaska Legislative Council for expenditures that it makes for the operation of the Citizens' Oversight Council on Oil and Other Hazardous Substances, established under AS 24.20.600 [;] AND (2) THE COMMISSIONER OF TRANSPORTATION AND PUBLIC FACILITIES, THE COMMISSIONER SHALL TRANSFER MONEY FROM THE FUND TO THE DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES TO PAY FOR THE CONSTRUCTION OR REFURBISHMENT OF ONE OR MORE VESSELS OF THE ALASKA MARINE HIGHWAY SYSTEM THAT HAVE THE CAPABILITY TO ASSIST IN RESPONDING TO SPILLS OF OIL AND HAZARDOUS SUBSTANCES; IN EXPENDING MONEY IN THE FUND WHOSE USE FOR VESSELS OF THE MARINE HIGHWAY SYSTEM IS AUTHORIZED BY AS 19.65.025 AND THIS PARAGRAPH, THE COMMISSIONER SHALL GIVE PRIORITY TO CONSTRUCTION OF ONE OR MORE NEW VESSELS THAT HAVE THE CHARACTERISTICS REQUIRED BY THIS PARAGRAPH]." Renumber the following bill sections accordingly. Page 26, line 14: Delete "AS 24.20.600, 24.20.610, 24.20.620, 24.20.630;" Page 26, lines 15-16: Delete ", 46.08.040(d)" REPRESENTATIVE FINKELSTEIN said the Citizens' Oversight Council came out of the Oil Spill Commission. The Commission's conclusion was that while there are specific oversight bodies tied to specific parts of the state, there was not an overall body to address the issue of how to get ahead of some of the problems. He stressed the Citizens' Oversight Council did that. He stated there was some political unhappiness with the council's activities because of its coverage of areas outside of oil such as hazardous waste issues, but there was never any unhappiness in the work which the council did in the field of oil. He felt the council was a productive body. He added that the legislature did make a decision not to fund the council in the current fiscal year. However, SB 215 completely eliminates the council from the statute, which he did not feel is necessary or appropriate. Number 174 REPRESENTATIVE DAVIES said he was previously the state's seismologist and one of the clear things he learned in that experience was that society's response to catastrophes, either man-made or natural, follows a predictable pattern. When a catastrophe occurs, a lot of money is thrown at it and then over time the problem is forgotten and money for the problem dwindles until the next catastrophe occurs. He stated if there was a more even approach, the state would spend less money overall and do a better job. He pointed out that one of the major functions of an Oversight Council is to keep the problem before the state, ensuring that the state's guard is not allowed to drop too far. He felt the Citizens' Oversight Council can actually save the state money and save the state heartache in the long run. He expressed support for the amendment. REPRESENTATIVE MULDER said as Chair of the Legislative Council, he objects to the amendment. He stated the Legislative Council feels the Citizens' Oversight Council is redundant and the work they are doing should be done by DEC. He pointed out the reason the Citizens' Oversight Council was not funded was because of an abuse of the funds by the council. He said there were over a dozen contracts given out to so-called friends of individuals involved with, participating on, or running the council. He stressed there have not been any problems with the deletion of the Citizens' Oversight Council. REPRESENTATIVE GREEN also objected to the amendment. He felt the amendment may be unconstitutional. REPRESENTATIVE FINKELSTEIN WITHDREW his MOTION. Number 217 CHAIRMAN WILLIAMS said the committee meeting will reconvene at 3:30 p.m. He stated the committee will also discuss SB 310 at that time. THE MEETING RECESSED AT 10:15 A.M. TAPE 94-62, SIDE A Number 000 THE MEETING RECONVENED AT 3:58 P.M. CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVES HUDSON, BUNDE, MULDER, AND JAMES are present. CHAIRMAN WILLIAMS stated the committee will again take up CSSB 215(FIN) am(efd fld). When the committee recessed, the committee was discussing an amendment proposed by Representative Finkelstein, which was withdrawn because there was a need for the committee to get to the floor. REPRESENTATIVE JAMES made a MOTION to MOVE CSSB 215(FIN) am(efd fld), out of committee with INDIVIDUAL RECOMMENDATIONS. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. A brief at-ease was taken. (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVES CARNEY, DAVIES, FINKELSTEIN, and GREEN had joined the committee.) REPRESENTATIVE HUDSON made a MOTION to RESCIND the committee's action in adopting and moving CSSB 215(RES) out of committee. REPRESENTATIVES JAMES AND BUNDE OBJECTED. REPRESENTATIVE BUNDE said the amendments will be seen again on the floor and felt it is an academic exercise to go through them, hear them now and again on the floor. Number 031 REPRESENTATIVE DAVIES stated unlike the previous speaker, he sat through the entire morning meeting and in the course of that discussion, he came up with an amendment that the sponsor of SB 215 had no objection to. He said he asked Representative William's staff to contact him when the meeting was going to begin. REPRESENTATIVE MULDER said the Chairman did not railroad anything through. He did not feel the burden of presence should be placed on a staff person to get the committee members to the meeting. He felt it is the responsibility of each legislator to be at the meeting on time. REPRESENTATIVE CARNEY agreed that the burden should not be placed on staff if the meeting starts on time. He said many committee members were available and waiting for the chairman to start the meeting. He felt it was proper to expect some notification as to when the meeting was going to start. He stressed if the meeting started on time, the committee members would have been there. REPRESENTATIVE JAMES stated it is the legislator's responsibility to get to a meeting. She was on time for the meeting and waited for the meeting to begin. She WITHDREW her OBJECTION. CHAIRMAN WILLIAMS asked if there were any objections to rescinding the committee's action. Hearing none, the MOTION PASSED. Number 082 REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 215(FIN) am(efd fld) as follows: Page 21, following line 27: Insert a new bill section to read: "*Sec. 29. AS 46.08.040(d) is amended to read: (d) Upon a request from [(1)] the Alaska Legislative Council, the commissioner may [SHALL] use money from the prevention account in the fund to reimburse the Alaska Legislative Council for expenditures that it makes for the operation of the Citizens' Oversight Council on Oil and Other Hazardous Substances, established under AS 24.20.600 [; AND (2) THE COMMISSIONER OF TRANSPORTATION AND PUBLIC FACILITIES, THE COMMISSIONER SHALL TRANSFER MONEY FROM THE FUND TO THE DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES TO PAY FOR THE CONSTRUCTION OR REFURBISHMENT OF ONE OR MORE VESSELS OF THE ALASKA MARINE HIGHWAY SYSTEM THAT HAVE THE CAPABILITY TO ASSIST IN RESPONDING TO SPILLS OF OIL AND HAZARDOUS SUBSTANCES; IN EXPENDING MONEY IN THE FUND WHOSE USE FOR VESSELS OF THE MARINE HIGHWAY SYSTEM IS AUTHORIZED BY AS 19.65.025 AND THIS PARAGRAPH, THE COMMISSIONER SHALL GIVE PRIORITY TO CONSTRUCTION OF ONE OR MORE NEW VESSELS THAT HAVE THE CHARACTERISTICS REQUIRED BY THIS PARAGRAPH]." Renumber the following bill sections accordingly. Page 26, line 14: Delete "AS 24.20.600, 24.20.610, 24.20.620, 24.20.630;" Page 26, lines 15-16: Delete ", 46.08.040(d)" REPRESENTATIVE FINKELSTEIN said this amendment provides to not delete the Citizens' Oversight Council. He stated it may be the choice of the legislature to not fund the council again in the future, but he felt the council is a logical product of the Oil Spill Commission's deliberations on the impact of the oil spill and remains an important action. He pointed out the change in this amendment from the previous amendment (offered and withdrawn at the morning hearing) is changing the word "shall" to "may". REPRESENTATIVE MULDER OBJECTED to the motion. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES CARNEY, DAVIES, AND FINKELSTEIN. Voting against the amendment were REPRESENTATIVES GREEN, HUDSON, BUNDE, JAMES, MULDER, AND WILLIAMS. The MOTION was DEFEATED 6-3. Number 105 REPRESENTATIVE CARNEY made a MOTION to AMEND CSSB 215(FIN) am(efd fld) as follows: Page 26, line 21, through page 27, line 1: Delete all material and insert: "*Sec. 44. CONDITIONAL SUSPENSION OF SURCHARGE IMPOSED BY AS 43.55.201 - 43.55.231. In addition to the circumstances set out in AS 43.55.231, the surcharge authorized by AS 43.55.201 is not levied on and after the effective date of this section and until June 30, 1995, if (1) the Eighteenth Alaska State Legislature does not, during the Second Regular Session or during any special session held before the effective date of this section, (A) appropriate to the oil and hazardous substance release prevention and response fund established by AS 46.08.010(a), as amended by sec. 21 of this Act, the balance, as of July 1, 1994, of the account established under former AS 43.55.210 to receive the proceeds of the conservation surcharge; the appropriation required by this subparagraph must be allocated as follows: (i) 40 percent of that balance to the response account established by AS 46.08.010(a)(2), as amended by sec. 21 of this Act; and (ii) 60 percent of that balance to the prevention account established by AS 46.08.010(a)(1), as amended by sec. 21 of this Act; and (B) appropriate at least an amount equal to the estimated amount, as of the day before the effective date of this section, of the unexpended and unobligated balance of the former oil and hazardous substance release response fund, exclusive of the amount appropriated under (A) of this paragraph, to the oil and hazardous substance release prevention and response fund; the appropriation required by this subparagraph must be allocated as follows: (i) 40 percent of that balance to the response account established by AS 46.08.010(a)(2), as amended by sec. 21 of this Act; and (ii) 60 percent of that balance to the prevention account established by AS 46.08.010(a)(1), as amended by sec. 21 of this Act, to be appropriated for purposes described in AS 46.08.040(a)(2)(C)(i) and (ii), added by sec. 26 of this Act, and for purposes described in AS 46.08.100 - 46.08.190; or (2) the governor vetoes or reduces any of the amounts appropriated or allocated under (1) of this section." Page 27, lines 2-4: Delete APPLICABLE TO CONSERVATION SURCHARGE ON OIL IMPOSED BY AS 43.55.200 AFTER JUNE 30, 1994, AND BEFORE THE EFFECTIVE DATE OF THIS SECTION." Insert ". (a)" Page 27, line 18: Delete "section" Insert "subsection" Page 27, following line 20: Insert a new subsection to read: "(b) On the effective date of this section, if so appropriated by the legislature, the commissioner of administration shall transfer to the oil and hazardous substance release prevention and response fund established by AS 46.08.010(a), as amended by sec. 21 of this Act, an amount equal to the estimated amount, as of the day before the effective date of this section, of the unexpended and unobligated balance of the former oil and hazardous substance release response fund; the appropriation required by this subparagraph must be allocated as follows: (1) 40 percent of that balance to the response account established by AS 46.08.010(a)(2), as amended by sec. 21 of this Act; and (2) 60 percent of that balance to the prevention account established by AS 46.08.010(a)(1), as amended by sec. 21 of this Act." CHAIRMAN WILLIAMS asked if there were any objections to the motion. REPRESENTATIVE JAMES OBJECTED. Number 115 REPRESENTATIVE FINKELSTEIN noted he intends to move the Letter of Intent because it makes it clear that the amendment is attempting to ensure funding for the depots and corps. He said unless the reserve is split, there is not going to be funding available to get the depots and corps going. He stated the Letter of Intent will indicate an interest in accomplishing that goal. REPRESENTATIVE DAVIES stated the amendment is important because in earlier discussions, DEC said if the depots and corps money has to be taken out of the declining prevention account, it will be 15-20 years before the depots and corps are in place. He felt that is too long to wait. He stressed if the amendment is passed and funds are designated for depots and corps, they might be in place in a couple of years instead of a couple of decades. REPRESENTATIVE JAMES expressed support for getting the depots and corps on line also but she is concerned about spending a lot of money out of the prevention account for things which should not be paid for from the tax on the crude oil industry. She is more interested in finding another source of funds. Number 145 REPRESENTATIVE HUDSON said he did not recall DEC saying the depots and corps will take 15-20 years. He recalled there was a discussion about what the balance will be and what effect that balance will have on the accomplishment of putting some of the near shore depots and corps in place. MR. CONWAY replied there is going to be too many items on the plate to fund from the 3 cents revenue. He said in the letter to Representative James, there was a strategic plan included on what the depots and corps will cost. He stated with all the demands on the prevention account, along with a desire to pay for depots and corps out of that account, it could take 15-20 years to get them in place, depending upon the will of the legislature in looking at all of the demands and all things which need to be funded. MR. POE explained approximately $15.7 million will be available the first year, and that decreases in the years thereafter. He stressed one of the good things SB 215 does is make several funding sources available for the prevention mitigation account. He pointed out the legislature may appropriate the money from the mitigation account to the prevention account. He felt the $2.5 million is a reasonable estimate on interest earned one year from now. Additionally, there is $28 million in Exxon money which will come in sometime between now and the year 2000. He noted the payment amounts and time are not specified. MR. POE stated the word "may" is an important aspect because the legislative history thus far has shown the mitigation moneys not being appropriated to the response fund. The moneys have been appropriated to storage tank assistance, etc. He said it is important to recognize there is an amount of money, with unlimited wants going after that money. He said there is nothing preventing the legislature from treating the mitigation moneys as general funds. He felt when legislators are gaging on what they positively will have for depots and corps and a prevention program, it will probably be the $15.7 million plus whatever the will of that particular legislature is to get the money out of the mitigation account to the prevention account. Number 207 REPRESENTATIVE FINKELSTEIN clarified without the amendment, the 2 cents surcharge shuts off within the year and with the amendment, the 2 cents surcharge shuts off within 2 1/2 years. MR. POE replied that is correct. REPRESENTATIVE FINKELSTEIN said at that point, until there is a major spill, there is no reason to assume there will be a significant amount of assessment on the 2 cents. MR. POE stated DEC has been using about $250,000 annually in the substantial threat (indiscernible) and that amount would come from the response account. REPRESENTATIVE FINKELSTEIN pointed out that the assessment has been in place for a number of years and if it is continued for another year or two, there will be enough money to complete the program. REPRESENTATIVE CARNEY asked who drafted the amendment. CHAIRMAN WILLIAMS replied he drafted the amendment. REPRESENTATIVE CARNEY asked Chairman Williams if the amendment is something the committee should not do now. CHAIRMAN WILLIAMS replied he chose not to bring the amendment before the committee. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES DAVIES, FINKELSTEIN, and CARNEY. Voting against the amendment were REPRESENTATIVES GREEN, MULDER, BUNDE, HUDSON, JAMES, and WILLIAMS. Number 242 REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 215(FIN) am(efd fld) as follows: Page 9, lines 30-31: Delete "the oil and hazardous substance release" Insert "a [THE OIL AND HAZARDOUS SUBSTANCE RELEASE]" Page 10, line 3: After "prevention" Insert "mitigation" After "in" Insert "AS 46.08.020(b)" Page 10, line 5: Delete "OR] AS 46.08.020" Insert "OR AS 46.08.020]" Page 20, lines 25-27: Delete all material. Page 20, line 28: Delete "(I)" Insert "(H)" Page 21, line 1: Delete "(J)" Insert "(I)" Page 21, line 8: Delete "(K)" Insert "(J)" REPRESENTATIVE FINKELSTEIN said the amendment removes the reference to underground storage tanks. REPRESENTATIVE JAMES OBJECTED. REPRESENTATIVE FINKELSTEIN stated leaking underground storage tanks are a cleanup operation but the funding is coming from the prevention side. He said he would not object to funding the cleanup of these tanks from the prevention side if there was enough money. He felt the proper funding source for the cleanup of leaking underground storage tanks is a gasoline tax. He stressed the last place the funding should come from is the assessment on the oil companies because they are not the cost causer and should not be the cost payer. Number 280 REPRESENTATIVE JAMES said she would like more explanation of the amendment. She agrees with the statement that leaking underground storage tanks should be funded from another source and thought sufficient funds should be funneled to the prevention account to accomplish that. REPRESENTATIVE FINKELSTEIN explained the key point of the amendment page 20, lines 25-27 is removing the cleanup of leaking underground storage tanks as a use of the prevention fund. He said currently funding is taken from the mitigation account, which is basically general funds. His preference is a gasoline tax in the future rather than the current approach or this proposed approach of taking the funding out of the 470 fund, which is the contribution from the oil companies. REPRESENTATIVE MULDER stated the reason the prevention account is identified as the source of funding for the cleanup of leaking underground storage tanks is because an earlier part of the bill says mitigation funds can be put into the prevention account. He pointed out that mitigation funds have been the primary source of funding for this cleanup program in the past. REPRESENTATIVE JAMES is happy with Representative Mulder's explanation and will not support the amendment. REPRESENTATIVE FINKELSTEIN recalled Representative Mulder's point about the ability of putting the mitigation account into the prevention account and pointed out that has always been allowed but has never been done. He said no changes have been made on the ability of the legislature to put the mitigation money into the prevention account. He explained what has occurred is that there have been additions made to the list of allowed prevention account uses. He stressed the list is a long way from what many believe should be done on the prevention side. Number 345 REPRESENTATIVE DAVIES asked DEC if the amendment is adopted, will it be more likely that the depots and corps will be put in place sooner. MR. POE replied the amendment will mean less potential pressure on the $15.7 million. REPRESENTATIVE DAVIES recalled earlier that Mr. Conway had stated one of his concerns is that if the cleanup of the leaking underground storage tanks has to be taken from the prevention side, it will take longer to get the depots and corps in place. MR. POE responded that is not an unreasonable inference to draw. He pointed out that if there is $15.7 million available and the program has cost about $13.5 million, that leaves approximately $2.2 million to do many of the things which have been added to the prevention account use list. REPRESENTATIVE DAVIES stated the minimum amount needed to accomplish the depots and corps was approximately $12 million. REPRESENTATIVE HUDSON stressed there is also $28 million coming in from the Exxon Corporation between now and the year 2000, which will flow into this account as well and will be available for whatever the legislature in the future decides to do with it. That is one of the reasons he is not convinced the fund should be split because he felt it is important to get to the $50 million. He asked if SB 215 provides for a leaking underground storage tanks cleanup appropriation. MR. POE replied it does. REPRESENTATIVE HUDSON clarified the amendment will remove the cleanup of the leaking underground storage tanks language. MR. POE said the amendment will remove the language relating to allowed uses for the prevention account. The amendment does not mean the legislature could not still use the mitigation account to pay for the cleanup program. Number 410 REPRESENTATIVE HUDSON clarified if the amendment is adopted, the pressure is reduced on the funds in the prevention account, providing more money for depots and corps. MR. POE said that is correct. MR. ROGERS stated he is not in a position to speak on the amendment for his client because there has been no discussion about it. He said the Senate Finance Committee would probably oppose the amendment. REPRESENTATIVE BUNDE clarified if the amendment passes, the legislature can still use the money for the cleanup of leaking underground storage tanks so the amendment is not that significant. REPRESENTATIVE DAVIES stated the amount which really needs to be appropriated to the leaking underground storage tanks cleanup program is $4-5 million annually, so if the amendment is passed, there will be $2 million potentially available for depots and corps. He pointed out if the amendment is not passed, potentially $4-5 million will be taken out of the account. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES FINKELSTEIN, DAVIES, AND CARNEY. Voting against the amendment were REPRESENTATIVES BUNDE, JAMES, MULDER, GREEN, HUDSON, and WILLIAMS. The MOTION was DEFEATED 6-3. Number 462 REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 215(FIN) am(efd fld) as follows: Page 16, line 11, after "substance;": Insert "and" Page 16, lines 14-19: Delete ";and (6) the interest earned on the balances of each of the following: (A) the prevention account; (B) the prevention mitigation account; (C) the response account; and (D) the response mitigation account" Page 16, line 20: Delete "(a)(2) - (6)" Insert "(a)(2) - (5)" Page 16, line 25: Delete "(a)(2) - (6)" Insert "(a)(2) - (5)" Page 16, following line 26: Insert a new bill section to read: "*Sec. 25. AS 46.08.020 is amended by adding a new subsection to read: (c) The interest earned on the balances of each of the following accounts shall be deposited into the general fund and credited to the prevention account in the fund: (1) the prevention account; (2) the prevention mitigation account; (3) the response account; and (4) the response mitigation account." Renumber the following bill sections accordingly. Page 26, line 19: Delete "sec. 42" Insert "sec. 43" Page 27, line 21: Delete "Section 27" Insert "Section 28" REPRESENTATIVE JAMES OBJECTED. REPRESENTATIVE DAVIES stated this amendment will accomplish the direct deposit of the interest from the various accounts through the general fund, into the prevention account and would obviate the necessity for legislative action to put the funds in the account. The money will still have to be appropriated out of the prevention account. REPRESENTATIVE MULDER stated the concept is good but he wondered if there is a constitutional problem with the amendment. REPRESENTATIVE FINKELSTEIN said funds can be designated to go to a particular place. The constitutional problem is when the legislature is required to appropriate the money out of a particular place for a particular purpose. He pointed out the amendment still requires the legislature to appropriate the money out. MR. POE stated the amendment does accomplish what has been debated throughout the discussion, which is using the interest from the funds on the prevention side. He said DEC supports the amendment. REPRESENTATIVE JAMES asked if a large amount of money accumulates in the account, can the legislature appropriate the money for use other than what is listed. MR. POE replied yes. REPRESENTATIVE HUDSON stated he has always wanted the interest to flow to the prevention account. He said if the amendment makes that more specifically stated, he will support the amendment. REPRESENTATIVE GREEN expressed concern about the direct manner. He felt there may be a constitutional problem. REPRESENTATIVE JAMES stated even though the interest is deposited directly, the legislature still has to appropriate the money. REPRESENTATIVE BUNDE asked if it is determined that the amendment is unconstitutional, is the amendment severable or is the entire bill thrown out. REPRESENTATIVE HUDSON replied the amendment is severable. REPRESENTATIVE FINKELSTEIN pointed out that Jack Chenoweth would not have drafted an amendment that was unconstitutional. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES HUDSON, CARNEY, MULDER, DAVIES, JAMES, FINKELSTEIN, and WILLIAMS. Voting against the amendment were REPRESENTATIVES GREEN and BUNDE. The MOTION PASSED 7-2. Number 615 REPRESENTATIVE JAMES made a MOTION to MOVE CSSB 215(FIN) am(efd fld), as amended, out of committee with INDIVIDUAL RECOMMENDATIONS. CHAIRMAN WILLIAMS asked if there were any objections. REPRESENTATIVE FINKELSTEIN OBJECTED. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the motion were REPRESENTATIVES JAMES, BUNDE, MULDER, GREEN, HUDSON, and WILLIAMS. Voting against the motion were REPRESENTATIVES DAVIES, CARNEY, and FINKELSTEIN. The MOTION PASSED 6-3. TAPE 94-62, SIDE B Number 000 SB 310 - STATE/PRIVATE/MUNI TIMBER OPERATION/SALE REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 1, line 4: Delete "AS 38.05.112(c)" Insert "AS 38.05.112" Page 1, following line 4: Insert new material to read: "Sec. 38.05.112. FOREST LAND USE PLANS. (a) The department may not [SELL OR] harvest timber, except for isolated sales of less than 50,000 board feet [PERSONAL USE TIMBER HARVEST], until a site-specific forest land use plan has been adopted. A forest land use plan is required whether or not a regional or area land use plan under AS 38.04.065(a) or a forest management plan under AS 41.17.230 has been adopted. (b) The commissioner shall base a forest land use plan on the best available data, including information provided by other agencies [DESCRIBING THE IMMEDIATE AND LONG-TERM EFFECTS OF INDIVIDUAL AND COLLECTIVE FOREST ACTIVITIES ON THE TIMBER BASE AND ON OTHER RESOURCES AND USES]." Page 2, following line 14: Insert a new subsection to read: "(d) A management plan prepared by the commissioner under AS 41.17.230 or AS 38.04.065 must consider and permit the uses described in (c) of this section. If the commissioner finds that a permitted use is incompatible with one or more other uses in a portion of a state forest, the commissioner shall, consistent with AS 41.17.200, affirmatively state in the management plan that finding of incompatibility for the specific area where the incompatibility is anticipated to exist and the time period when the incompatibility is anticipated to exist together with the reasons for each finding. If the commissioner finds that the use described in (c)(1) of this section is incompatible, or otherwise restricts that use, the commissioner must also document the finding with sound scientific data that clearly proves the incompatibility and the benefits of the restriction." REPRESENTATIVE JAMES stated the amendment was requested by the Interior Alaska Forest Association in Fairbanks and contains the needed changes to provide options for the "little guy" to be able to continue in the timber industry. The first part of the amendment allows for sales of less than 50,000 board feet. She said that size of timber sales is not being done currently because the Division of Forestry feels those size sales are more trouble than what they are worth. The amendment will allow salvage sales and sale of timber which has been stacked, without going through the planning process. REPRESENTATIVE JAMES explained the other portion of the amendment provides that if the commissioner finds the permitted use is incompatible with one or more uses in a portion of a state forest, that there will be scientific evidence proving the incompatibility and the benefits of the restriction. Number 062 REPRESENTATIVE GREEN asked if a person has a hunting lodge with a vast panoramas, which is part of the reason the lodge is in a certain location, and a clearcut is allowed by a forest management agreement (FMA) affecting the lodge's view, will the proposed amendment have any impact. REPRESENTATIVE JAMES replied if trees have a direct relation to the person's livelihood, cutting the trees down is scientifically deteriorating to the business. She felt that person would be protected. She stated the intent of the language is to ensure that decisions are not made subjectively or politically. REPRESENTATIVE GREEN expressed concern about what is determined to be scientific and what is determined to be aesthetic. REPRESENTATIVE JAMES reiterated the amendment says if a permitted use is incompatible with one or more of the uses in the state forest. She gave several examples. Number 117 REPRESENTATIVE DAVIES made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) on page 2, line 5, after the word "scientific" insert the words "or economic". REPRESENTATIVE MULDER OBJECTED for the purpose of discussion. REPRESENTATIVE DAVIES, referring to Representative Green's example of a hunting lodge, stated if the trees are cut down it is a scientific fact the trees are gone, but it would not be a scientific issue as to whether it impacted the value of the lodge. Rather, it would be an economic issue. REPRESENTATIVE JAMES stated she does not object to the amendment to the amendment. REPRESENTATIVE MULDER WITHDREW his OBJECTION. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. REPRESENTATIVE FINKELSTEIN clarified the amendment says if the commissioner finds commercial logging to be incompatible with any other use in the forest, or if any other use even restricts commercial logging, the finding must be made with scientific data clearly proving the incompatibility. He felt that is a burden of proof which is nearly insurmountable. He stressed the state forests were set up not only for the timber value but also because of public use. He said currently, the commissioner is able to sell timber sales and only has to deal with local objections. REPRESENTATIVE JAMES stated Representative Finkelstein is assuming that FMAs are going to involve huge pieces of land, which is not necessarily true. She said a forest management plan could be a small parcel of timber land. The benefits and advantages of a forest management plan is it is a management plan as opposed to a timber sale, whereby reforestation and all of the other identified conditions needed to be maintained in that forest are the responsibility of the person who has the forest management plan. She felt there is a need to ensure that subjective information does not stop every sale. She pointed out it would be possible in a FMA to have a fishing or hunting lodge within the agreement, thereby protecting that lodge. Number 307 REPRESENTATIVE FINKELSTEIN stated the previous discussion assumes the amendment is a provision which affects FMAs and he felt it is not. He said the amendment is inserting a provision in the complete overall process and he felt the amendment is not restricted to FMAs. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES GREEN, MULDER, BUNDE, JAMES, CARNEY, HUDSON, and WILLIAMS. Voting against the amendment were REPRESENTATIVES DAVIES and FINKELSTEIN. The MOTION PASSED 7-2. CHAIRMAN WILLIAMS noted for the record that proposed amendments X21 and X23 have been withdrawn. REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 2, line 31, following "land.": Insert "The commissioner shall identify the forest land included in the solicitation of proposals. The land identified may include land covered by a cooperative resource management or development agreement under AS 38.05.027, subject to the approval of the owner of any land than state land." Page 6, line 10, following "commissioner.": Insert "If the forest management agreement covers non- state land under an agreement authorized under AS 38.05.027, the owner of the land must approve the agreement." REPRESENTATIVE GREEN OBJECTED for discussion purposes. REPRESENTATIVE JAMES stated this amendment allows a FMA to include land owned by several other owners. The amendment also provides that everyone will know what land is being discussed through the commissioner identifying the forest land in the solicitation of proposals. She said the sponsor of SB 310 feels the amendment is fine. REPRESENTATIVE HUDSON said the key language in the amendment is "the owner of the land must approve the agreement." REPRESENTATIVE GREEN WITHDREW his OBJECTION. CHAIRMAN WILLIAMS stated no objections being heard, the MOTION PASSED. REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 8, following line 23: Insert a new bill section to read: "*Sec. 7. AS 41.17.230(a) is amended to read: (a) The commissioner shall prepare a management plan consistent with AS 38.04.005 and this chapter for each state forest and for each unit of a state forest to assist in meeting the requirements of this chapter. An operational level forest inventory shall be completed before a management plan for the state forest or the unit of a state forest is adopted. The management plan shall be adopted, implemented, and maintained within three years of the establishment of a state forest by the legislature. The management plan shall set a total amount of the harvestable timber of the forest or unit, not to exceed 75 percent, that may be the subject of forest management agreements under AS 38.05.122." REPRESENTATIVE MULDER OBJECTED. REPRESENTATIVE DAVIES stated the important part of the amendment is the underlined portion at the bottom. He said the amendment addresses one of the basic concerns people have in regard to large FMAs, which is there is incomplete information about the inventory. If there is an overestimation on what is available and the state commits to an offering based on that overestimate and is locked in for 20 years, there is no way to make an adjustment. He noted the other concern is by allowing a large fraction of the potential harvestable timber to go into an FMA, smaller operators are being eliminated. He stressed there are enough small operators in the Tanana Valley currently to take care of all the spruce there and there is no need for another plant in the Tanana Forest. REPRESENTATIVE DAVIES stated he does not want to prescribe for the entire state what the percentage of the allowable cut for FMAs should be. Rather, he wants the allowable cut to be set on a region by region basis in the management plan, which is consistent with the way SB 310 sets up the relationship between the FMA and the management plan--every FMA has to be consistent with the existing management plan. Number 330 REPRESENTATIVE JAMES felt the protections are already in the bill but she asked the sponsor to speak on the amendment. RICK SOLIE, AIDE, SENATOR STEVE FRANK, stated there is no need to further restrict a FMA by requiring a certain percentage of harvest because there is already a sustained yield requirement in law and the Division of Forestry has to maintain the requirement. He said there is no need to rewrite all of the Alaska statutes in SB 310 as there is the Forest Practices Act (FPA). The Division of Forestry is not going to allow a FMA until there is a sufficient inventory to determine that the sustained yield can be maintained. He felt the amendment is inappropriate and will hurt the spirit of giving the Department of Natural Resources (DNR) flexibility to do good FMAs, allowing for responsible sustained yield harvest. REPRESENTATIVE JAMES added that one of the requirements for a FMA is that existing operations be considered. She is not comfortable with including certain amounts in the bill. REPRESENTATIVE DAVIES stated it could be consistent with the sustained yield philosophy to allocate the entire forest under a FMA, because a FMA has to operate under sustained yield. The sustained yield requirement in the FPA does not restrict the percentage of the forest to be allocated to a FMA. He felt it is a philosophical question as to whether one wants to allow the entire forest to be harvested by one large operator or to preserve some portion of the forest for small operators. He agreed that SB 310 does protect existing small operators but does not protect future small operators. REPRESENTATIVE DAVIES pointed out that testimony suggests spruce are not even being discussed, but rather the development of a new forest operation in the Tanana Valley relating to low quality hardwoods. He stressed the issue is the allocation between large FMAs and small operators. He felt the management plan should address that issue. Number 404 REPRESENTATIVE JAMES thought there could be a FMA which includes some small operators. She said since existing small operators are already protected in the bill, she would like to leave that up to the decision of the FMA proposal and the public can respond during the public comment period. She did not feel there is a need for a further restriction. REPRESENTATIVE DAVIES stated SB 310 only protects existing small operators and does not preserve a niche for small operators to bid on the forest in the future. MR. SOLIE pointed out that the protection for existing operators is located on page 4, line 22, subsection (1). He said the bill does address consistency with management plans both on page 2, line 26 and page 4, line 26, subsection (2). He felt the amendment restricts more than necessary. REPRESENTATIVE FINKELSTEIN reiterated the lines referred to do not speak to any future base for the small operators and their ability to run their small mills. REPRESENTATIVE DAVIES agreed SB 310 does provide for protection of existing operators and does require that a FMA operate under existing land use plans but his concerns are still not addressed. First, there is a possibility of an error in the inventory. Second, the bill does not protect the niche for small operators. Finally, the land use plans are not required to consider the percentage of forest to be allocated to FMAs. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES DAVIES, CARNEY, and FINKELSTEIN. Voting against the amendment were REPRESENTATIVES MULDER, JAMES, GREEN, BUNDE, HUDSON, and WILLIAMS. The MOTION was DEFEATED 6-3. Number 525 REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 2, line 29, following "yield.": Insert "The commissioner may only enter into one forest management agreement that covers land within each state forest in a three-year period. The commissioner may only enter into one forest management agreement in a three-year period in each region of the state for which a regional land use plan has been adopted or is to be adopted for land outside of state forests. In this subsection, "state forest" has the meaning given in AS 41.17.950." REPRESENTATIVE MULDER OBJECTED for purposes of discussion. REPRESENTATIVE DAVIES stated this amendment addresses the concern regarding the forest being tied up in a series of large agreements and being renewed for a long period of time, with no possibility of responding to changing circumstances in the forest. He said this amendment limits the number of FMAs entered into in any three year period. He pointed out that because the prior amendment was not passed, there is still a possibility of having the entire forest tied up in FMAs but with this amendment, every three years, there would be an opportunity to revisit at least one agreement. REPRESENTATIVE JAMES stated this amendment also assumes the FMAs are going to be large. She pointed out that the bill provides for an annual solicitation. She did not feel comfortable binding the department. She felt it should not be assumed that because a solicitation is put out, there will be response. She added there may also be unsolicited FMAs. She commented just because the state is ready to sell timber, does not mean there will be a buyer and to put restrictions on the commissioner, may close the door to some opportunities. Based on that, she objected to the amendment. REPRESENTATIVE MULDER felt there will be two adverse affects in adopting the proposed amendment. He stated a bind will be put on the small companies as the amendment will not just involve big companies being bound to one contract, but also the small companies. He said there may be a niche requiring several small companies for different needs. He also felt the amendment puts further restraint on the economic feasibility. He stressed the purpose of SB 310 is to promote economic diversity and opportunity and the amendment hinders that opportunity. MR. SOLIE stated the amendment will limit the time of the certainty of a FMA to three years. He stressed it is fundamental to have some certainty in order for a company to be able to get financing to construct the value-added facilities, which will create long-term stable jobs. The sponsor opposes the amendment. REPRESENTATIVE DAVIES said he is not proposing limiting the length of a FMA. The amendment only says a FMA can be entered into every three years. The purpose is to stagger the FMAs in time and serves as a management tool for the department. He stated no one is going to go through the process to establish a FMA for a small sale. The purpose of a FMA is to capitalize a new plant and a new plant is not going to be built based on a small sale. Rather, the sale will involve a large portion of the forest, guaranteeing a large resource in the future in order to get financing for a value-added plant. He said there is a need to preserve some operations for small operators and preserve the ability for DNR to manage the forest in the best way possible. He stressed whether or not SB 310 is passed, there will continue to be small lease sales and small plants. He reiterated that FMAs are not directed at small operations. REPRESENTATIVE GREEN asked if the amendment precludes the Native associations. TAPE 94-63, SIDE A Number 000 REPRESENTATIVE DAVIES replied the amendment does not apply to private land, but to state land only. REPRESENTATIVE GREEN noted the amendment says "land outside of state forests." REPRESENTATIVE DAVIES said the regional land use plan may cover portions of state land that are not classified as state forests. Timber sales can be offered on land which is not classified as state forests. REPRESENTATIVE HUDSON stated the earlier amendment by Representative James which was adopted does include private land within the forest (indiscernible). He said whatever is done with the proposed amendment will couple with the private operator. REPRESENTATIVE DAVIES noted the previous amendment addressed FMAs and cooperative land sales. The portions under the state forests would satisfy the requirement that it was a sale on state land within a regional land use area. He pointed out that what is being discussed is a regional land use plan not under the FMA. Number 030 CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the amendment were REPRESENTATIVES JAMES, BUNDE, MULDER, HUDSON, and WILLIAMS. The MOTION was DEFEATED 5-3. Number 039 REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 4, following line 11: Insert a new paragraph to read: "(7) extent to which the proposed agreement provides for processing in the state of the timber harvested, to the extent permitted by law;" Renumber the following paragraphs accordingly. Page 5, following line 19: Insert a new subparagraph to read: "(F) provisions requiring the processing of the timber in the state if that is the highest and best use of the timber as determined by the commissioner and if permitted by law;" Reletter the following subparagraphs accordingly. Page 8, following line 23: Insert a new bill section to read: "*Sec. 7. SEVERABILITY. Under AS 01.10.030, if AS 38.05.122(d)(7) or (g)(2)(F), or the application of those provisions to any person or circumstance, is held invalid, the remainder of this Act and its application to other persons or circumstances shall not be affected." REPRESENTATIVE MULDER OBJECTED for discussion purposes. REPRESENTATIVE JAMES said the amendment adds a paragraph which will provide instructions to the FMA that in-state processing is desired if possible. She stated the next part of the amendment provides for the highest and best use of the timber. She noted the third part of the amendment ensures, that in case either of the first parts of the amendment are unconstitutional, the rest of the bill will stand. REPRESENTATIVE CARNEY agreed with the intent of the amendment but would like to see an effective date. REPRESENTATIVE MULDER agreed. He said there have been numerous discussions about promoting the work force in the state and value-added products in Alaska and while there are restrictions on what can be done, this amendment makes a strong statement about the desire for this type of economic development to occur in Alaska. REPRESENTATIVE JAMES stated the effective date will be a given because the bill will probably be challenged. REPRESENTATIVE DAVIES said the way to make this amendment happen is to petition the state's Congressional delegation to exempt the state of Alaska from the interstate commerce restriction. Number 084 REPRESENTATIVE JAMES felt that is a separate issue. She felt if SB 310 has not done anything else, it has made Alaskans rally behind that thought and idea. In the meantime, she is not willing to hold up the process until that happens. She said passing this amendment will give the DNR commissioner the ability to choose a proposal which includes in-state processing. CHAIRMAN WILLIAMS agreed. REPRESENTATIVE CARNEY made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) on page 6, line 7, insert a new paragraph which says, "The commissioner may not enter into a final agreement until the state receives from the federal government an exemption from federal law so that the state may require that timber harvested under the agreement be processed within the state." REPRESENTATIVES MULDER AND JAMES OBJECTED. REPRESENTATIVE DAVIES said he attempted to get an opinion from the Attorney General about this issue without success, but it is his understanding that the state cannot put a requirement in the bill for in-state processing unless the exemption is received from the federal government. He noted the state of Oregon has received an exemption. Number 123 CHRIS GATES, DIRECTOR, DIVISION OF ECONOMIC DEVELOPMENT, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT (DCED), stated there is not much faith that the federal law can be changed. However, he encouraged committee members to allow this tool (the amendment) to exist while there is an attempt to change the federal law. He said the ability to choose, out of several competing proposals, the one which has in- state processing and a provision to hire Alaskans, allows the department to do things contractually which they could never do if it were mandated by law. He pointed out that Alaska hire and in-state processing cannot be mandated but it can be done contractually. REPRESENTATIVE JAMES stated FMAs may not include white spruce going to Japan but in fact might involve hardwoods. She said to hold up the entire FMA process until a federal exemption can be received will be taking a step backward. REPRESENTATIVE DAVIES reminded everyone SB 310 applies statewide, not just in the Tanana Valley. He stated if a process is set up and bids are evaluated with a selection made based on the in-state processing requirement, that process would be unconstitutional and could be challenged. He said a change in federal law is not required, as the federal law allows for these exemptions currently, the state just needs to ask for the exemption and get it. REPRESENTATIVE CARNEY asked if there is any way to stipulate that the contract contain the requirement for in-state processing. MR. GATES replied the state cannot mandate primary manufacture but it can be accomplished contractually. REPRESENTATIVE DAVIES agreed as long as the price remains the same, but as soon as someone offers one cent less for the materials and the contract is not granted because of in- state processing, the state will lose in court. REPRESENTATIVE JAMES speaking against the amendment to the amendment, said subsection (F) in the amendment says ..."the processing of the timber if that is the highest and best use of the timber" and she felt decisions can be made on what benefits the state the best. She stated the price itself may not necessarily be the determining factor. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the motion were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the motion were REPRESENTATIVES MULDER, HUDSON, JAMES, and WILLIAMS. The MOTION was DEFEATED 4-3. Number 209 REPRESENTATIVE DAVIES made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) deleting the severability clause. He stated the clause is redundant with existing statutes. REPRESENTATIVES HUDSON and WILLIAMS OBJECTED. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the motion were REPRESENTATIVES DAVIES, CARNEY, and FINKELSTEIN. Voting against the motion were REPRESENTATIVES MULDER, JAMES, GREEN, HUDSON and WILLIAMS. The MOTION was DEFEATED 5-3. CHAIRMAN WILLIAMS asked for a roll call vote on the motion to amend. Voting in favor of the motion were REPRESENTATIVES DAVIES, HUDSON, JAMES, MULDER, FINKELSTEIN, GREEN, CARNEY, and WILLIAMS. The MOTION PASSED 8-0. Number 235 REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 2, line 30: Delete "shall" Insert "may" CHAIRMAN WILLIAMS asked if there were any objections to the motion. Hearing none, the MOTION PASSED. REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 8, line 6, following "industry;": Delete "and" Insert "[AND]" Page 8, line 7, following "habitat": Insert new material to read: "; and (8) to the fullest extent practicable, harvested forest land shall be reforested, naturally or artificially, so as to result in a sustained yield of merchantable timber from that land; if artificial planting is required, silviculturally acceptable seedlings must first be available for planting at an economically fair price" Page 8, following line 7: Insert a new bill section to read: "*Sec. 5. AS 41.17.060 is amended by adding a new subsection to read: (d) With respect to private forest land only, to the fullest extent practicable, harvested forest land shall be reforested, naturally or artificially. If artificial planting is required,silviculturally acceptable seedlings must first be available for planting at an economically fair price." Renumber the following bill sections accordingly. Page 8, following line 23: Insert a new bill section to read: "*Sec. 8 AS 41.17.060(b)(4) is repealed." REPRESENTATIVE HUDSON OBJECTED for discussion purposes. MR. SOLIE stated this amendment will amend the reforestation statute in the FPA and clarify what was intended when the statute was drafted. He said existing law pertains to state and municipal forest lands and this new Section 5 pertains to private lands. The section clarifies that private land harvest is not on a sustained yield basis as required by law. He noted that private landowners wanted this clarification in statute. REPRESENTATIVE MULDER asked what is the definition of silviculturally. CHAIRMAN WILLIAMS stated it means tree planting. Number 282 REPRESENTATIVE GREEN wondered if "economically fair price" is an understood term or is it subject to conflict. MR. SOLIE replied he did not think so. He said the amendment is existing law except for the deletion of the words "sustained yield". REPRESENTATIVE DAVIES asked where the words "sustained yield" appear in the amendment. CHAIRMAN WILLIAMS said the wording is in the FPA and was put in inadvertently. He indicated that attached to the amendment is a copy of current law. MR. SOLIE said the underlined portion of the amendment is a repeat of existing law and the words "so as to result in a sustained yield" was deleted from the section below. He noted at the end of the sentence in existing law, the words "in the state" was deleted in the new law that only applies to private forest land. He stated there was concern it might require the purchase of trees. He explained existing law stands for state and municipal and this change is only to private lands. Number 334 REPRESENTATIVE FINKELSTEIN stated he does not fully understand the impact of repealing (b)(4). He clarified the end result is eliminating the application of sustained yield to private timber lands. MR. SOLIE said that is incorrect. He explained currently there is no state requirement for sustained yield harvest on private forest lands. The amendment makes existing law consistent with that and the reforestation part of the FPA. REPRESENTATIVE FINKELSTEIN felt he must be missing something because the wording is exactly the same as existing law. REPRESENTATIVE JAMES said on page 8, line 7, after the word "habitat", the new material is to be inserted. (8) is added which is precisely the language in existing (4). She explained (4) is being moved to (8). REPRESENTATIVE FINKELSTEIN stated the impact of moving the language is to say it does not apply to private lands which is what it applies to now. He felt this amendment is a major change. He said if there is an existing sustained yield requirement on private lands and that is going to be removed, he is concerned there has been no testimony regarding the change. MR. SOLIE said existing law relates to sustained yield harvest for state and municipal. He stressed reforestation is different than harvesting. Reforestation is something done after the trees are cut down. He stated sustained yield does not relate to reforestation. In this change, the language will remain the same for state and municipal land. For private land, the language is kept as it should apply, which does not require any sustained yield harvest. He pointed out this amendment clarifies existing law. Number 430 REPRESENTATIVE FINKELSTEIN felt he is getting different answers. He stated now it sounds like the reforestation requirement for private lands is being removed. REPRESENTATIVE JAMES pointed out that the new Section 5 contains the word "reforested". REPRESENTATIVE FINKELSTEIN said the point of the amendment is to eliminate any inference of sustained yield on private lands. REPRESENTATIVE JAMES responded that is correct. REPRESENTATIVE FINKELSTEIN stated he will have to oppose the amendment because there has been no discussion or public testimony regarding this change. He said perhaps sustained yield on private lands was the intent of the FPA and has been an issue in the past. REPRESENTATIVE DAVIES agreed with Representative Finkelstein's comments and added that the Division of Forestry has not commented on this amendment. He also noted that existing law says "to the fullest extent practicable", so if someone has private land and wants to use it for agriculture purposes, reforestation is not practicable. He said the law is only saying that if someone has private land and is managing it as a forest, to the extent practicable, the sustained yield principle should be followed. He did not understand why a change is needed. Number 473 REPRESENTATIVE JAMES did not feel the state should be telling private landowners what they should do with their land. She will support the amendment because the Tanana Chiefs Conference wants this amendment and should be supported. REPRESENTATIVE DAVIES pointed out the FPA was enacted after a huge amount of public involvement and consensus debate. He felt this amendment is not a trivial aspect of the debate. He also felt that making this change without having an adequate amount of debate is bad public policy. CHAIRMAN WILLIAMS stated during the negotiations on the FPA, it was determined that nothing would be done with the FPA unless everyone agreed. He said he is willing to hold this amendment and amendment X38 until the Alaska Forest Association and DNR can testify. REPRESENTATIVE DAVIES stated the amendment is amending the FPA and is not required by SB 310. He said if the amendment is such a good idea, it should be introduced as a bill by itself. REPRESENTATIVE JAMES WITHDREW her MOTION. Number 605 REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 7, line 4, after "(1)": Insert "The commissioner shall conduct biennial performance reviews of the agreement throughout the term of the agreement." Page 7, line 9, after "operator.": Insert "The operator shall pay the reasonable cost of all reviews conducted under this subsection." REPRESENTATIVE JAMES OBJECTED. REPRESENTATIVE DAVIES said this amendment will require the commissioner to perform biennial performance reviews and determine whether or not the contract is being followed. He stated one of the criticisms of the FPA is it is difficult to catch up to violations. One of the major justifications for the FPA is the state does not have the resources to plan, design, lay out, and monitor a lease sale. Much of the costs will be shifted from the state to the person who has the FMA with the state. He pointed out that if the agreement is not audited regularly, there will be no way to know whether or not the terms of the agreement are being followed. REPRESENTATIVE JAMES agreed there is a need to review but felt "conduct biennial performance reviews" does not necessarily have any definition. She hoped there will be monitoring but that does not necessarily mean every two years. She expected there will be some method by which the FMAs will be monitored. She stressed ongoing monitoring is needed. REPRESENTATIVE DAVIES felt uncomfortable discussing amendments when no representatives from the department are present. CHAIRMAN WILLIAMS asked for a roll call vote on the motion. Voting in favor of the amendment were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the amendment were REPRESENTATIVES HUDSON, JAMES, MULDER, and WILLIAMS. The MOTION was DEFEATED 4-3. Number 713 REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 6, after "agreement": Insert "and the final agreement" Page 5, line 12, after "timber": Insert ", which may not be less than fair market value and shall be adjusted annually by the commissioner using a nationally recognized index that is suitable for measuring inflation or deflation in the cost of comparable stumpage" Page 5, line 19, after "agreement;": Insert "the cost of construction and maintenance of necessary access roads and other necessary infrastructure shall be paid by the operator;" Page 6, line 5: Delete "may" Insert "must" REPRESENTATIVES WILLIAMS and JAMES OBJECTED. TAPE 94-63, SIDE B Number 000 REPRESENTATIVE DAVIES stated there is nothing in SB 310 requiring any resemblance between the final agreement and the proposed final agreement. He pointed out former Attorney General Charlie Cole's principal concern is too much power is being given to the DNR commissioner. He said the first part of the amendment provides that the final agreement contain the elements which have been said should be in the proposed final agreement. REPRESENTATIVE DAVIES explained the second part of the amendment is an attempt to address a concern regarding long- term FMAs--throughout the years of the agreement, inflation goes up, and at the end of the time period, timber is being sold at a low rate. He stated this amendment says the initial sale should be at fair market value and there should be some type of index, so inflation can be taken into consideration. He said the third part of the amendment provides that the cost and maintenance of roads and other infrastructure be paid by the operator. He felt any agreement should be self sustaining. Representative Davies stated the final part of the amendment provides for a requirement of bonding. MR. GATES said most FMAs do anticipate a consumer price index (CPI) (indiscernible). The issue is whether or not that should be mandatory. He stated there is a small argument for having the flexibility to not require a CPI escalator as a tool of negotiating. He cannot envision entering into a FMA without a CPI escalator. However, the question becomes why compel a CPI escalator as a tool for every FMA. He was not sure it is valid for every agreement. MR. GATES said in regard to the last part of the amendment, there can be small and customized FMAs. He felt it might be wise not to mandate bonding in those situations and to limit the flexibility. He stated for large agreements, it is anticipated there will be bonding. REPRESENTATIVE CARNEY asked Mr. Gates to speak to the costs of roads. MR. GATES replied normally, the cost of road construction will always be included in the operator's costs. However, if a new part of the state is being accessed and it is important to provide access, the market cannot tolerate the costs of access to a big region. He said the state may want to put the road in as an economic development effort. The individual roads would then be paid for by the operator. He pointed out the amendment provides that even the major roads would have to be paid for by the FMA operator. Number 093 REPRESENTATIVE JAMES said although she agrees with all that is contained in the amendment, she is not willing to support it. She stated in regard to the cost of construction and maintenance of necessary access roads, part of the provision is that the proposed final agreement must include provisions regarding the responsibilities for construction and maintenance of the access road. She has always had a problem with the term fair market value. She felt it means the biggest price anyone is willing to pay and she was not sure there is any place to get a nationally recognized index suitable for measuring inflation or deflation in the cost of comparable stumpage. She pointed out the determining factor of whether or not something is financially feasible depends on the end product. In many cases where there is bidding on federal forest timber, there will be a minimum bid and she supports including a minimum bid in the bill. REPRESENTATIVE JAMES stressed a FMA is being discussed and that presumably there is some best interest in the state which is going to be devised out of the agreement. She expected the operator will pay full price for the timber. REPRESENTATIVE DAVIES made a MOTION to DIVIDE the QUESTION and offer the first part of the amendment (Page 5, line 6, after "agreement":) and the second part would be the rest of the amendment (Page 5, line 12, after "timber":). CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION TO DIVIDE PASSED. Number 156 MR. SOLIE expressed support for the first amendment. CHAIRMAN WILLIAMS asked if there were any objections to the first part of the amendment. Hearing none, the MOTION PASSED. REPRESENTATIVE MULDER OBJECTED to the second part of the amendment. REPRESENTATIVE GREEN made a MOTION to AMEND the AMENDMENT, on the first line, changing the word "shall" to "may". REPRESENTATIVE HUDSON said he is not convinced there should be a requirement in the law to annually adjust the stumpage prices in the contract because if the desire is to lure corporations into investing in a factory, there may be a need to have flexibility. MR. GATES expressed concern about the fair market value part of the amendment because there may be a desire to encourage people to put in plants and give lower rates for 2-3 years while they are building their plant or getting financing. He felt a major tool is being taken away through this amendment by compelling the fair market value on trees always. He said it is a tremendous amount of flexibility to encourage investment if a period of time of forgiveness can be given or 50 percent of fair market value rate of stumpage as an inducement. REPRESENTATIVE HUDSON mentioned it is not an unknown tool which has been used in the state. He pointed out the state would never have had the oil industry on the Kenai Peninsula if there had been no flexibility to encourage those kinds of investments into that area. CHAIRMAN WILLIAMS asked if there were any objections to the motion. Hearing none, the MOTION PASSED. CHAIRMAN WILLIAMS asked for a roll call vote on the amendment (2nd part). Voting in favor of the motion were REPRESENTATIVES CARNEY, DAVIES, and FINKELSTEIN. Voting against the motion were REPRESENTATIVES MULDER, HUDSON, JAMES, GREEN, and WILLIAMS. The MOTION FAILED 5-3. REPRESENTATIVE GREEN made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 19, after "agreement;": Insert "the cost of construction and maintenance of necessary access roads and other necessary infrastructure shall be paid by the operator;" CHAIRMAN WILLIAMS OBJECTED. MR. GATES stated roads must be considered in the FMA plan but this amendment will require the operator to pay costs for all roads, which may not give the flexibility desired. CHAIRMAN WILLIAMS ruled the MOTION OUT OF ORDER. He said the amendment has already been discussed and voted on. REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 19, after "agreement;": Insert "the cost of construction and maintenance of necessary temporary access roads and other necessary infrastructure shall be paid by the operator;" REPRESENTATIVE WILLIAMS OBJECTED. REPRESENTATIVE DAVIES said this amendment will eliminate the concerns expressed by Mr. Gates. This amendment will allow the state to construct the permanent roads and the FMA will only be required to incur the costs of the temporary roads. MR. GATES stated the amendment is still limiting the commissioner's flexibility to do the best job possible to craft a good FMA. REPRESENTATIVE JAMES stated amendments such as this are detrimental to the process because it identifies what the operator is going to pay for. She hoped the operator will pay for all the roads. She stressed if the word "temporary" is used, it could be assumed the operator only has to pay for the temporary roads, when in fact there may be sufficient value in the timber to pay for all of the roads. Number 354 CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES CARNEY, DAVIES, and FINKELSTEIN. Voting against the amendment were REPRESENTATIVES JAMES, HUDSON, MULDER, and WILLIAMS. The MOTION FAILED 4-3. REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 7, after line 12: Insert a new subsection to read: "(n) Notwithstanding any other provision of this section, the operator under an agreement that includes timber harvesting on land within the Tanana Valley drainage may not harvest timber on that land under the agreement if the harvest would result, during a calendar year, in timber harvest operations (1) on more than 6,000 acres of land, public and private, in the Tanana Valley drainage; or (2) that harvested more than 1,000 acres of white spruce in the Tanana Valley drainage." Reletter the following subsection accordingly. CHAIRMAN WILLIAMS OBJECTED. REPRESENTATIVE DAVIES said this amendment will apply specifically to the Tanana Valley drainage and not statewide. The amendment will limit the total amount of acreage of land contained in a single FMA. REPRESENTATIVE JAMES clarified the limit is being put on not necessarily a single FMA but any FMA in the Tanana Valley drainage. Number 383 REPRESENTATIVE DAVIES noted the amendment says "the operator under an agreement" and "a calendar year." REPRESENTATIVE JAMES recalled in Mr. Pagh's testimony, he had indicated in regard to spruce, there is the capability of harvesting 5,000 acres a year and currently 1,000 acres a year is being harvested. She said this amendment does not make any provision for hardwoods. She felt uncomfortable including any kind of limits in the bill. However, she would like to send a message that there is a desire not to have all of the timber gone in a year but she is not comfortable with the numbers contained in the amendment. REPRESENTATIVE DAVIES noted the amendment says a single agreement and pointed out there are two distinctions: a total of 6,000 acres and a subtotal of acres in white spruce. REPRESENTATIVE HUDSON asked how much general timber land is available in the Tanana Valley drainage. REPRESENTATIVE DAVIES replied approximately 1.5 million acres. REPRESENTATIVE HUDSON asked how may acres of white spruce are available. REPRESENTATIVE DAVIES replied there are approximately 5,000 acres of white spruce available per year and this amendment would limit a single agreement to one-fifth of that total. Number 443 MR. GATES stated DCED tried to advance the concepts of sustained yield, multiple use, good scientific evidence and a balancing of values as controlling the amount of acreage in a given area and the types of things which could be done. He felt to set truly arbitrary limits goes away from those types of principles and takes away the flexibility. REPRESENTATIVE DAVIES stressed the numbers are not arbitrary but were based on an estimate of the total amount of acreage available and what was considered to be a reasonable maximum for the total acreage to be allowed in a FMA. He stated he has received 275 public opinion messages on SB 310 and they are running 4-1 opposed to SB 310. One of the fundamental reasons why people are opposed to the bill is size. Most people want the scale of a FMA to be limited. He noted most people are not opposed to a long-term contract. Most people are opposed to having a big operation requiring huge amounts of acreage every year to be clearcut. He stressed this amendment attempts to look at a reasonable amount of the forest, which could be set aside for long-term agreements, yet is big enough to enable some small plants to be capitalized but not so big that it will allow the capitalization of big plants. Number 503 REPRESENTATIVE JAMES said she shares the concerns which Representative Davies mentioned. She also expressed concern that when restrictions are put in statute, the hands of a solicited bid from someone are being tied. She stated when a proposal goes out to the public, there is an opportunity for the public to determine that an amount is more than what they are willing to support. She felt the public will be listened to. She noted there are 30 million acres in the Tanana Valley basin and she is not comfortable with the numbers in the amendment, even though she does understand the concerns. MR. GATES stated all concerns mentioned are valid. However, this amendment is eliminating the possibility that an operator could propose something that is acceptable to the public and contains more acres. He felt the operator should be given the chance to convince the public, through the public hearing process, that a cut is appropriate at a higher level. CHAIRMAN WILLIAMS recalled someone had asked how long it would take to cut 6,000 acres. He said the cut could be done in a season. Number 557 MR. SOLIE stated since DNR is not represented, he will offer some statistics they provided. There are approximately 30 million acres of land in the Tanana basin, with about 3.4 million acres classified as forest land or is in the Tanana Valley State Forest, and the sustained yield estimate harvests are between 16,000-20,000 acres a year. He pointed out this amendment is proposing 6,000 acres which is 25-33 percent of the sustained yield harvest as a cap. He said there are approximately 95,000 acres (indiscernible). REPRESENTATIVE FINKELSTEIN said this amendment does not place a cap. This amendment only specifies the amount of acres which can be put in each agreement. REPRESENTATIVE JAMES expressed concern that if this amendment is not intended to put a cap on the cut but rather a cap on each single FMA, this amendment is limiting a FMA on what kinds of operations it could have. She felt the amendment might eliminate a large FMA. She pointed out that the whole purpose of SB 310 is to encourage FMAs for future development and in-state processing. She stressed it would be defeating if an amendment is passed which discourages FMAs. Number 612 REPRESENTATIVE DAVIES stated that is exactly what the amendment does. It would eliminate large FMAs in the Tanana Valley. He pointed out that overwhelming testimony has indicated there is a desire to not limit the use of the forest as long as it is used in an appropriate scale. People fear clearcuts in their backyards. CHAIRMAN WILLIAMS stated view sheds are important. However, one of the things happening in the Tongass is the timber industry is continually being told in a critical manner that they are being subsidized. He said a lot of money is involved in determining view sheds. TAPE 94-64, SIDE A Number 000 CHAIRMAN WILLIAMS stated the people asking for the view sheds are also speaking against the timber industry because of the industry being subsidized. MR. GATES said there has been a lot of limited thinking in regard to what a FMA is. He stated there is a concept of a FMA which may or may not be true. FMAs may come with a package of incentives from a company to a community saying there is an understanding of the impact and the possible negative things and offer a package of good things such as restoration to streams, building bridges, and community centers. This amendment keeps the operator from attempting to convince the public that a larger scale FMA might be in the community's best interest. REPRESENTATIVE DAVIES said the only experience people have had in this state similar to a FMA is the Haines Forest experience. People were upset, a lot of money was lost, an inventory still is not in hand, etc. The track record leaves room for skepticism. He felt small FMAs should be tried first and then later consider larger FMAs. He stressed there are a lot of people concerned statewide. He reiterated people in Fairbanks do not oppose the timber industry but are concerned about a large scale timber industry. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the amendment were REPRESENTATIVES JAMES, HUDSON, MULDER, and WILLIAMS. The MOTION FAILED 4-3. Number 058 REPRESENTATIVE HUDSON felt the last proposed amendment was an attempt to address the concern expressed by the public. He thought perhaps another approach is language such as, "To the extent practicable, the commissioner shall seek agreements that include timber harvesting in the Tanana Valley drainage that do not exceed..." He stated some reasonable limitations would be placed at the end. He thought that approach would be constructive and not tie the hands of the commissioner in regard to FMAs but rather would guide the commissioner. REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 4, following line 13: Insert "(8) timber inventory;" Renumber the following text accordingly. REPRESENTATIVE JAMES said the amendment provides for an addition of "timber inventory" to the list of what the commissioner considers when reviewing and evaluating a proposed agreements. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. ANNOUNCEMENTS CHAIRMAN WILLIAMS announced the committee will meet on Monday, April 25 at 8:15 a.m. to hear SB 306 and SB 374. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 7:35 p.m.