Legislature(1995 - 1996)
01/18/1996 03:05 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE January 18, 1996 3:05 p.m. MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative William K. "Bill" Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative Alan Austerman Representative Ramona Barnes Representative John Davies Representative Pete Kott Representative Don Long Representative Irene Nicholia MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 212 "An Act relating to the management and sale of state timber and relating to the administration of forest land and classification of state land." - PASSED CSHB 212(RES) OUT OF COMMITTEE OVERVIEW: State's Air Quality Plan Application PREVIOUS ACTION BILL: HB 212 SHORT TITLE: TIMBER MANAGEMENT; STATE LAND SPONSOR(S): STATE AFFAIRS JRN-DATE JRN-PG ACTION 03/01/95 530 (H) READ THE FIRST TIME - REFERRAL(S) 03/01/95 530 (H) STATE AFFAIRS, RESOURCES, FINANCE 03/16/95 (H) STA AT 08:00 AM CAPITOL 102 03/16/95 (H) MINUTE(STA) 03/21/95 (H) STA AT 08:00 AM CAPITOL 102 03/21/95 (H) MINUTE(STA) 03/21/95 (H) MINUTE(STA) 03/21/95 (H) MINUTE(STA) 03/22/95 844 (H) STA RPT 1DP 4NR 1AM 03/22/95 845 (H) DP: JAMES 03/22/95 845 (H) NR: OGAN, PORTER, IVAN, GREEN 03/22/95 845 (H) AM: WILLIS 03/22/95 845 (H) 2 FISCAL NOTES (DEC, F&G) 03/22/95 845 (H) ZERO FISCAL NOTE (DNR) 04/26/95 (H) RES AT 08:00 AM CAPITOL 124 04/26/95 (H) MINUTE(RES) 04/26/95 (H) MINUTE(RES) 09/19/95 (H) RES AT 09:00 AM 12/05/95 (H) RES AT 09:00 AM ANCHORAGE LIO 01/17/96 (H) RES AT 08:15 AM CAPITOL 124 01/17/96 (H) MINUTE(RES) 01/18/96 (H) RES AT 03:00 PM CAPITOL 124 01/18/96 (H) MINUTE(RES) WITNESS REGISTER REPRESENTATIVE JEANNETTE JAMES Alaska State Legislature State Capitol, Room 102 Juneau, AK 99801 Telephone: (907) 465-3743 POSITION STATEMENT: Testified on HB 212 JOHN STONE, Chief Air Quality Maintenance Division of Air and Water Quality Department of Environmental Conservation 410 Willoughby Avenue, Suite 105 Juneau, Alaska 99801-1795 Telephone: (907) 465-5103 POSITION STATEMENT: Provided information on air quality control ROBERT REGES, Assistant Attorney General Natural Resources Section Civil Division Department of Law P.O. Box 110300 Sixth Floor Dimond Courthouse Juneau, AK 99811-0300 Telephone: (907) 465-3600 POSITION STATEMENT: Provided information on air quality control JOHN KUTERBACH, Environmental Engineer Division of Air and Water Quality Department of Environmental Conservation 410 Willoughby Avenue, Suite 105 Juneau, Alaska 99801-1795 Telephone: (907) 465-5100 POSITION STATEMENT: Provided information on air quality control. DAVID ROGERS, Attorney and Lobbyist Council of Alaska Producers P.O. Box 33932 Juneau, Alaska 99801 Telephone: (907) 586-1107 POSITION STATEMENT: Provided information on air quality control. SVEND A. BRANDT-ERICHSEN, Attorney Heller Ehrman White and McAuliffe 6100 Columbia Center 701 Fifth Avenue Seattle, Washington 98104-7098 Telephone: (206) 447-0900 POSITION STATEMENT: Provided information on air quality control. KATHRYN LAMAL Golden Valley Electric P. O. Box 71249 Fairbanks, AK 99707 Telephone: (907) 452-1151 POSITION STATEMENT: Testified on air quality control. CARL HARMON Chugach Electric 5601 Minnesota Avenue, Building G P. O. 196300 Anchorage, AK 99519-6300 Telephone: (907) 762-4739 POSITION STATEMENT: Testified on air quality control. STEVE TOROK Environmental Protection Agency 410 Willoughby Avenue, Suite 100 Juneau, AK 99801 Telephone: (907) 586-7619 POSITION STATEMENT: Answered questions on air quality control. LEONARD D. VERRELLI, Director Division of Air & Water Quality Department of Environmental Conservation 410 Willoughby Avenue, Suite 105 Juneau, AK 99801-1975 Telephone: (907) 5260 POSITION STATEMENT: Testified on air quality control. BILL WALKER Division of Air & Water Quality Department of Environmental Conservation 410 Willoughby Avenue, Suite 105 Juneau, AK 99801-1975 Telephone: (907) 465-5104 POSITION STATEMENT: Addressed an air quality issue. ACTION NARRATIVE TAPE 96-3, SIDE A Number 000 CO-CHAIRMAN BILL WILLIAMS called the House Resources Committee meeting to order at 3:05 p.m. Members present at the call to order were Representatives Green, Ogan, Austerman, Barnes, Davies, Kott, Long and Williams. Representative Nicholia was absent. HB 212 - TIMBER MANAGEMENT; STATE LAND CO-CHAIRMAN WILLIAMS announced that the agenda was a continuation of the Wednesday, January 17, 1996, meeting on HB 212. He added that committee members had been requested to submit any amendments, in writing, so the committee could address them at this meeting. Number 120 REPRESENTATIVE JOHN DAVIES read his proposed amendment for CSHB 212, version "M." He referred to page 3, line 20, and said delete the words "sales of 160 acres or less" and insert "sales under 500,000 board feet." Number 165 CO-CHAIRMAN JOE GREEN objected for the purposes of discussion. REPRESENTATIVE DAVIES said his purpose in offering this amendment is based on the different productivity rates in different forests of the state. He said in the Tanana Valley State Forest a sale of 160 acres is not a small sale, it is a large one. He added that currently, 80 percent of the timber sales in the Tanana Valley would be less than 160 acres. The productivity of the forest in the Tanana Valley is different from the productivity in the Susitna area. Representative Davies said that if HB 212 were to use "500,000 board feet" instead of "160 acres" it would reduce the amount of acreage sold in the Tanana Valley State Forest to approximately 50 acres. He said the impact in the Susitna area, because the productivity factor is about 3,000 board feet per acre, the acreage would increase to about 166 acres. He concluded that the value of having a number that has to do with the quantity of board feet as opposed to acres is that it will accommodate the different productivity of forests around the state. In the Tanana Valley State Forest, a sale of 160 acres would be tantamount to getting rid of the whole Five Year Schedule; 80 percent of the sales would not be required to be on the schedule. Number 348 REPRESENTATIVE JEANETTE JAMES objected to the proposed amendment to HB 212. She said the wording of "160 acres" is a management tool that is effective because when a sale of 160 acres is announced the public can conceptualize that amount which they can not do with 500,000 board feet. She said the Department of Natural Resources (DNR) gave testimony stating that they will put all sales, even those under 160 acres on the five year schedule, even though they are not required to do so. Number 451 REPRESENTATIVE DAVIES said that he does not believe that there was a strong consensus as to the wording of HB 212. He added that the Board of Forestry is on record, with a unanimous recommendation that if the committee leaves the wording of "160 acres" in HB 212, the board requires that it be on the five year schedule at least once. Number 513 A roll call vote was taken on the proposed amendment to HB 212. Representatives Davies and Long voted in favor of the amendment. Representatives Williams, Green, Ogan, Barnes, Austerman and Kott voted against the amendment. Representative Nicholia was absent for the vote. The motion to adopt Representative Davies amendment to HB 212 failed. Number 536 REPRESENTATIVE DAVIES offered an additional amendment to HB 212. On page 4, line 13, delete the word "management". The wording and the purpose of the state forest would be, "the primary purpose in the establishment of state forests is multiple use that provides for production utilization and replenishment," et cetera. Representative Davies said his primary purpose in deleting the word "management" is to eliminate the connotation that the primary purpose of the forest is bureaucracy, rather than multiple use. Number 587 REPRESENTATIVE JAMES objected to the proposed amendment. Number 625 A roll call vote was taken on Representative Davies proposed amendment. Representatives Davies and Long voted in favor of the amendment. Representatives Williams, Green, Ogan, Barnes, Austerman, and Kott voted against the amendment. Representative Nicholia was absent for the vote. The motion to adopt the proposed amendment to HB 212 failed. Number 638 REPRESENTATIVE DAVIES said he had one last proposed amendment to HB 212. On page 5, lines 20 to 24, delete Section 11 and renumber accordingly. He said Section 11 is redundant with the list that is provided on page 2. Number 713 REPRESENTATIVE JAMES objected. She said the classifications listed on page 2 are in relationship to the forest management plan and Section 11 restates the objective of wildlife management within the Tanana Valley State Forest. REPRESENTATIVE NICHOLIA joined the committee meeting. A roll call vote was taken on the proposed amendment to HB 212. Representatives Davies, Long and Nicholia voted in favor of the amendment. Representatives Kott, Austerman, Barnes, Ogan, Green, Williams voted against the amendment. The motion to adopt the proposed amendment to HB 212 failed. Number 778 CO-CHAIRMAN GREEN moved that committee substitute for HB 212, Resources version, 9LSO695-M, be moved from committee with individual recommendations and attached fiscal note. Number 796 REPRESENTATIVE IRENE NICHOLIA asked if the committee received any fiscal notes for the new version from the Department of Fish and Game (DFG) and the Department of Environmental Conservation (DEC). CO-CHAIRMAN WILLIAMS said affected agencies can submit fiscal notes to the House Finance Committee when it hears CSHB 212(RES). A roll call vote was taken. Representatives Williams, Green, Ogan, Barnes, Austerman, Kott and Nicholia voted in favor of moving the bill from committee. Representatives Davies and Long voted against moving the bill. The motion to pass committee substitute for HB 212, Resources 9LSO695-M, out of the House Resources Committee succeeded. So HB 212(RES) moved from committee. Number 870 CO-CHAIRMAN GREEN announced that the second part of the committee meeting would be a work session on Alaska's air quality program with the Department of Environmental Conservation (DEC) providing background information. He said the DEC would explain the Clean Air Act of 1990, also know as Title Five and then discuss HB 167, passed by the 18th Legislature, which gives the DEC authority to promulgate regulations to implement the clean air program. The DEC would also provide information on the development of regulations which the Commissioner signed one month prior to this meeting and the last part of the agenda would be to discuss any outstanding issues or problems with the rates. Co-chair Green provided some information on how this meeting would be conducted and asked that comments be focused on the regulations. Number 1060 JOHN STONE, Chief, Air Quality Maintenance, Division of Air and Water Quality, Department of Environmental Conservation, was first to testify. He said that his division is responsible for developing an air quality management program that regulates industrial sources of air pollution in the state of Alaska and gives the state primacy for that program under the Clean Air Act. The 1972 Alaska State Air Quality Control Plan is a series of regulations and guidance and allows Alaska primacy in granting construction permits to large sources of air pollution. In contrast, the National Pollutant Discharge Elimination System, commonly referred to as wastewater permits, are given to large industrial facilities in the state and are implemented by the Environmental Protection Agency (EPA). The Air Quality Control Plan also gives the state primacy for vehicle emission standards program which is also administered by the DEC. MR. STONE said in 1990, the Clean Air Act was amended by adding new requirements including the Title Five Operating Permits Program. This program required Alaska to submit, to the EPA, a plan for meeting federal requirements for this federal operating permit program. The DEC, several industries as well as environmental and citizen groups worked to develop a language for the statutes that give Alaska the authority to develop that program. The intent of the legislation was for the DEC to develop a program that complied with the Clean Air Act in a manner that met federal requirements, allowed efficient and cost effective processing of permits, required accountability from the DEC on matters relating to recovery of program costs, and insured the productivity of Alaska's businesses while protecting the health and welfare of the state's residents. This legislature also intended for the DEC to implement that bill in a manner that contained costs, minimized the number of staff preforming air quality permit duties, fostered accountability, improved the efficiency of government and used it's contracting authority, as appropriate, to undertake all alternative methods of accomplishing duties under this act. This statutory legislation was passed in 1993. Title Five Permit Program was designed in compliance with air pollution laws of the federal government. In Alaska it is estimated that 450 facilities will be subject to the statutory legislation. Number 1274 MR. STONE provided an overview of what the Department Environmental Conservation has done to meet the intent of HB 167 and listed programs the DEC is in the process of developing. The DEC has been involved in developing regulations to obtain primacy of all important federal clean air programs. The DEC reorganized, adding the new Air Quality Maintenance Section. This minimized the number of staff preforming air quality duties and improved the efficiency of how permits are processed which keeps costs low. The DEC is developing a small business assistance program to help smaller facilities subject to these statutes. General operating permits to reduce the administrative burden on similar types of facilities located throughout the state are being developed as well as streamlining the permitting of requirements related to oil exploration activities within the state. Other programs being developed include a certification program that will allow private air pollution inspectors in the state to conduct air compliance inspections therefore a substitute by those inspectors for the DEC staff. The Alaska Rural Electric Cooperative Association (ARECA) and the department are working together to exempt small facilities from permit requirements if their emissions are less than the emissions that trigger a permit requirement. The DEC is also writing regulations that would simplify the application requirements, changing the EPA legalese into plain English so that people can comply with those application requirements more easily. Number 1361 MR. STONE said the DEC estimated the cost of a federal construction permit program, based on proposed regulations that the EPA as put forth, as $14 million would be funded by the federal budget and user fees. He said that it would cost the department $2.7 million, the majority of which would be derived from user fees. Number 1440 MR. STONE gave an overview on the public process that the DEC uses to develop regulations. When the air bill was completed in the summer of 1993, workshops were held to explain the new law and to get public input on what type of public processes should be incorporated. Using that information, a proposal was given and approved by Commissioner Sandor which included the strawman regulation package distributed in December, 1993, with workshops and video presentations to help clarify and get public input on the most difficult aspects of that package. On June 1, 1994, regulations were proposed with a 90-day public comment period combined with additional workshops. After the 90-day period, Commissioner Sandor adopted regulations in the fall of 1994. The DEC continued to accept public recommendations through the winter of 1995. Throughout the past summer, the department held meetings to address the industry stakeholder concerns. In December, proposed regulations to address those concerns were submitted to the EPA, who are in the process of reviewing the DEC's program and determining if it meets the federal minimal requirements. Number 1558 REPRESENTATIVE RAMONA BARNES asked if the regulations were signed into administrative code in December of 1994. MR. STONE said yes they were. REPRESENTATIVE BARNES commented that the DEC is then going through an amendment process because those regulations have been signed into law. MR. STONE said the DEC adopted the regulations and sent them to the Department of Law (DOL) in the December of 1994. He said the department has been involved in amending portions of those regulations. He said provisions have been adopted in place of the provisions that were in the December 5, 1994, adoption. Number 1600 REPRESENTATIVE BARNES asked Mr. Stone to supply those proposed changes to the committee. MR. STONE stated that the regulations the DEC had adopted will not become effective until the EPA approves the program. He said he would cover the parts of the regulations that received the most comment. The first was whether the DEC had exceeded federal requirements in order for the state to retain primacy in air quality regulations. The second was whether or not the DEC provide for all of the federal air pollution exemptions and the third was what and how air pollution violations are excused. MR. STONE discussed the policy principals used by Commissioner Sandor and Commissioner Burden for making decisions regarding the regulations for the new program. First, they wanted to develop regulations that met the intent of the legislation. Secondly, they did not want to fundamentally alter the existing programs in the state that provided for primacy of those programs. Their concern was to obtain primacy of the new programs adopted in the 1990 Clean Air Act, namely Title Five. MR. STONE addressed the DEC analysis of the concern raised by the Alaska Stakeholder Coalition (ASC). Number 1750 REPRESENTATIVE BARNES asked for an explanation of the Alaska Stakeholder Coalition. MR. STONE said the Alaska Stakeholder Coalition was a group of industry representatives that assembled for the purpose of providing uniform comment on these regulations. One of the Alaska Stakeholder Coalition remaining concerns is regarding excess emissions which are the air pollution violations that can be excused. The industry feels that the DEC should provide affirmative defense for more types of violations. Meanwhile the EPA has informed the DEC that their adopted regulation provides an affirmative defense for more "violations" than we are allowed to provide if the state is to get primacy for this program. Number 1813 CO-CHAIRMAN GREEN asked if the DEC were to grant an affirmative defense for more types of violations then the state might lose primacy. MR. STONE said that would be one of the reasons. The second major concern of the EPA is the ambient air quality impact requirements which relate to those measures incorporated into Alaska's 1980 revision of the implementation plan giving control over granting construction permits. The contention is that Alaska is applying that program in excess of what is allowed under federal law. In this new regulation package, the DEC did not endeavor to change that 1982 prevention of significant deterioration (PSD) plan. The plan is a set of measures distributed in the compliance burden among the large sources of pollution in the state. In order to revise that plan, compliance burdens would have to be redistributed among those facilities or different facilities in order to obtain primacy for that program. He said the DEC would be willing to undergo this process, but did not do it because of the undertakings of the Title Five requirements and the lack of staff resources. MR. STONE said that the Alaska Stakeholder Coalition believes the federal government has exemptions not currently recognized by state regulations. The first has to do with insignificant pollution sources which are the small pollution emitting activities within a facility that do not have to be listed on the applications. The EPA has told the DEC that the proposed amendments will need to be altered over time because it goes beyond what the federal law allows. The DEC feels that as the application process continues, they will get a feel for what pollution sources can or cannot be exempted. Number 1975 MR. STONE said there is some concern over temporary source exemptions, especially regarding exemptions for oil exploration activities, that may have been provided under the Clean Air Act. The Clean Air Act gives some exemptions for modifications and pollution increases that are classified by the cause of the pollution. In Alaska, exemptions are not given for the cause of the pollution but rather by the amount of the pollution. This type of approach was deemed more flexible. The EPA has informed the DEC that they are not reviewing as much pollution increases as is expected and are not sure if the Alaska program is adequate to meet the federal requirements. Number 2048 MR. STONE said the final Alaska Stakeholder Coalition concern has to do with audit requirements such as how user fees are collected and how the DEC is accountable. Number 2078 REPRESENTATIVE BARNES asked if the user fees collected go into the general fund. MR. STONE said that the user fees have gone into the general fund, but when the program is approved by the EPA, the user fees will go into a clean air protection fund. CO-CHAIRMAN GREEN remarked that this sounded like a dedicated fund. ROBERT REGES, Assistant Attorney General, Natural Resources Section, Civil Division, Department of Law, answered that it was a dedicated fund. He added that it is exempt from the constitutional consideration because the federal clean air act overrides it and was approved by the legislature back in 1993. MR. STONE said the Alaska Stakeholder Coalition requested streamlined administrative procedures for issuing construction permits which was a recent request and that the DEC is not against making those changes. Finally, the last Alaska Stakeholder Coalition concern is with the DEC's ability to specify terms and conditions in permits to ensure compliance with the state air quality statutes and regulations. The statutes limit the establishment of those permit terms both in monitoring and how many permit terms can be allowed without a regulation process. MR. STONE said that the DEC would work with the various parties to achieve consensus and would work to adhere to the legislators intent in the statutes. Number 2247 REPRESENTATIVE DAVIES asked if the $2.7 million operating budget for air quality programs was paid entirely out of user fees. He also asked how much the federal government program would expect the regulated community to pay in user fee burden. MR. STONE said 80 percent of the DEC figure is user fees. He said the federal government figure would be $5.8 million for user fees. REPRESENTATIVE DAVIES read from a section of the constitution that dealt with dedicated funds under federal statutes. He said that Alaska is voluntarily entering into agreement with a dedicated fund because the state is seeking primacy. Number 2230 REPRESENTATIVE AUSTERMAN asked if interpretations of the federal clean air laws have been challenged by the state of Alaska. Number 2236 MR. STONE said the state has had a long history of challenging the EPA on interpretations on an ongoing basis. He said the DEC has created regulations based on Alaska's needs which the DEC felt met the minimum requirements of the federal law. He added that based on what the EPA has told him today, the DEC will continue to challenge their interpretations. Number 2265 REPRESENTATIVE AUSTERMAN asked how challenges are presented. MR. STONE said that in most cases the state needs to convince the EPA of our position through on going discussion and contact. Once the EPA is convinced, flexibility is gained in the ability to implement the program. Number 2390 CO-CHAIRMAN GREEN asked about the cases where the DEC is exceeding the federal requirements on applications. MR. STONE said the problems with the EPA involve not requiring enough information on operating permit applications. He said the only case where they would exceed the federal requirement would be in regards to air pollution nuisance. The state has an air pollution prohibited statute which directs the operator of a facility to ensure that they do not create an air pollution nuisance and does not allow for the federal excursion in cases of emergency. Number 2450 CO-CHAIRMAN GREEN asked if the EPA would allow an excursion for that period because it is considered a nuisance. TAPE 96-3, SIDE B Number 000 MR. STONE said no, the affirmative defense is for unplanned events and the federal requirements say that a state can provide an affirmative defense to something that exceeds a technology based emission standard and is in effect only if an emergency occurs. Number 068 CO-CHAIRMAN GREEN asked if this was an EPA requirement in all states. MR. STONE said it is an EPA requirement of the Title Five permit program. He added that all states may have different standards in regards to start-up and shut-down conditions within that standard. Some federal standards have start-up and shut-down conditions. CO-CHAIRMAN GREEN asked if Alaska's penalty for a start-up condition, that wasn't an emergency, would be a problem in this state but might not be a problem in another state and wouldn't that exceed the EPA minimum. Number 145 MR. STONE said in this state if someone exceeded the DEC standards on start-up and shut-down the state could take enforcement action, but wouldn't have to do so. The DEC reviews those situations on a case by case basis to see if it needs correction over time. Addressing Co-Chair Green's question, he said that the DEC would have to review what other states were doing, he then went on to review why the DEC had addressed this issue in this manner. Number 170 MR. STONE said that in the federal model it depends upon the emissions standard type, the affirmative defense that has come into controversy, both with the Alaska Stakeholder Coalition and the EPA, comes from Title Five of the Clean Air Act. This specifically relates to technology based emission standards. Those standards are not used to protect public health. In the state implementation plan developed in 1972, revised in 1982, there are health based emission standards. Therefore the federal Title Five affirmative defense does not apply to those standards, and instead the DEC normal enforcement discretion is used. This discretion models the EPA's discretion. Each state has developed different emissions standards which sometimes accommodate a start-up and shut-down process. The state of Alaska did not accommodate this process. Number 198 CO-CHAIRMAN GREEN reiterated his question as to whether or not it exceeded federal minimum requirements. Number 201 JOHN KUTERBACH, Environmental Engineer, Division of Air and Water Quality, Department of Environmental Conservation, explained the air quality control plan that has been in place in the state since 1972. He said if the DEC were to show the EPA that extra emissions for the start-up and shut-down process won't cause an ambient air quality problem in our state they would allow an exemption. The DEC is in the process of developing proof of this and will then present revisions of Alaska regulations to incorporate these exemptions. Number 228 REPRESENTATIVE AUSTERMAN asked if there were disparity concerns between the federal requirements generalized across all states. Number 295 MR. STONE said that the EPA just monitors the DEC to make sure that it meets the fundamental purpose of the Clean Air Act. Each state can tailor a mix of control strategies and regulations. Number 320 REPRESENTATIVE SCOTT OGAN said he heard of companies that cannot start-up and shut-down facilities without being in violation of regulations and asked Mr. Stone to respond to this. MR. STONE said that the DEC has set up a guide on how to request changes to those standards so that companies can comply. CO-CHAIRMAN GREEN asked if any of the new regulations require any additional permitting to an existing facility. Number 370 MR. STONE said all existing facilities will have to submit an application in order to get an operating permit that meets the new operating permit program requirements. Number 397 CO-CHAIRMAN GREEN received confirmation that the new operating permits would be required nationwide. He then asked if the DEC will follow the same guidelines as the EPA with regards to allowing existing facilities to make certain changes without requiring construction permits. Number 435 MR. STONE said that facilities can make changes and would only need a construction permit if the change they made pushed them past a designated emission level. This system was kept because it was felt it allowed for more flexibility and was simpler to use, but this system has been questioned by the EPA. The federal provisions differ in that they allow for exemptions depending on the type or cause of pollution increase. Number 535 DAVID ROGERS, Attorney and Lobbyist, Council of Alaska Producers, representing the Alaska Stakeholder Coalition (ASC), was next to testify. He said the ASC is an ad hoc group that industry representatives formed a year ago to develop and communicate a unified industrial position on issues of general concern. He stated that other members of this group, besides the Council of Alaska Producers, are the Alaska Oil and Gas Association, the Pacific Seafood Processors Association, Chugach Electric, Homer Electric Association, Alyeska Pipeline Service Company, UNOCAL, Anchorage Municipal Light and Power, Golden Valley, and ARECA. He said that Alaska Stakeholder Coalition still has concerns in four general categories which include regulations that exceed minimum federal requirements, regulations that are unrealistic, industry proposals that take advantage of opportunity for streamlining the permitting process, and industry proposals for increased accountability. Number 745 SVEND A. BRANDT-ERICHSEN, Attorney, Heller Ehrman White and McAuliffe, representing Chugach Electric was next to testify. He said that the industries feel that although the DEC has done a good job there are some areas that they are not presently addressing that they should. Number 788 CO-CHAIRMAN GREEN requested and received confirmation that these concerns deal with those falling under the DEC's control. Number 835 REPRESENTATIVE BARNES asked if these are regulations that the DEC is trying to amend. MR. BRANDT-ERICHSEN answered the issues currently of concern are those raised in response to the development of the December, 1994 regulations. Comments were made that winter and were not addressed when those regulations finally came out of the Department of Labor and were adopted in May of 1995. These issues have been addressed and are currently under the EPA's review. MR. BRANDT-ERICHSEN said the Congress, through the EPA, required the development of operating permit programs by the states, Alaska already had a combined construction and operating permit program. A new or existing facility went through the same permit process with a renewal time of five years. With the federal mandate, the DEC had to split their program into two parts. One part being a construction permit program for new facilities or changes to existing facilities that are issues only once. The second part is an operating permit program which is renewed every five years and is supposed to incorporate existing requirements that come out of air law. Number 934 MR. BRANDT-ERICHSEN said this change in federal law has caused the DEC to change the existing operating permit system. Currently, the facility that gets an operating permit is now obligated to self monitor and report their compliance. In exchange for this, industry is supposed to get a clear understanding of what rules apply. Alaska's divergence from the EPA model eliminates the EPA's guidance. One of the new requirements is a national ambient air quality standard, which is the surrounding air quality. The EPA has stated that this standard is evaluated when it is new or modified and should not be a new permit limit in the operating permit program which the DEC has done. Facilities are required to determine what effect they have on surrounding air quality and proposed permit terms and conditions are based on those findings. Mr Brandt-Erichsen said these terms should be in the construction permits. Number 1110 CO-CHAIRMAN GREEN inquired why an ongoing industry operation should have to redo their operating permits. Number 1136 MR. BRANDT-ERICHSEN said that any time that you try to figure out the impact of a facility on the surrounding air; you must, at first, try to use a model. These models tend to be conservative and overestimate the impact. Usually, other methods of accurately predicting the air quality levels are needed but they are more expensive. Number 1180 CO-CHAIRMAN GREEN asked if this cost was borne by the state or the applicant. Number 1239 MR. BRANDT-ERICHSEN said a large change to an existing facility is proposed, the applicant is responsible for gathering that information. The DEC's requirement that all facilities undergo the ambient air standard is because a number of facilities were permitted that did not have this type of review. The DEC is now trying to get facilities to go back and do these reviews that should have been done all along. MR. BRANDT-ERICHSEN said the second issue is the broad language that the DEC has included allowing conditions it feels are necessary to implement the statute or the air regulations. The DEC said that this is specifically designed for unusual situations such as odor problems, but the language does not specify these circumstances. Number 1326 MR. BRANDT-ERICHSEN said there is one other area in which the DEC has exceeded the EPA's requirements and this is with non-road engines such as exploratory drilling rigs, floating fish processing units and, in some cases, power generation. The DEC is treating these as temporary stationary sources rather than mobile sources which means they need to get operating permits. The EPA has developed protocol in which they would be regarded as mobile sources. Number 1432 CO-CHAIRMAN WILLIAMS asked what are suggested changes to these issues. MR. BRANDT-ERICHSEN said the regulations could be narrowly drawn. He felt that this provision does not belong in an operating permit. Number 1471 MR. ROGERS said there are some specific additional requirements that do belong in the program, but that they should be identified. Number 1485 CO-CHAIRMAN WILLIAMS asked whether the Resources Committee could drop or suggest new language. Number 1539 MR. BRANDT-ERICHSEN said that the statutes should note that the DEC will specify the operating permit program requirements. Number 1570 MR. ROGERS said that the enabling legislation dealt with that issue to some extent. The provision is current law 010E, it discusses the development of regulations in any situation where emission standard limitation monitoring reporting requirements and compliance verification requirements are incorporated into more than one permit. We do not want an ad hoc decision if these things affect more than one permit. REPRESENTATIVE OGAN asked for clarification of what industry is looking for in the regulatory process. Number 1692 MR. BRANDT-ERICHSEN talked about an existing facility applying for an operating permit. When a facility gets its operating permit and there is something in it that they did not have to do before; that means changes in the facility that were not anticipated. He said the impact of the facility on air quality is supposed to be evaluated when it is built or when it is modified. If there are particular problems with a facility that are discovered over time, there are mechanisms in the Clear Air Act to deal with that. Particularly, if there are ambient air quality problems in an area, there are major portions of the Clean Air Act that address specifically how that is supposed to be dealt with. The state is supposed to do a planning process to evaluate what the source of the problems are in an area and deal with it on an area-wide basis rather than individual existing facilities. Number 1735 REPRESENTATIVE DON LONG asked if the presentation by Mr. Stone was premature before we addressed ASC's problem. MR. ROGERS answered that the representative was getting a different view of these issues. Number 1830 MR. BRANDT-ERICHSEN stated his company has been working with the Department of Environmental Conversation for 3 1/2 years on this issue. He said a number of the issues between them are well defined and there does not appear to be much middle ground. While the department portrayed a situation where they are penned between the EPA and Alaska industry on the vast majority of the issues that we really care about, that is not the case. The department has indicated their lack of willingness, given several opportunities to change the regulations, to address the issues that we are raising. He said there are some key issues, the two that he as identified, that he doesn't feel that the department has any intention of correcting without some direction from his company. MR. ROGERS interjected the situation is at an impasse. CO-CHAIRMAN GREEN wanted more clarification from Mr. Brandt- Erichsen regarding the areas of differences with the DEC. Number 1958 MR. BRANDT-ERICHSEN said a good example is how modifications of facilities are handled. In the last set of regulations adopted in December, the department adopted a different approach. It was not something that his company asked for although it would be favorable for some companies if approved. If the department were to adopt the changes to the definition of modification that was suggested, it would really simplify construction permitting for a number of facilities. The changes that were asked for include allowing us to switch fuels at a facility without having to get a construction permit; allowing us to change hours of operation due to changes in conditions without any changes in capital structure or changes in shifts or a change in throughput without having to get a construction permit. Number 2062 REPRESENTATIVE DAVIES asked clarification of the assertion that the DEC was asked to make these exemptions and would not. MR. BRANDT-ERICHSEN replied that this issue was not responded to in the most recent set of comments. He said in October, his company filed comments raising this issue. The department prepared an extensive response to comments, but this particular issue was not addressed in that response. In prior discussions and informal settings, some in the DEC have said that it is inconsistent with the definition of modification contained in statute. Number 2157 REPRESENTATIVE DAVIES asked if it was in October, 1995. MR. BRANDT-ERICHSEN answered that was the most recent time this issue was raised. It was also raised it February, 1995. He noted he is sure this issue was discussed before then. Number 2192 REPRESENTATIVE DAVIES asked Mr. Brandt-Erichsen to provide the committee with a written detailed list of the issues, a issue background briefing paper on what the issues are that he specifically enumerated with the DEC. REPRESENTATIVE DAVIES said he just wanted to understand what the issues are. Number 2270 MR. BRANDT-ERICHSEN said he would provide a summary of comments on the last set of regulations from the October filing. Number 2323 REPRESENTATIVE LONG queried about construction permits and asked, without the exemption put in by the state are we not exceeding the federal EPA standards? MR. BRANDT-ERICHSEN said the EPA does not have a construction permit program that applies to the type of sources that are being talked about. He said the problem is the EPA does not administer this program, it is delegated to the states, it is a state program. States are given a lot of latitude as to how they draw up their construction permit program. In this area, the EPA would not require a new permit for a facility, for example, that switched fuels unless its fuel type was specifically specified in a permit. CO-CHAIRMAN GREEN asked further clarification of the areas of difference between the stakeholder's and the DEC where the EPA said, states we do not have limits, you establish them? MR. BRANDT-ERICHSEN responded that states have the authority to set a different definition of modification .....end tape. TAPE 96-4, SIDE A Number 000 MR. BRANDT-ERICHSEN addressed violations and explained two types of exceedencies. Unexpected malfunctions and types of problems that result in elevated emission levels may violate a standard. The current rules do deal with malfunctions or other unplanned events that cause an exceedence. He said a number of states do allow unavoidable excess emissions that occur during start-up and shut- down to be excused and the EPA has found that acceptable. He said he is talking about things that good air quality management practices can not correct. Number 286 REPRESENTATIVE DAVIES asked Mr. Brandt-Erichsen if he agreed with the DEC's assertion that it is basically an EPA requirement that we have to make this demonstration. MR. BRANDT-ERICHSEN replied in order to have this change federally recognized, we would have to get it incorporated into the State Implementation Plan. To get it into the State Implementation Plan, we have to satisfy the EPA that it is not going to hurt our ability to meet ambient air quality standards. There would have to be a demonstration. The question is, who is going to be the advocate for this? Is the department going to put this on the companies that care about this to do the whole thing, or is it going to be an advocate for the process? He said, until we get it into the state program, we are not going to get anywhere in getting it into the federal program. Number 339 REPRESENTATIVE DAVIES referred to the "advocate," and asked if this implied also the question about who is going to pay for this. MR. BRANDT-ERICHSEN said it is part of carrying out the department's duties as well in managing the State Implementation Plan to amend it as necessary, to manage that plan. That has not been the issue on the table. Number 524 MR. BRANDT-ERICHSEN said the industry is very concerned about having an operating permit program go into effect where industry will be documenting compliance status, reporting compliance status, certifying compliance status and be subject to citizen suit or state action based on that certification without having this issue addressed. MR. BRANDT-ERICHSEN discussed the streamline construction permit process that takes minor sources and gives them an expedited review process. If we are going to do additional work on this area, it ought to be considered. It will benefit a number of facilities in the state, it would make things easier for a number of facilities and should be given some consideration. Number 596 MR. BRANDT-ERICHSEN talked about accountability, audits both performance and financial. There has been a suggestion from industry that because of the amount of fees that will be collected under this program that the way they are spent should be watched closely. The department has not been very open to the idea of a productivity audit, they indicate they feel it will not be a good use of resources. We think it is something that will be needed, we are going to have to take a look at how well this program is operating. It is going to require a substantial "chunk of change" from a lot of companies and they are concerned that their money not be wasted. Number 684 CO-CHAIRMAN GREEN wanted clarification that the agency was likewise, not in favor of this. MR. BRANDT-ERICHSEN said the department's response to comments on this issue did include a one or two page response which indicated the DEC felt it inappropriate for them to initiate. Number 769 MR. ROGERS said other stakeholders were available on the teleconference line. Number 798 KATHRYN LAMAL, Golden Valley Electric, testified that the Coal Burners of the Interior had worked with the DEC on the excess emissions. The department is charging all the coal power plants for their work on this issue. She said her comments were in response to Representative Davies question about who was paying for the work on the start-up, shut-down provision. Number 853 REPRESENTATIVE DAVIES followed up on the audit issue, he asked if there are specific things that Mr. Brandt-Erichsen is concerned about or is this a general performance audit. He questioned what the sore spots are. MR. ROGERS said, "bang for the buck," is the overall concern. Number 893 CARL HARMON, Chugach Electric, said we talk about industry here paying the bill. It is not just industry, it is the consumer. Every dollar we talk about comes out of the consumer's pocket. Number 950 STEVE TOROK, Environmental Protection Agency, came forward at the request of Co-Chairman Green. He said the EPA is willing to work with the DEC in addressing the issues as the EPA reviews the DEC's submittal and, hopefully, a submittal to the federal register for an action on the state's proposal. Number 1000 CO-CHAIRMAN GREEN asked Mr. Torok if the department was right or are the operators are right. MR. TOROK said it is difficult to answer in a generality because the issues are very specific. As we are approaching the completion of the review of the state's submittal, there a number of areas where we do have problems with that submittal. We commend the state and the DEC for putting together a program they think is in the best interest of all Alaskans. Unfortunately, in some areas, they push the envelope a little too far in terms of what the EPA can approve. We will provide those comments to the state in those areas. Some of those areas are serious enough that will probably require some modification in the regulations. While we can still proceed ahead with a public Federal Register action on the state submittal, we will need from the department a commitment that they feel they can get these deficiencies corrected prior to the time we are ready to take a final Federal Register action. MR. TOROK said among other issues, it was most prudent to give interim approval to a portion of the state's program now, with every indication that these issues can be worked out later in the program without having to delay the federal approval. He said the EPA will work with the state and the stakeholders to find the middle ground. He said it was interesting to hear that the state has not taken full advantage of the flexibility that the federal law allows while, at the same time, there areas where the state has pushed the envelope a little too far in that flexibility and the EPA is going to have to push back to reach a middle ground. Number 1180 CO-CHAIRMAN GREEN asked the department to respond to the stakeholder's testimony. The chairman said he planned to dismiss this hearing and take the issue up again after the committee has received forthcoming information and the lists. Number 1215 MR. STONE said he wanted to make it clear that the department did not establish any new air pollution control standards during this regulation process. All of the existing standards that were in effect since 1972 and 1980, formed the basis of the new program. He said, what has changed is the new operating permit program requires a lot more information about compliance status. So, both the DEC and the people that submit applications have to provide much more scrutiny of what the compliance status of the facility is with those existing air pollution control requirements. He felt that is where some of the differences in agreement are coming from. The DEC laid out a couple of processes in this last adoption to help address that: (1) We laid out a guide on how to change the air pollution control requirements so that industry can comply with them. Obviously, Commissioner Burden was concerned that he did not want to be in the position of providing all of these new standards for facilities that may not be doing much at all to control pollution. The DEC recognizes that it needs to strive for a balance there. The important thing being that we still make sure that that new standard will provide clean air surrounding the facility or air that does not exceed the federal air standards. CO-CHAIRMAN GREEN clarified that most of that was on new facilities but the one the issue raised is with existing facilities and new permitting. MR. STONE replied that is an existing facility requirement. He said most of the facilities that have that problem are existing facilities, facilities that have been in Alaska for a long time. CO-CHAIRMAN GREEN stated that there is a difference in opinion. The department's view and the stakeholder's view. There still is a difference of opinion whether that is necessary. Number 1348 REPRESENTATIVE DAVIES said as he understood the stakeholder's argument, they are saying there were some requirements that were originally required in the construction permit having to do with ambient air quality that are now appearing in the operating permit. He asked Mr. Stone if he agreed with his statement. Number 1364 MR. STONE replied that the stakeholders were addressing the ambient air quality standards. Those are the standards that the EPA has established that the state of Alaska has to meet everywhere in the state. It is assumed, that if the air quality concentration of those contaminants is below the standard, then the air will be healthy. If it is above that standard, then it is unhealthy. In the state of Alaska, the program that was developed in 1972 and carried forward imposed the compliance burden on big sources of air pollution. Basically, what we said is you have to comply with the ambient air quality standards surrounding your facility. There are 240 big facilities in the state of Alaska. Now, when the operating permit program comes into effect they have to show us how they are going to comply with ambient air quality standards. That is a requirement of the Operating Permit Program. This is difficult in some cases. Mr. Stone said he and Commissioner Burden created a document to help people get through that process. Number 1442 REPRESENTATIVE DAVIES asked Mr. Stone to specifically address the construction permit versus the operating permit. Number 1474 MR. STONE said the state of Alaska, up until these regulations take effect, had a permit program that not only was a construction permit, it was also a operating permit; a combined permit system. The purpose of that permit program since 1972 was to make sure that facilities complied with the stack emission standards and the ambient air quality standards. So, that is what was used over time for that vehicle. That provides for primacy of our program. In the air bill that was passed in 1993, that was broken up into two programs. One was a construction permit program that would be for new industrial expansion in an area, or increased industrial expansion to an existing facility and that would require a review of that facility before the permit construct was given along with an opportunity for public comment. Number 1504 CO-CHAIRMAN GREEN asked Mr. Stone if the situation is an attitude difference more than a factual difference. He said he remembered asking several times if the DEC felt it was exceeding federal requirements. CO-CHAIRMAN GREEN stated that the stakeholders said yes, and he felt from Mr. Torok that there are some cases, and two- thirds of the testimony that maybe you are exceeding requirements. Number 1574 MR. STONE said a lot of it has to do with interpreting regulations and his responsibility is to make sure the department's program is approved by the federal administrator. MR. STONE agreed that what he does for purposes of having a program approved by the federal administrator is at odds with what people asking him to do. Number 1626 MR. STONE said with respect to adjusting the start-up, shut-down standards for the coal burners, the EPA was present at one meeting to make sure that everyone understood what the DEC has to do to meet the EPA's concerns. He said the DEC's priority system has been to issue construction permits for industrial expansion in the state which is priority number one. Priority two is to work with facilities on their compliance problems. There is not much staff left to help other people beyond that. Number 1664 CO-CHAIRMAN GREEN asked if there any merit to the state wanting to have conditions, restriction, requirements in excess of what is absolutely required by the EPA. Number 1691 MR. STONE said there are situations in which the federal minimum requirements do not provide certain protections from air pollution to the public. He said the department has a threshold for incinerators that is greater than, for permit requirements, what a lot of people would like. The department's incinerator permit threshold was established for federal primacy only. It does not provide any additional health protection to the public. He gave other examples such as odor control plans for facilities burning old sewage sludge and cancer causing pollutants such as chloroform from pulp mills. Number 1770 LEONARD D.VERRELLI, Director, Division of Air and Water, Department of Environmental Conservation, said we are talking around whether the department can or can not be more strict than the federal government. He said that was part of the statutory development. There were instances where the DEC started regulations different that the federal government such as the ammonia standards for UNOCAL. He said, we have had that ability since 1972, we go beyond the feds anytime we wanted to, it was there for our taking. We did not abuse that authority, we did it when the public came in and asked us to do that. In the statute, there is a provision that says if the state wants to go beyond the federal government, or beyond the statutes, there is a board of peers who reviews the need for that regulation. For the onerous things, the DEC has a provision in statute to take care of that, what we are dealing with in the discussion here is very minute things that we have always had the ability to do to protect the ambient air. What we are leaving out of the discussion today is the public. We have heard from the state side and the EPA side, we have not heard from the public who also has input in this. Therein lies the problem. The EPA has given us 26 pages of input. The most important thing that we have to face today, we want primacy, you folks told us you want primacy. That is the first thing we have to do. Number 1893 C0-CHAIRMAN GREEN said the areas you feel you need to have more stringent requirements are in the remote areas where there are big facilities; and maybe in the metropolitan areas, you have not restricted enough. Number 1920 CO-CHAIRMAN WILLIAMS asked if the public had the opportunity to comment on the EPA's comments. MR. VERRELLI said EPA's comments had just been received and are 26 pages long. He said the DEC hopes the committee and others will evaluate the department's submission. It is in the negotiation phase. When we decide certain things have to go to regulation to be fixed, it will go out for public comment. Number 1920 MR. VERRELLI stated the committee meeting went beyond what the public has had opportunity to comment on. CO-CHAIRMAN WILLIAMS clarified that the public has already had the opportunity to comment on it. Number 1982 REPRESENTATIVE DAVIES referred to the argument from the stakeholders regarding start-up and shut-down, and said the DEC does not disagree with trying to seek that exemption but it is going to take some time to do it. The stakeholder's concern was, without that exemption in place, putting in the new requirements that forced industry to report these violations, they are exposing themselves to some potential losses. Number 2027 MR. STONE said the new program provides that you can incorporate compliance schedules within the permit. So, you can accommodate situations where somebody may not be complying at the time you issue the permit. The permit life is five years. Once the permit is issued, the owner and operator is shielded from any intervention by third parties or the state. Number 2074 REPRESENTATIVE DAVIES asked if the compliance schedule specifically provides an exemption for start-up and shut-down conditions. MR. STONE said it could possibly. There is flexibility there. Number 2088 REPRESENTATIVE OGAN said he hoped the department could come up with something more than a five year compliance schedule type permit. Number 2122 BILL WALKER, Division of Air and Water, Department of Environmental Conservation, commented for the record that the start-up, shut-down provision, (indisc.--repeated paper tearing, shuffling) we proposed it in the strawman version, we proposed it in the formal proposal and we received comment from the EPA that the DEC can not do this without the demonstration. The DEC decided, at that time, that we had a choice of either going with a case-by-case EPA approval for every permit, which was not going to work for industry, or go with what we have talked about developing for the future and which Representative Ogan has asked us to do. Number 2165 CO-CHAIRMAN GREEN announced the committee schedule for January 19, 1996 was HB 341, tax appeal process. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Green adjourned the meeting at 5:21 p.m.