Legislature(1997 - 1998)
03/25/1997 01:30 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE March 25, 1997 1:30 p.m. MEMBERS PRESENT Representative Bill Hudson, Co-Chairman Representative Scott Ogan, Co-Chairman Representative Fred Dyson Representative Joe Green Representative Irene Nicholia Representative Reggie Joule MEMBERS ABSENT Representative Beverly Masek, Vice Chair Representative Ramona Barnes Representative William K. ("Bill") Williams COMMITTEE CALENDAR * SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 128 "An Act relating to water quality; directing the Department of Environmental Conservation to conduct water quality research; establishing the Water Science Oversight Board; and providing for an effective date." - HEARD AND HELD * HOUSE JOINT RESOLUTION NO. 32 Relating to the Tongass Land Management Plan and to continued Congressional oversight of that plan. - MOVED OUT OF COMMITTEE OVERVIEW: Oil and Gas Field Technology - HEARD * HOUSE BILL NO. 144 "An Act authorizing the Department of Environmental Conservation to charge certain fees relating to registration of pesticides and broadcast chemicals; and providing for an effective date." - SCHEDULED BUT NOT HEARD OVERVIEW: Nerox - OVERVIEW CANCELLED (* First public hearing) PREVIOUS ACTION BILL: HB 128 SHORT TITLE: WATER QUALITY; WATER SCIENCE OVERSIGHT BD SPONSOR(S): REPRESENTATIVE(S) HUDSON JRN-DATE JRN-PG ACTION 02/12/97 318 (H) READ THE FIRST TIME - REFERRAL(S) 02/12/97 318 (H) RESOURCES, FINANCE 02/18/97 (H) RES AT 1:00 PM CAPITOL 124 02/18/97 (H) MINUTE(RES) 02/20/97 (H) RES AT 1:00 PM CAPITOL 124 02/20/97 (H) MINUTE(RES) 02/27/97 (H) RES AT 1:00 PM CAPITOL 124 02/27/97 (H) MINUTE(RES) 03/18/97 (H) RES AT 1:00 PM CAPITOL 124 03/18/97 (H) MINUTE(RES) 03/19/97 756 (H) SPONSOR SUBSTITUTE INTRODUCED - REFERRALS 03/19/97 756 (H) READ THE FIRST TIME - REFERRAL(S) 03/19/97 756 (H) RESOURCES, FINANCE 03/20/97 (H) RES AT 1:00 PM CAPITOL 124 03/20/97 (H) MINUTE(RES) 03/25/97 (H) RES AT 1:00 PM CAPITOL 124 BILL: HJR 32 SHORT TITLE: TONGASS LAND MANAGEMENT PLAN SPONSOR(S): RESOURCES JRN-DATE JRN-PG ACTION 03/20/97 772 (H) READ THE FIRST TIME - REFERRAL(S) 03/20/97 772 (H) RESOURCES 03/25/97 (H) RES AT 1:00 PM CAPITOL 124 WITNESS REGISTER DAVID STONE, President Council of Alaska Producers P.O. Box 22653 Juneau, Alaska 99802 Telephone: (907) 463-5704 POSITION STATEMENT: Testified in support of SSHB 128. McKIE CAMPBELL, Consultant for the Council of Alaska Producers 416 Harris Street, Suite 206 Juneau, Alaska 99801 Telephone: (907) 463-3171 POSITION STATEMENT: Testified in support of SSHB 128. MICHELE BROWN, Commissioner Department of Environmental Conservation 410 Willoughby Avenue, Suite 105 Juneau, Alaska 99801-1795 Telephone: (907) 465-5065 POSITION STATEMENT: Provided department's position and answered questions regarding SSHB 128. JAMES BALDWIN, Assistant Attorney General Governmental Affairs Section Civil Division (Juneau) Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3600 POSITION STATEMENT: Provided department's position and answered questions regarding SSHB 128. JIM BACON P.O. Box 210383 Auke Bay, Alaska 99821 Telephone: (907) 789-2405 POSITION STATEMENT: Testified in support of SSHB 128. SUSAN SCHRADER, Executive Director Alaska Environmental Lobby P.O. Box 22151 Juneau, Alaska 99802 Telephone: (907) 463-3366 POSITION STATEMENT: Testified on SSHB 128. WALT SHERIDAN, Principal Walt Sheridan and Associates 124 West Fifth Street Juneau, Alaska 99801 Telephone: (907) 586-6367 POSITION STATEMENT: Testified in support of HJR 32. BERNE MILLER, Executive Director Southeast Conference 124 West Fifth Street Juneau, Alaska 99801 Telephone: (907) 463-3445 POSITION STATEMENT: Testified on HJR 32. BUCK LINDEKUGEL, Conservation Director Southeast Alaska Conservation Council 419 Sixth Street, Suite 328 Juneau, Alaska 99801 Telephone: (907) 586-6942 POSITION STATEMENT: Testified in opposition to HJR 32. MARC WHEELER, Grass Roots Organizer Southeast Alaska Conservation Council 419 Sixth Street, Suite 328 Juneau, Alaska 99801 Telephone: (907) 586-6942 POSITION STATEMENT: Testified on HJR 32. ELAINE PRICE, Mayor City of Coffman Cove P.O. Box 18135 Coffman Cove, Alaska 99918 Telephone: (907) 329-2233 POSITION STATEMENT: Testified in support of HJR 32. DAVE McNAUGHTON, Support Manager Mincom, Incorporated 14811 Saint Mary's Lane, Suite 152 Houston, Texas 77079 Telephone: (281) 497-4600 POSITION STATEMENT: Presented overview on oil and gas field technology. ACTION NARRATIVE TAPE 97-32, SIDE A Number 0001 CO-CHAIRMAN BILL HUDSON called the House Resources Standing Committee meeting to order at 1:30 p.m. Members present at the call to order were Representatives Hudson, Ogan, Dyson, Green and Joule. Representative Nicholia arrived at 1:42 p.m. Absent were Representatives Masek, Barnes and Williams. SSHB 128 - WATER QUALITY; WATER SCIENCE OVERSIGHT BD [Contains considerable discussion of HB 51 at tape numbers 1006- 1189 and 1871-2263] Number 0058 CO-CHAIRMAN HUDSON announced the first order of business was Sponsor Substitute for House Bill No. 128, "An Act relating to water quality; directing the Department of Environmental Conservation to conduct water quality research; establishing the Water Science Oversight Board; and providing for an effective date." CO-CHAIRMAN HUDSON, sponsor, explained that SSHB 128 provides a means to improve and Alaskanize water quality standards in the state. He believes standards are often predicated on scientific research from other states or countries, with little or no relationship to Arctic and sub-Arctic conditions. The bill allows the Department of Environmental Conservation (ADEC) to form partnerships with interested parties to seek funding for water quality research, with a goal of substituting science and certainty for emotion and politics where possible. CO-CHAIRMAN HUDSON said without Alaska-specific research, the Environmental Protection Agency (EPA) will not accept specific Alaska changes to water quality regulations. He expressed confidence that all parties will agree to the concept of forming a partnership to seek funding for five years of technical research. Number 0313 CO-CHAIRMAN HUDSON reported that the Alaska Science and Technology Foundation (ASTF) has expressed interest in funding this research. However, it will only accept an application from a public agency if that agency is in partnership with a private organization. He advised that the ASTF may not exist soon. However, if that is not a source, he believes there are others. CO-CHAIRMAN HUDSON advised that SSHB 128 sets up a process and an organization that can try to obtain ASTF or federal funds. He does not intend to request general funds for this research. Number 0378 CO-CHAIRMAN HUDSON explained that the sponsor substitute removed interim regulations. At the beginning of session, permit holders from the mining community had approached him, expressing concerns about the permitting process in Alaska. He had worked with them and the ADEC to agree on specific interim regulations, included in the original bill. Now, he is working closely with the Administration, who are moving rapidly and deliberately to address many interim standards on their own. As long as he sees that progress, he sees no need for the legislature to place its own standards. CO-CHAIRMAN HUDSON generally believes regulation should not be micromanaged. However, frustration on all sides makes legislative oversight necessary. To that end, he had formally urged swift consideration of technical matters by the ADEC and cooperation of the industry. He had not treated one differently from the other, and he believes they both depend and rely upon each other. Number 0559 DAVID STONE, President, Council of Alaska Producers, came forward to testify. The council is a nonprofit corporation composed of all the major mining companies doing business in Alaska: Alaska Gold Company; American Copper and Nickel Company, Incorporated/INCO; Coeur Alaska, Incorporated; Cominco Alaska, Incorporated; Echo Bay Mines; Fairbanks Gold Mining, Incorporated; Greens Creek Mining Company; Kennecott Exploration; Nevada Goldfields, Incorporated; Newmont Mining Corporation; North Pacific Mining Company/CIRI; Placer Dome, U.S., Incorporated; and USMX, Incorporated. MR. STONE urged support for SSHB 128, saying mining is a bright growth industry in Alaska. He read the last paragraph of an article on mining by Tim Bradner, from the November 10, 1996, Anchorage Daily News, which says it is comforting to see expansion of an industry that will require a skilled, highly paid work force. MR. STONE said they agree but believe Alaska's future can be bright for many natural resource industries. However, it depends on environmental regulations that protect Alaska's air and water while allowing responsible development. He believes SSHB 128 helps achieve that. He deferred to McKie Campbell. Number 0756 McKIE CAMPBELL, Consultant for the Council of Alaska Producers, addressed questions that had arisen. He said if there is no funding, nothing will happen. The law would exist, and efforts to work with the ADEC to obtain other funding could continue. He emphasized that this type of research is necessary before the EPA will consider changing water quality regulations. MR. CAMPBELL cited Whole Effluent Toxicity (WET) testing as an example of appropriate research. Even if individual discharge levels are met, there may be synergistic reactions. However, present WET testing gives "flukey" results. While the council does not believe those tests should be either more stringent or more liberal, they do believe the testing should be evaluated. Number 0896 MR. CAMPBELL explained that similarly, the Water Science Oversight Board would only be active if there is funding. He noted that committee packets contain two legal opinions regarding board appointments. The first, dated March 4, 1996, by James Baldwin, Assistant Attorney General, states there may be a constitutional issue. Mr. Campbell said he believes the Department of Law, in defense of the governor's powers, has always tried to have the least restrictions upon the governor's ability to appoint. MR. CAMPBELL referred to the second opinion, dated March 14, 1997, from Terri Lauterbach, Legislative Counsel, Division of Legal and Research Services. Mr. Campbell said Ms. Lauterbach does not believe this would be a constitutional problem. MR. CAMPBELL expressed appreciation for the cooperative relationship established with Commissioner Brown and the ADEC, regardless of whether parties agreed or disagreed on particular points. He concluded by urging passage of SSHB 128. Number 1006 REPRESENTATIVE JOE GREEN referred to HB 51, currently being debated on the House floor. He asked how the two bills differ and whether there are areas where they will compete. CO-CHAIRMAN HUDSON replied that SSHB 128 will produce scientific data that will legitimize some concerns expressed in HB 51. He believes it complements HB 51. Number 1070 MR. CAMPBELL indicated the council does not see a conflict. REPRESENTATIVE GREEN asked for clarification. CO-CHAIRMAN HUDSON elaborated, saying SSHB 128 provides scientific research that will be the basis for the ultimate Alaska water quality standards on most of the major contentious issues, such as mixing zones and WET testing, over which the ADEC has been battling with federal agencies. The industry tells him they are prepared to live with standards arrived at under SSHB 128 because those will be based on scientific research, not politics. Number 1129 REPRESENTATIVE GREEN said SSHB 128 tries to establish standards, then, rather than be a testing mechanism for standards that might be approved if HB 51 goes through. From that standpoint, it appears they may be in competition. CO-CHAIRMAN HUDSON suggested that Commissioner Brown respond. He restated his belief that there is no conflict. Number 1189 REPRESENTATIVE FRED DYSON asked who opposes SSHB 128. MR. CAMPBELL said they may hear concerns about components of the bill, including whether the governor will have unfettered appointment ability for the board. The council believes SSHB 128 provides a balanced approach, and appointees are required to have academic and professional expertise in water quality science. Although there may be discussion that somehow the board should be totally removed from politics, he does not know how that is done. He is unaware of anyone opposing SSHB 128 outright. Number 1277 REPRESENTATIVE DYSON stated his understanding that there is concern the board may be tilted in one direction. MR. CAMPBELL believes there is a feeling that the board is fairly balanced but should be appointed by a nonpolitical entity. He pointed out that the board's role is advisory, which he believes is important as far as constitutionality. Number 1370 MICHELE BROWN, Commissioner, Department of Environmental Conservation, came forward to testify. She said the Administration is pleased by the change in the sponsor substitute. They are also heartened by the caliber of discussion. She thanked Co-Chairman Hudson and the council for that approach in a time of growing and needless polarization over environmental management. COMMISSIONER BROWN said Alaskans' well-being is inextricably tied to water quality. Maintaining it begins with setting good water quality standards, which must protect public health, value resources and foster and respect all water users. To that extent, the ADEC shares SSHB 128's vision of seeking to Alaskanize standards. The bill will supplement their efforts, which include using sound science, good resource management principles and full public participation in setting standards. Number 1434 COMMISSIONER BROWN said equally important is the application of standards. In applying standards, the ADEC considers specific information on water bodies and contaminants. They use those specifics to permit discharge; create mixing zones, which are variances wherein standards can be exceeded; create site-specific criteria to handle the exceeding of standards for specified water bodies where it will not cause harm; and classify and reclassify water bodies for specified uses. These tools allow them to accommodate particular activities without downgrading standards statewide. COMMISSIONER BROWN discussed roles of the EPA and the state. The federal Clean Water Act gives states the duty to set standards. The EPA retains four functions. First, it develops effluent technology requirements, equipment that certain kinds of processes must use to reduce the amount of pollutants discharged. Second, it develops scientific guidelines on pollutants. States frequently do not have money for necessary research. The EPA does that research and makes it available as guidance for the states, which may use it as they choose in setting standards. If states have their own research, they may use that. COMMISSIONER BROWN said third, the EPA reviews and approves state standards to ensure consistency with the Clean Water Act. Fourth, it takes over and writes standards when it believes a state has not properly done so. She believes in avoiding that at all costs. The one time it occurred in Alaska, the National Toxics Rule (NTR) was imposed, leading to problems with arsenic levels, for instance. Number 1545 COMMISSIONER BROWN explained that a standard is defined as the maximum pollutant concentration that a water body can absorb yet still maintain the water uses for which it has been used or could be used. These include drinking water, industrial usage, agriculture, aquaculture, fishing and other uses. COMMISSIONER BROWN said when the ADEC works on setting standards, they start with a thorough scientific review. They do independent research, use the EPA's research, and look at what other states and Canada do. They then carefully look at Alaska's multiple water uses and consult with users to ensure everyone's interests are considered. COMMISSIONER BROWN said that kind of detailed process is currently underway for 13 standards, 12 of which were identified by industry and the public as most in need of review and update. She pointed out that scientific information is constantly changing, and it is appropriate to constantly review standards to ensure they are up- to-date. The 13th standard, the mixing zone standard, is currently out for public review. Number 1604 COMMISSIONER BROWN referred to two charts. The first, dated 2/18/97, addresses the 12 standards currently under review. Some issues are resolved, and others are underway. COMMISSIONER BROWN briefly discussed the second chart, entitled "WQS Review Process." She believes SSHB 128 will complement the ADEC's efforts and enable them, should they gain funding, to tackle difficult issues requiring Alaska-specific research. When necessary, it will also enable them to convince the EPA a suggested standard is inappropriate and that Alaska has a sound scientific basis for its own. Number 1699 COMMISSIONER BROWN concurred with Co-Chairman Hudson that water quality issues are highly volatile and emotional. There are competing livelihood demands and serious health issues. The more science and rationality brought to this process, the better. COMMISSIONER BROWN discussed mixing zones. Variances from existing standards, they are highly controversial. The ADEC has been revising standards to more clearly demonstrate how the department will exercise its discretion and balance views on mixing zones. They have held six public hearings and workshops, factored in over 500 comments and spent hundreds of hours in research and individual conversations "on just about every word in this proposed reg." Those standards are out for final public comment. COMMISSIONER BROWN said as painful as that process has been, she believes it is necessary. Because the subject is so complex, there must be painstaking research and analysis to ensure that a standard is not created that inadvertently creates a problem for someone else. The ADEC is convinced this type of negotiated stakeholder rule-making is the way to build certainty, common sense and rationality in the process. A science board and the kind of research in SSHB 128 will certainly further that effort. Number 1781 COMMISSIONER BROWN expressed concern that the board is set up in a way that politicizes it. Most boards are set up with the governor making the appointment, because they work with the executive branch. She noted that the Attorney General's office believes there is a constitutional separation of powers issue. COMMISSIONER BROWN stated concern that the board is not simply advisory because the bill mandates the ADEC to adopt regulations when the board tells them to. It also says the board is to direct and oversee. COMMISSIONER BROWN suggested appointments be made by the governor. Beefing up the required scientific credentials would also be acceptable to ensure board members are focused on the science. Number 1835 COMMISSIONER BROWN advised that the ADEC has a few minor technical changes, clarifications of language, that she has spoken to McKie Campbell about and that can be worked out in the future. The board composition is the only issue outstanding. "When we resolve that, we'd like to join with you to move this quickly through," she stated. Number 1871 COMMISSIONER BROWN addressed HB 51. She does not believe the two bills contradict each other, although they differ in methodology. While SSHB 128 seeks to Alaskanize standards, HB 51, for reasons that baffle her, defers to the federal government. COMMISSIONER BROWN emphasized that the federal government does not set standards for Alaska. "And when they did, we hated it," she said. "Why we would turn over our standards to them is beyond me. We don't want them to manage our fish and wildlife. We can't stand the way they manage our forests. They're driving us crazy with their interpretation of RS 2477. Why we would turn over something as important as water quality standards to them, when they base them on what's going on in New Jersey, I just cannot understand." COMMISSIONER BROWN advised that she has spent a lot of time trying to convince the EPA that Alaska has very different conditions. She said SSHB 128 provides the tools to convince the EPA that Alaska is different and needs to set its own standards that make sense for Alaska. COMMISSIONER BROWN pointed out that Alaska has more competing resource users than most states. She believes there can be mining next to fishing. It's a question of good management and of being good neighbors to each other. However, HB 51 does not encourage that kind of multiple use. It says the first user on the block gets to use up the water body, and if the rest are cut out, so be it. She believes that is not in Alaska's best economic or "good neighbor" interests. Number 1941 COMMISSIONER BROWN said while SSHB 128 emphasizes good science before making decisions, HB 51 says it wants good science but proceeds to adopt standards without having looked at any science. She believes SSHB 128 provides a good long-term approach and protects all users. COMMISSIONER BROWN stated, "I think HB 51 is a tempting quick-fix, although I'm not quite sure for whom, because I've yet to hear any industry say they really support it. It's an attempt to paint with a broad brush, to say if one industrial discharger needs a standard to be lowered in a certain area, then the standard for the whole state should lower, as opposed to, you keep the standard and the protective basis, but if you need to change it on a site-specific basis and you can show it doesn't do harm, as we've done in a number of sites, then you change that. So it's a difference in approach." Number 2002 REPRESENTATIVE GREEN discussed the possibility of an increased standard if, for example, multiple uses occur where previously someone else operated in compliance with the EPA standard. COMMISSIONER BROWN said she did not follow. She advised that the Clean Air Act sets national standards. In contrast, under the Clean Water Act, the federal government only sets standards when a state does not. They offer scientific guidelines, but not for everything. For example, they have no mixing zones. Number 2120 CO-CHAIRMAN HUDSON advised that he hesitated to get too deep into HB 51 without the sponsor. REPRESENTATIVE GREEN said he was trying to make sure there is no conflict. He recalled a discussion the previous year about federal levels. COMMISSIONER BROWN replied that she does not believe this is a direct conflict. The only place where there could conceivably be a conflict is if the state does research and finds that a stricter standard than the federal government's criteria is necessary to protect Alaska's water resources. Under HB 51, Alaska would not be allowed to use its research, even if it showed a stricter standard was needed. Commissioner Brown cited the example of turbidity standards. Number 2209 CO-CHAIRMAN HUDSON said SSHB 128 tries to develop scientific standards that could be used, if necessary, to change the statutes modified by HB 51. REPRESENTATIVE GREEN referred to Commissioner Brown's indication that there are no federal standards and asked for clarification. Number 2263 COMMISSIONER BROWN explained it is federal criteria guidance. The criterion is a scientific basis, such as maximum pollutant load, which when applied to water uses becomes a standard. Although both are loosely called "standards," they are different. REPRESENTATIVE GREEN suggested that using the EPA criteria and Alaska's uses, there is a way to establish some limit based on the EPA criteria. COMMISSIONER BROWN responded, "If they have criteria. There's a number that they don't have criteria for." REPRESENTATIVE GREEN said evidently there were some, though. COMMISSIONER BROWN agreed. Number 2347 REPRESENTATIVE GREEN asked: If Alaska goes through this type of research group and discovers a lower level of pollutants should be allowed, would the state tell the EPA they believe it should be more stringent and show them why? And until that could be shown, would there be no change? COMMISSIONER BROWN said where the federal government has criteria, and the scientific research for it, the state would have to prove alternative scientific research to justify a different standard, which could be either less or more stringent. REPRESENTATIVE GREEN asked whether at that point, the EPA must go along with it. COMMISSIONER BROWN said the EPA must approve the state's standards. For example, the federal government had just approved a change in Alaska's arsenic standards. REPRESENTATIVE GREEN said he believes that intermediate step is important. TAPE 97-32, SIDE B Number 0006 REPRESENTATIVE GREEN said he had been concerned that an operator complying with state standards would be subject to rapid change in standards. He believes this would be more detrimental than slower or more gradual changes by the EPA. COMMISSIONER BROWN replied that she believes both federal standards and criteria change more quickly than Alaska's because they have the research tools. Any change by the ADEC goes through a full public process under the Administrative Procedures Act, and the board would not be empowered to pass standards or regulations. REPRESENTATIVE GREEN said this is advisory to another action. COMMISSIONER BROWN said it is a precursor to another action. Number 0103 JAMES BALDWIN, Assistant Attorney General, Governmental Affairs Section, Civil Division (Juneau), Department of Law, came forward to testify. Although his written opinion of March 4, 1997, addressed the original version of the bill, the applicable section relating to composition of the Water Science Oversight Board is basically unchanged. MR. BALDWIN said the proposed statute may violate the separation of powers doctrine inherent in the state constitution. First, it leaves appointment of executive branch officials largely in the hands of someone other than the governor. It also provides an overly restrictive, limited list for those members whom the governor may appoint. MR. BALDWIN expressed interest in ensuring the most legally defensible set of regulations. He stated concern that regulations relating to water quality would be highly litigious. Number 0210 MR. BALDWIN said he respects the opinions of Ms. Lauterbach. However, he believes the correct way to look at whether a board is advisory or not is by who listens to the advice. If the board gives fairly important advice to fairly important people, such as the commissioner of a principal department of state government, and it is a necessary step in the adoption process of regulations, then those factors together mean "that we have to be very careful." This is an important board, and the fact that it is advisory in nature is not going to carry the day. MR. BALDWIN noted that Ms. Lauterbach had not cited a case supporting her conclusion. He referred to Bradner v. Hammond, cited in his opinion, which indicates the legislature only has a role in the appointment process when the constitution specifically provides for it. That case arose from the legislature's desire to confirm executive officials not specifically named in the constitution. Mr. Baldwin takes the reasoning in that case to say there really is not much of a role in the appointment process, other than confirmation, for legislators. MR. BALDWIN said since this is not a principal department head or quasi-judicial or regulatory board, there would be no confirmation. Therefore, it would be a noticeable legal issue that may get wound up in any litigation resulting over the regulations. He said the ultimate point to worry about is defending these regulations and making them carry the day when they are adopted. Number 0305 CO-CHAIRMAN HUDSON responded that he would be more inclined to agree if just the Speaker of the House or President of the Senate presented candidates. This requires a list of three, all of whom could be struck by the governor, who could then request another list. The intent is to depoliticize it. The governor chooses, but from a list managed or developed by the House and Senate. Number 0376 MR. BALDWIN said on a continuum, it is not as bad as it could be. However, the effect is that the legislative officers make the appointment. He suggested a scheme that would pass constitutional muster. The bill could specify the desired qualifications of appointees, then require the governor to consult with presiding officers of the legislature. The bill could also require, for example, that appointees be recognized in their fields. MR. BALDWIN commended the sponsor for providing real compensation for private members of the board. He believes that is extremely important for getting good people. Number 0426 CO-CHAIRMAN HUDSON pointed out that the bill specifies, at least generally, that candidates have academic credentials and Alaska- based expertise in the field of water quality. He acknowledged perhaps there could be a deeper definition. Number 0442 REPRESENTATIVE GREEN posed a hypothetical situation where the board is established, recommends a change, and that change occurs. If a court decided that board was not properly constituted, he wondered whether litigation or other legal action could affect the change made on the board's recommendation. MR. BALDWIN replied that it is highly possible since the board's recommendation is a necessary step in the enactment process, as he reads it. He is less sure whether someone could contest the validity of scientific information provided by the board. However, one could contend the board's influence is so pervasive over the ADEC's decision-making that there is a defect possibly emanating from the composition of the board itself. MR. BALDWIN explained one reason for the separation of powers doctrine is so each branch of government acts within its own sphere, without one predominating over another. He stated, "And if someone were to say, `Well, what happened here is that really this wasn't an executive act at all, it was really a legislative act when the power was given to the commissioner,' then that's a serious legal defect ...." Number 0518 CO-CHAIRMAN HUDSON referred to subsection (c), beginning on page 3, line 15, and pointed out that the board shall review and comment; meet at the request of the commissioner; provide advice to the department; and report annually to the governor, the House and the Senate. These are constructive, important elements in order to come up with bipartisan, scientifically-based standards. He believes both the industry and the environmental community want that. He said the action defined in SSHB 128 is all advisory, and he believes it is a well-crafted mechanism to establish standards. Number 0598 MR. BALDWIN pointed out that this board is a necessary element. If science becomes the basis of regulations, when the regulations are tested, the basis will also be tested, as well as composition of the board and every other element that smart, well-paid lawyers can bring into litigation. CO-CHAIRMAN HUDSON said the board, as he sees it, gets scientists together and tries to put the research together in the kind of language that legislators and the administration will understand. He is not inclined to accept that change. Number 0661 CO-CHAIRMAN SCOTT OGAN referred to separation of powers and said the legislature had already delegated a great deal of authority to the ADEC, which regulates and adjudicates the regulations. He suggested bureaucracy is currently a fourth branch of government. Number 0723 REPRESENTATIVE GREEN asked whether other boards were made of a composite. MR. BALDWIN said yes, there are other boards where the legislature has charted its own course. "I wouldn't cite them as reasons why we should do it again," he cautioned. Number 0772 JIM BACON came forward to testify. A commercial fisherman, he supports SSHB 128. He expressed appreciation for the good-faith effort to address concerns about the original version. MR. BACON believes the bill seeks to establish good, sound scientific findings that can address unique situations in Alaska and bring about a system whereby the seafood industry can work in concert with other industries in the state and move forward. "And that is something that we would very much like to do," he concluded. Number 0863 SUSAN SCHRADER, Executive Director, Alaska Environmental Lobby (AEL), came forward to testify. She advised that member groups represent over 10,000 Alaskans, united in the belief that there is ample room in Alaska for both a strong state economy and strong environmental protection. They also believe there cannot be one without the other. MS. SCHRADER said resource-extracting industries must be able and willing to expend funds to conduct activities with the utmost care for the resources. They must also recognize and respect other water resource users who depend on its purity for their livelihood and enjoyment. Under the public trust doctrine, the legislature has an affirmative duty to manage water resources for the public good, not just for private gain of individual interests. MS. SCHRADER expressed appreciation for the sponsor's efforts in working with the ADEC and in keeping the AEL briefed. The AEL is pleased the interim standards have been deleted, which goes a long way towards making the bill more balanced. Number 0971 MS. SCHRADER cautioned that a couple of concerns prevent the AEL from fully endorsing SSHB 128. First, as discussed by others, is the board composition. Whether or not it will be politicized, it will certainly have that appearance. For that reason, the AEL believes it would be difficult for the board to gain the confidence of the many stakeholders involved in water quality issues. MS. SCHRADER said the AEL foresees that SSHB 128 will result in good science and the adoption of improved regulations that industry will feel more comfortable with. However, the ADEC's funding is inadequate to implement these regulations. The AEL supports continued dialogue along the lines that SSHB 128 has initiated. They suggest additional funding for the ADEC, so that department can continue to fulfill its mission of protecting water quality. Number 1088 REPRESENTATIVE DYSON asked how Ms. Schrader would propose that the board members be selected to meet the objectivity criteria. MS. SCHRADER indicated she is not familiar with water quality research in particular. In medical research, her own background, the research itself is removed from political influences. Number 1152 REPRESENTATIVE DYSON said someone must make a choice. He asked whether Ms. Schrader believes it would be more objective if the governor chose. MS. SCHRADER said she does not know because she lacks real knowledge of water quality research. REPRESENTATIVE DYSON questioned whether it would be perceived as more objective if the AEL or industrial users selected the board. Number 1218 CO-CHAIRMAN HUDSON advised that there is a fiscal note from the ADEC. He said there is a fairly strong indication that substantial funds may be available from federal sources or others. He believes the ASTF was ultimately designed to participate in producing scientific standards that both the environmental and developmental communities can agree upon. Number 1258 CO-CHAIRMAN OGAN referred to Representative Dyson's questions. He commented that the logical conclusion is to have a diverse group select the board. He believes SSHB 128 reflects that. MS. SCHRADER responded that the AEL does not believes the bill reflects the diversity of input with which they would feel comfortable. Number 1325 REPRESENTATIVE REGGIE JOULE suggested a highly politicized board may be positive because it places participants under intense scrutiny. He expressed concern over funding and suggested passing a fiscal note reflecting support, rather than just having the legislation sit on the books. If for some reason other funding were unavailable, perhaps the fiscal note could kick in. Number 1460 CO-CHAIRMAN HUDSON replied that he would be diligently searching for funding. He prefers to stick with the mode in place, which is to create the board, establish the process, embark on a search for scientific funds and "go for it." REPRESENTATIVE JOULE noted that in his district, there has been some mining development, and there will be more in other areas. This provides an avenue in rural Alaska for people to obtain work. But it also provides a safety net for ensuring development occurs in an environmentally sound manner. Number 1594 CO-CHAIRMAN HUDSON advised that SSHB 128 next goes to the House Finance Committee. He stated his intention, as it moves from one committee to the next, to discuss again with the commissioner and others whether fine tuning is necessary. REPRESENTATIVE GREEN said he has several questions. He offered to talk with the sponsor about them privately. CO-CHAIRMAN HUDSON announced he would hold SSHB 128 until the next meeting. HJR 32 - TONGASS LAND MANAGEMENT PLAN Number 1720 CO-CHAIRMAN HUDSON announced the next order of business was House Joint Resolution No. 32, relating to the Tongass Land Management Plan (TLMP) and to continued Congressional oversight of that plan. He said HJR 32 is fairly straightforward and resulted from findings of the Governor's Timber Task Force. Number 1857 WALT SHERIDAN, Principal, Walt Sheridan and Associates (consulting firm), came forward to testify. He said HJR 32 encourages the U.S. Forest Service (USFS) to bring the decade-long TLMP process to a close. It also puts the Alaska legislature on record as supporting an annual timber harvest level of at least 300 million board feet. MR. SHERIDAN asked: Why the rush? And why 300 million? The USFS has worked on the TLMP for over a decade, during which time more than half of the direct timber industry employment has been lost. Furthermore, failure to produce a revised plan has put the economic lives of people in Southeast Alaska communities on hold. The revised plan will let these people know what resources from the Tongass National Forest will be available in the next 10 to 15 years. It will also provide a degree of certainty and predictability, necessary to attract investment in new plants and equipment. MR. SHERIDAN said there are indications the USFS is under intense pressure from the U.S. Fish and Wildlife Service to drastically reduce harvest levels in the Tongass National Forest in response to concerns about goshawks and wolves. He does not believe those concerns justify further delay. There has been no new science since the previous year, when the USFS issued a draft plan allowing a harvest level of 297 million board feet, and when the U.S. Fish and Wildlife Service issued its finding that goshawks and wolves were not endangered. Number 1009 MR. SHERIDAN explained that an annual harvest of 300 million board feet is the amount recently endorsed by the Governor's Timber Task Force. He said we can and should restructure the timber industry around value-added processing. However, that is only possible if a way is found to deal with low-quality material and if there is sufficient infrastructure, as well as primary manufacturing equipment, to efficiently log, transport and process the raw materials needed by the value-added segment of the industry. MR. SHERIDAN said according to industry exports and the Governor's Timber Task Force, that requires a minimum annual harvest level of 300 million board feet. He noted that "value-added processing" is not a precise term. Number 2122 MR. SHERIDAN discussed the need to process low-quality material, which accounts for up to half of the Tongass stand. He said logging around low-quality material, taking only the best, would leave a legacy of degraded forest stands made up primarily of defective material. MR. SHERIDAN noted that on April 5, 1996, the USFS came out with a draft plan for a harvest level of 297 million board feet. He concluded that HJR 32 sends a message to the USFS and to the Administration that Alaskans want to get on with their personal and economic lives, including the opportunity to establish a value- added timber industry that is economically viable and environmentally sound. Number 2244 REPRESENTATIVE GREEN stated that he supports this 1,000 percent. He reported that Co-Chairman Ogan and Representative Williams had arranged for them to go to Southeast communities to observe what had happened. They had also held a hearing in Ketchikan. "And at that time, it was heart-rending to see what was going on down there without an adequate harvest," he noted. REPRESENTATIVE GREEN pointed out that the Administration had failed to be present for this extremely important issue. CO-CHAIRMAN HUDSON noted that they had invited the Administration. Number 2356 BERNE MILLER, Executive Director, Southeast Conference, came forward to testify, summarizing his written statement. For the past year and a half, the conference has actively participated in the USFS TLMP revision process. MR. MILLER said they have repeatedly urged the Regional Forester to select a TLMP alternative that does no unnecessary economic or social harm to Southeast Alaska's people or communities. In the past, they were critical of the USFS's TLMP work, and last August, they advocated that the USFS delay completion of TLMP until analysis defects were corrected. However, that was before Ketchikan Pulp Company announced their mill would close. TAPE 97-33, SIDE A Number 0006 MR. MILLER said they recently urged that the Regional Forester make a decision, based on what his supervisors have already placed before him, and publish a TLMP revision now. They believe that is necessary to rebuild a strong, diversified economy. Number 0081 BUCK LINDEKUGEL, Conservation Director, Southeast Alaska Conservation Council (SEACC), came forward to testify. He advised that SEACC is a regional coalition of 15 volunteer citizen conservation groups in 12 Southeast communities. MR. LINDEKUGEL stated, "We all want a Tongass plan completed. But the new plan must ensure the logging occurs only at a sustainable rate that is consistent with maintaining current and future demand for fish, wildlife and the other renewable resources that local communities here in Southeast depend on. We believe that 300 million board feet is too high to sustain the long-term use of all those resources. Therefore, we oppose this resolution, and we urge that the legislature shift its effort to helping support communities' efforts to make a transition to high-value-added timber industry that produces the most number of jobs per board foot cut here in Southeast." MR. LINDEKUGEL reported that 59 percent of comments from Alaska on the TLMP opposed the forest supervisor's preferred alternative. He said 52 percent of those comments request significantly more protection for fish and wildlife resources. MR. LINDEKUGEL pointed out that of the 11 communities represented on the Governor's Timber Task Force, eight opposed the resolution calling for a 300-million-board-foot minimum. These included Petersburg, Sitka and six small Southeast communities, represented in a coalition called the Tongass Community Alliance. MR. LINDEKUGEL restated SEACC's opposition to HJR 32 and urged the legislature to use resources to help Alaskan communities stabilize their economies. Number 0293 REPRESENTATIVE IRENE NICHOLIA asked which six small communities opposed that minimum. MR. LINDEKUGEL deferred to Mark Wheeler. Number 0335 MARC WHEELER, Grass Roots Organizer, Southeast Alaska Conservation Council, answered that the six communities are: Gustavus, Elfin Cove, Pelican, Tenakee Springs, Port Alexander and the City of Kupreanof. Number 0350 REPRESENTATIVE JOULE requested copies of documents relating to the 59 percent and 52 percent figures quoted by Mr. Lindekugel. CO-CHAIRMAN OGAN asked what criteria were used as a basis for the assertion that communities opposed it. MR. LINDEKUGEL replied that the mayors of Sitka and Petersburg, as well as a representative from the six communities, had been empowered to vote for those communities on the TLMP. He stated that numerous communities had opposed the preferred alternative and offered to provide information to the committee. Number 0545 ELAINE PRICE, Mayor, City of Coffman Cove, testified via teleconference in support of HJR 32. They support both completion of the TLMP and the 300-million-board-feet annual minimum. They believe the latter is essential for the existence of any timber industry. She said the 100 million board feet suggested by environmental groups does not allow for lawsuits and set-asides, for example. Nor does it leave room for growth in the timber industry. MS. PRICE indicated waiting for the TLMP has caused great stress in her area on Prince of Wales Island. Without knowing the allowable sales level, people have been unable to start new businesses, for example, by obtaining financing or drawing up business plans. Number 0672 CO-CHAIRMAN OGAN made a motion to move HJR 32 from committee with individual recommendations and the attached zero fiscal note. There being no objection, HJR 32 moved from the House Resources Standing Committee. CO-CHAIRMAN HUDSON called an at-ease at 3:13 p.m. He called the meeting back to order at 3:15 p.m. OVERVIEW: Oil and Gas Field Technology Number 0737 DAVE McNAUGHTON, Support Manager, Mincom, Incorporated, presented an overview on oil and gas field technology via teleconference. He is a petroleum engineer for "Mincom USA" of Houston, Texas, which provides resource evaluation and engineering planning software for the mining and petroleum industries. He worked in Alaska 16 of his 23 years in the oil industry, much of that time for ARCO. MR. McNAUGHTON said while Mincom originally developed resource planning tools for the mining industry, it has diversified into the petroleum industry over the last ten years. He stated, "The software we provide is used by a number of clients, including ARCO, BP and Marathon there in Alaska. And as we continue to expand our client base, we are providing engineering and geoscience consulting services, in addition to the software, in order to support newer clients who don't have the large population of engineers and geoscientists on staff that the major oil companies typically include." MR. McNAUGHTON asked whether committee members had received Mincom's brochure packet. Number 0852 CO-CHAIRMAN HUDSON said yes, it was in front of them. MR. McNAUGHTON referred to the folded brochure entitled "Geolog" and said that contains an overview of the product line. Back-up material includes details on the seven product lines offered. He said Mincom's philosophy is to provide basic engineering software tools, from a powerful data base through the entire tool kit that the engineer and/or geoscientist would need to model reservoir performance and predict resource sales volumes at various stages of a project. He advised that it was premature to go into specific products. Number 0975 MR. McNAUGHTON said the reason for discussing Mincom software products was because he, Representative Green and Robert Trent, Dean of the School of Mineral Engineering at the University of Alaska Fairbanks (UAF), had been discussing aspects of the proposed pipeline for transporting Prudhoe Bay and other North Slope gas to Valdez. They recognize that there does not appear to be an active valuation and planning effort for the gas project from the state's perspective. MR. McNAUGHTON said as far as he can tell, all subsurface reservoir productivity projections and pipeline deliverability planning is being provided by the operators, who are appropriately maximizing their interests in the project. He suggested as a business partner, the state should ask how it knows its interests are being protected. He said discussions with Dean Trent indicate the UAF Petroleum Engineering Department has the technical expertise to conduct such studies on behalf of the state but not all of the technical tools. "And that's where we enter the picture," he stated. MR. McNAUGHTON explained that basic data used by engineers and geoscientists to evaluate hydrocarbon reservoirs are subsurface geophysical surveys, well test data and core sample analyses. He compared evaluating a resource on the North Slope to looking at a beehive honeycomb with thousands of small holes. To figure out what is happening in the beehive, the beekeeper inspects as many holes as possible to obtain adequate information. Similarly, there are more than 3,000 wells across the North Slope, with 1,200 in Prudhoe Bay, and these have an abundance of geological, geophysical and engineering data. They would study the gas resource by looking at a subpopulation of key wells, with extra focus towards the gas area. MR. McNAUGHTON explained, "The kind of project we're discussing on a preliminary basis would provide a high-level overview of the total resource value by describing the reservoir volumetrics and fluid contents. ... That first step is the geophysicist and geologist activity. Then we would pass these descriptions on to a reservoir performance modeling module - that would be `Resnet' - and then on to a gas delivery planning tool. So then we would be able to evaluate and analyze optimal gas delivery windows. The goal of the whole exercise would be to supply impartial information to the state that would allow appropriate discussion of optimal timing for beginning gas production." Number 1173 MR. McNAUGHTON said a critical side issue is to evaluate the impact of accelerating gas production on continuing oil production in the years 2000 to 2010. If early gas production would negatively impact oil production, it is important to identify the extent and timing of the impact. He said there is a high likelihood the optimal timing will only become apparent after analyzing multiple scenarios, which is nearly impossible without proper software tools in place. Mr. McNaughton said the foregoing was a thumbnail sketch of the project he, Representative Green and Dean Trent have been discussing. Number 1233 CO-CHAIRMAN HUDSON commented that this is an extremely important area for the state. He indicated he, for one, has too little information on the amount of reserves and the economics involved. This technology brings science to determining the level of reserves and what the potential is. Number 1268 REPRESENTATIVE GREEN advised that 20 years before, he himself had performed a reservoir analysis. He said Mr. McNaughton was doing this overview as a courtesy and would probably be a bidder should they decide to go this route. He indicated Mr. McNaughton could take the history, match that history to date and then project into the future under various scenarios. REPRESENTATIVE GREEN asked: Do we start selling gas as soon as we can build a pipeline, sometime around the Yukon-Pacific Corporation's window of 2001 to 2003? Or is it better to wait? He noted that the operators indicate the window has slipped from 2005 back to 2008 or 2009. He further asked: Is that window predicated on the market or on ultimate recovery of oil or ultimate profitability? He stated, "Those are three significant questions that they will be answering in their board room quarterly, certainly semi-annually. And we as a state are kind of left handcuffed, because as Dave said, the only information we get is what they give us." REPRESENTATIVE GREEN continued, "That's not necessary. We have access to all the same information they do, and we can certainly get as high-powered as they get." He suggested the state could make choices, and this would provide a bargaining chip. As it is, they must accept whatever the operators say is best. REPRESENTATIVE GREEN had asked Mr. McNaughton to come up with an estimated cost and was certain there would be a wide spectrum. For example, UAF students could study it. Whether or not "technical people" load the program and then experts crank out the variables, the state can provide hypothetical scenarios; although each run costs money, the more cases, the better the answer. He had wanted Mr. McNaughton to talk to the committee to see whether there is enough interest in the state's well-being to "start to push this thing and probably have to run it over the interim." He asked whether Mr. McNaughton estimated a six-month study was appropriate. Number 1470 MR. McNAUGHTON replied, "I think a minimum of six months' study in order to do anything that is reasonably good in terms of quality. Less time than that and all you do is just scratch the surface." REPRESENTATIVE GREEN recalled that 20 years before, legislator Chat Chatterton, a retired Chevron oil company executive, had felt it was so important that the legislature got emergency funding to conduct this study, which Representative Green said he was fortunate enough to do as a state employee. He stated, "My point is now that perhaps it's time to upgrade, especially so while we're trying to make decisions on the gas line." Number 1515 CO-CHAIRMAN HUDSON suggested they were thinking out loud. REPRESENTATIVE GREEN concurred. CO-CHAIRMAN HUDSON stated, "It strikes me that we've been pushing hard for a resolution bringing all of the big players together to ultimately lead to a gas pipeline, which is of major importance to our state." He said he was hearing that the state has no current information on its holdings and what aspects might affect the window of opportunity. He said as a committee member, he would certainly entertain a proposal for consideration. He said they need more information, including specifics on time lines, costs and so forth. Noting that Co-Chairman Ogan is responsible for oil and gas issues in committee, he asked for his opinion. Number 1582 CO-CHAIRMAN OGAN responded that it is difficult to come to a conclusion from one presentation. Questions that came to mind include what information is proprietary; the need for a capital appropriation even if UAF does the study, as they would need equipment; and timing. He noted there is no commitment from the oil producers other than a nonbinding memorandum of understanding. He questioned whether it would be money wisely spent at this point until they know that petroleum companies are making appropriate moves forward. Number 1646 REPRESENTATIVE GREEN said using UAF students and a relatively lean analysis - effective but not covering every possibility - he believes this could probably be done for around $100,000; he had talked with Mr. McNaughton briefly about it. He said this is "peanuts" even compared to Alaska's tourism marketing. They are possibly risking a window of opportunity that may not come again for 15 or 20 years. However, the operators and Yukon-Pacific Corporation indicate there are widely different views. REPRESENTATIVE GREEN recalled a presentation in Anchorage at a Chamber of Commerce meeting; he said for worldwide potential gas production, Alaska is a small player. He expressed concern that "if we don't get our oar in the water, the boat ain't gonna move." He agreed timing is important. Number 1715 CO-CHAIRMAN HUDSON asked Representative Green, from his past experience, what happens to the natural gas when an oil field runs out of oil or becomes uneconomic to operate. REPRESENTATIVE GREEN said normally, in fields where there is a pipeline connection, they can do a "blow-down." They blow the gas down and sell it. However, from all indications he has seen, blow- down, but not gas sales, would not occur until 2015 or 2020. He said, "That's about the time Prudhoe, unless there's some new technology that's developed, would be reaching pretty close to its economic limit. I don't know how many thousands of barrels a day that would be, because it's such a big field, but if we wait that long, we would minimize - absolutely minimize - any adverse affect on oil production." REPRESENTATIVE GREEN suggested even the major operators will say if they wait until 2015, there will be no market; they will have missed the Asian market. "So we can't wait till it's absolutely safe," he said. "So we've got to start now determining where do the lines cross between `let's get the gas on the market' and `we're going to start losing some oil production.'" He emphasized the importance of this kind of study. Number 1780 CO-CHAIRMAN HUDSON stated, "I would urge you, on an informal basis, at any rate, to follow through and at least give the committee something to consider. And it may be an expanded hearing or something, Mr. Chair, or something like that?" Number 1791 CO-CHAIRMAN OGAN advised that the House Special Committee on Oil and Gas was taking the lead on some of these issues. He suggested talking to Representative Hodgins, chair of that committee. He suggested they could find out what data is available and what studies have been done that the legislature can review, then ascertain whether further work is needed. Number 1823 REPRESENTATIVE GREEN said he did not fault the logic but the time schedule. If they lost a year, it could be a critical one. He suggested a special hearing, for example. He noted Mr. McNaughton's willingness to return for a more detailed presentation of the capabilities. CO-CHAIRMAN HUDSON asked who would oversee the study. REPRESENTATIVE GREEN replied the University of Alaska Fairbanks. CO-CHAIRMAN HUDSON asked whether that was for scientific research. REPRESENTATIVE GREEN said it was for running a model. He suggested it was so technical, they did not want the legislature to even touch it. However, once it was done, results could be used to weigh options. He cited examples. He said it may even turn out to be less sensitive, this late in the field development life, than he is concerned it may be. However, if it is sensitive, the legislature should know that. Number 1930 MR. McNAUGHTON offered to provide more information later. CO-CHAIRMAN OGAN advised that it would be weeks before it could be scheduled in committee. CO-CHAIRMAN HUDSON pointed out that it is a capital issue, and the capital budget is usually the last to come through. He encouraged Representative Green and Co-Chairman Ogan to work on this with him. CO-CHAIRMAN OGAN suggested the House Special Committee on Oil and Gas could do preliminary work. CO-CHAIRMAN HUDSON suggested a joint meeting. REPRESENTATIVE GREEN concurred, saying that was what he was hoping. CO-CHAIRMAN OGAN said it could be worked out. CO-CHAIRMAN HUDSON and REPRESENTATIVE GREEN thanked Mr. McNaughton for the presentation. ADJOURNMENT CO-CHAIRMAN HUDSON adjourned the House Resources Standing Committee meeting at 3:40 p.m.