Legislature(2017 - 2018)BARNES 124

02/02/2018 01:00 PM RESOURCES

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Audio Topic
01:04:49 PM Start
01:05:37 PM HB322
03:01:14 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 322 OIL SPILLS/POLLUTION:PENALTIES;PREVENTION TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        February 2, 2018                                                                                        
                           1:04 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Andy Josephson, Co-Chair                                                                                         
Representative Geran Tarr, Co-Chair                                                                                             
Representative John Lincoln, Vice Chair                                                                                         
Representative Harriet Drummond                                                                                                 
Representative Justin Parish                                                                                                    
Representative Chris Birch                                                                                                      
Representative DeLena Johnson                                                                                                   
Representative George Rauscher                                                                                                  
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative David Talerico                                                                                                   
Representative Mike Chenault (alternate)                                                                                        
Representative Chris Tuck (alternate)                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
HOUSE BILL NO. 322                                                                                                              
"An Act  relating to  penalties for discharges  of oil  and other                                                               
pollution violations;  relating to  oil discharge  prevention and                                                               
contingency  plans  for  commercial motor  vehicles  transporting                                                               
crude oil; and providing for an effective date."                                                                                
                                                                                                                                
     HEARD & HELD                                                                                                               
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                              
BILL: HB 322                                                                                                                  
SHORT TITLE: OIL SPILLS/POLLUTION:PENALTIES;PREVENTION                                                                          
SPONSOR(s): RESOURCES                                                                                                           
                                                                                                                                
01/31/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/31/18       (H)       RES, FIN                                                                                               
01/31/18       (H)       RES AT 1:00 PM BARNES 124                                                                              
01/31/18       (H)       Scheduled but Not Heard                                                                                
02/02/18       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KRISTIN RYAN, Director                                                                                                          
Division of Spill Prevention and Response                                                                                       
Department of Environmental Conservation                                                                                        
Anchorage, Alaska                                                                                                               
POSITION   STATEMENT:     Provided   a  PowerPoint   presentation                                                             
entitled,  "Spill Penalties  Overview," dated  2/2/18, and  brief                                                               
discussion of HB 322.                                                                                                           
                                                                                                                                
THOMAS ATKINSON, Staff                                                                                                          
Representative Andy Josephson                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Provided a Sectional Analysis of  HB 322 on                                                             
behalf  of  Representative  Josephson,   co-chair  of  the  House                                                               
Resources Standing Committee, sponsor.                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:04:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  ANDY  JOSEPHSON  called the  House  Resources  Standing                                                             
Committee  meeting  to  order  at   1:04  p.m.    Representatives                                                               
Josephson, Drummond, Parish, Birch,  Johnson, Rauscher, Tarr, and                                                               
Lincoln were present at the call to order.                                                                                      
                                                                                                                                
CO-CHAIR  JOSEPHSON   introduced  Representative   Lincoln,  Vice                                                               
Chair.                                                                                                                          
                                                                                                                                
        HB 322-OIL SPILLS/POLLUTION:PENALTIES;PREVENTION                                                                    
                                                                                                                                
1:05:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOSEPHSON announced  that the  first order  of business                                                               
would be  HOUSE BILL NO. 322,  "An Act relating to  penalties for                                                               
discharges  of oil  and other  pollution violations;  relating to                                                               
oil  discharge prevention  and contingency  plans for  commercial                                                               
motor  vehicles  transporting crude  oil;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
1:05:51 PM                                                                                                                    
                                                                                                                                
KRISTIN  RYAN,   Director,  Division  of  Spill   Prevention  and                                                               
Response (SPAR), Department  of Environmental Conservation (DEC),                                                               
provided  a PowerPoint  presentation  entitled, "Spill  Penalties                                                               
Overview," dated 2/2/18.   She informed the  committee the SPAR's                                                               
mission  is to  respond  to  spills of  oil  and other  hazardous                                                               
substances with the intent to  protect the environment and public                                                               
health (slide  2).   The division publishes  an annual  report to                                                               
the legislature  of the data it  collects on responses -  such as                                                               
location  and costs  - and  general  information on  contaminated                                                               
sites   in  Alaska.     She   said  SPAR   usually  responds   to                                                               
approximately  2,000  spills  per  year, many  of  which  do  not                                                               
warrant field  inspection by the  division, but are  requests for                                                               
technical assistance.   The  largest spill  reported in  2017 was                                                               
from  a boat  that sank  in  the Aleutians;  she advised  process                                                               
water is a  hazardous spill of slurry used in  a mining operation                                                               
(slide 3).                                                                                                                      
                                                                                                                                
REPRESENTATIVE  PARISH   asked  for  the  amount   of  the  spill                                                               
associated with the aforementioned sinking in the Aleutians.                                                                    
                                                                                                                                
MS.  RYAN  said 87,000  gallons.    She  said sinking  boats  are                                                               
common, as are  releases at mines and at oil  and gas exploration                                                               
and production sites.                                                                                                           
                                                                                                                                
REPRESENTATIVE  BIRCH questioned  whether penalties  are intended                                                               
as punishment or are collected to recover the cost of the spill.                                                                
                                                                                                                                
1:10:07 PM                                                                                                                    
                                                                                                                                
MS. RYAN  advised authorizing statute  requires SPAR  to regulate                                                               
certain companies to prevent spills  and respond when they occur;                                                               
the  regulated  companies  are required  to  have  the  financial                                                               
ability to clean up a spill,  and penalties come into play if the                                                               
state deems  a penalty should  be assessed for causing  damage or                                                               
harm to the environment.  After  a spill is cleaned up, there can                                                               
be residual  contamination and penalties  are used  as deterrents                                                               
against future releases.                                                                                                        
                                                                                                                                
CO-CHAIR TARR  recalled a  natural gas spill  by Hilcorp  in Cook                                                               
Inlet last year  and asked whether that release  was reflected in                                                               
the statistics on slide 3.                                                                                                      
                                                                                                                                
MS. RYAN noted  there were many questions raised  last year about                                                               
DEC penalties  related to  past releases;  HB 322  would increase                                                               
the penalty  amounts DEC  could levy, but  would not  change what                                                               
actions are  or are  not violations.   A  natural gas  release is                                                               
deemed as a hazardous substance by DEC.                                                                                         
                                                                                                                                
CO-CHAIR TARR  surmised the natural  gas release was  included in                                                               
the  62,527 [gallons]  hazardous substances  spilled as  shown on                                                               
slide 3.                                                                                                                        
                                                                                                                                
MS. RYAN said, "Correct, I'm not  sure we can capture natural gas                                                               
in a  gallon, so I don't  think that is reflected  in that number                                                               
but that's, that's where you would expect it to be, yes."                                                                       
                                                                                                                                
CO-CHAIR JOSEPHSON  directed attention  to the  bill on  [page 5,                                                               
line 3]  which included a reference  to AS 46.14, the  section on                                                               
on  air quality,  and asked  whether  the increase  in fines  may                                                               
affect air quality.                                                                                                             
                                                                                                                                
MS. RYAN said yes.   [AS 46.03.760(e)] is DEC's penalty authority                                                               
and covers many penalties for  DEC programs; the changes proposed                                                               
by  the bill  primarily  impact spills  and penalties  associated                                                               
with spills.   However, some other releases  into the environment                                                               
that would  be violations are  also affected.  She  expressed her                                                               
belief that AS  46.14 is related to  passenger vessel discharges,                                                               
and a few  other areas not related to spills  of oil or petroleum                                                               
are affected.                                                                                                                   
                                                                                                                                
CO-CHAIR JOSEPHSON asked whether DEC  would inspect a spill equal                                                               
to  the size  of  the  spill in  Bethel  [date  not provided]  of                                                               
several thousand gallons of fuel.                                                                                               
                                                                                                                                
MS. RYAN  explained an inspection  is dependent upon  whether the                                                               
contractors conducting the  cleanup of a spill are  known to DEC,                                                               
and whether  DEC is  assured of  compliance, as  was the  case in                                                               
Bethel.   She said  when possible, DEC  will monitor  a situation                                                               
via telephone and avoid an inspection to save money.                                                                            
                                                                                                                                
1:15:25 PM                                                                                                                    
                                                                                                                                
CO-CHAIR TARR  returned to  the issue of  reporting a  release of                                                               
natural  gas and  expressed her  understanding DEC  would have  a                                                               
formula to  convert, calculate, and  report a release  of natural                                                               
gas.   She  suggested the  addition of  a reporting  mechanism is                                                               
warranted in  order to  represent and evaluate  the extent  of an                                                               
ongoing problem.                                                                                                                
                                                                                                                                
MS. RYAN  advised the aforementioned  incident in Cook  Inlet was                                                               
the first natural gas release  from an underwater pipeline into a                                                               
waterbody, and deemed by DEC  to be hazardous to the environment,                                                               
because natural gas does not normally  exist in the aquifer.  She                                                               
was unsure  whether the incident  was included in  the statistics                                                               
shown  on   slide  3,  but   assumed  not  as  the   release  was                                                               
significant, so  including it  would have  yielded a  larger 2017                                                               
spill volume total.  Ms. Ryan said  DEC will find a way to report                                                               
the release  of natural gas  should incidents  continue; although                                                               
DEC's decision to label the  release as a hazardous substance was                                                               
controversial, DEC believes it has  the statutory authority to do                                                               
so.   She continued to  slide 4,  which illustrated a  decline in                                                               
the release of volumes of  petroleum products; she attributed the                                                               
decline both to  self-policing by industry and a  response to DEC                                                               
regulations.  Ms.  Ryan said the companies that  are regulated by                                                               
DEC exhibit  good records of  compliance.  Slide 5  illustrated a                                                               
decline in the number of spills from 1996-2017.                                                                                 
                                                                                                                                
REPRESENTATIVE  BIRCH  questioned the  need  for  an increase  in                                                               
fines when there  has been a decline in the  number and volume of                                                               
spills under the present regulations.                                                                                           
                                                                                                                                
MS. RYAN advised  the administration has no position  on the bill                                                               
at this time.  She opined  DEC's penalty amounts - written in the                                                               
'70s and '80s - are antiquated  and are not commensurate with the                                                               
potential harm caused by a release into the environment.                                                                        
                                                                                                                                
REPRESENTATIVE  BIRCH  asked  for   an  accounting  of  penalties                                                               
assessed, the  fines collected, the  number of spills,  and where                                                               
the fines are deposited after they are recovered.                                                                               
                                                                                                                                
1:20:35 PM                                                                                                                    
                                                                                                                                
MS.  RYAN explained  collected penalties  are deposited  into the                                                               
Oil and Hazardous Substance Release  Prevention and Response Fund                                                               
(Response  Fund),  which   is  an  account  that   pays  for  the                                                               
division's services and from which  the legislature allocates the                                                               
division's operating budget.  She  offered to provide information                                                               
on penalty amounts that have  been collected; however, due to the                                                               
way the statutes  are written, "it's not the easiest  path for us                                                               
to go  down, to issue  penalties and  fines, and the  amounts are                                                               
pretty small."                                                                                                                  
                                                                                                                                
REPRESENTATIVE  BIRCH  asked  for   an  estimate  of  the  amount                                                               
recovered in a certain period of time.                                                                                          
                                                                                                                                
MS. RYAN  estimated under $100,000  per year, and said  she would                                                               
provide the requested information.                                                                                              
                                                                                                                                
CO-CHAIR TARR surmised with fewer  spills, the existing penalties                                                               
are not sufficient to cover the cost of the cleanup of a spill.                                                                 
                                                                                                                                
MS. RYAN further explained the  amounts DEC charges for penalties                                                               
are very low; in fact, in  the case of a substantial release, DEC                                                               
would be limited  in recovering [costs] and  penalizing a company                                                               
for a release that harmed the environment.                                                                                      
                                                                                                                                
CO-CHAIR TARR concluded DEC would  be responsible for the cleanup                                                               
and the state would pay the cost.                                                                                               
                                                                                                                                
MS. RYAN agreed  that if a responsible party did  not pay for the                                                               
cost  to cleanup  a spill  and the  state completed  the cleanup,                                                               
DEC's penalty authorities would  probably be inadequate to recoup                                                               
the state's costs.                                                                                                              
                                                                                                                                
REPRESENTATIVE RAUSCHER asked what constitutes a spill.                                                                         
                                                                                                                                
MS. RYAN said, "There are  varying levels of reporting, depending                                                               
on  who you  are."    Companies that  are  regulated  by DEC  are                                                               
expected  to  report  everything,  and  very  small  volumes  are                                                               
reported  monthly;  larger  spills,  depending  on  the  type  of                                                               
substance  and  location, have  a  different  timeline.   [DEC's]                                                               
generic authority directs  that a spill of  a hazardous substance                                                               
into the environment is a spill,  and that is the broad authority                                                               
of the department.                                                                                                              
                                                                                                                                
REPRESENTATIVE  RAUSCHER asked  whether  the  spills indicted  on                                                               
slide 6 could have been of "a quart or less."                                                                                   
                                                                                                                                
MS. RYAN said no, and offered to provide specific information.                                                                  
                                                                                                                                
1:24:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH related his experience  is that a spill of a                                                               
teaspoon or  more would be  reported by Alyeska  Pipeline Service                                                               
Company.  He then inquired as to the value of the Response Fund.                                                                
                                                                                                                                
MS. RYAN  stated the  Department of  Revenue manages  the revenue                                                               
streams into the Response Fund which  is held in two accounts:  a                                                               
response account  for emergency responses capped  at $50 million,                                                               
and  a  prevention account  to  pay  for SPAR's  daily  operating                                                               
costs.   She  offered to  provide  the quarterly  report of  each                                                               
account to the committee.                                                                                                       
                                                                                                                                
1:26:43 PM                                                                                                                    
                                                                                                                                
MS. RYAN returned  attention to slide 6 which was  a map of spill                                                               
locations.  She  advised the location of a spill  - marine, land,                                                               
and underground  - is  paramount to  SPAR's response  and impacts                                                               
the cleanup  method (slide 7).   Ms. Ryan said oil  and petroleum                                                               
products and  other hazardous  substances are  considered harmful                                                               
to human  health and  the environment, thus  SPAR seeks  to avoid                                                               
human  contact through  skin, inhalation,  and ingestion,  and to                                                               
protect the  environment (slide 9).   Slide 10  was a photo  of a                                                               
release  of home  heating oil.    Slide 11  provided examples  of                                                               
spill impacts to the environment  and she said SPAR and companies                                                               
want to avoid releases.   Slide 12 was a photo  of a tanker truck                                                               
rollover.    Ms. Ryan  said  the  bill would  require  commercial                                                               
trucks   hauling  crude   oil  to   have  contingency   plans;  a                                                               
contingency plan  is SPAR's way  to know a company  is preventing                                                               
spills and  what it would  do in the  case of a  spill, including                                                               
the  availability of  equipment, equipment  operators, and  other                                                               
information.                                                                                                                    
                                                                                                                                
CO-CHAIR JOSEPHSON  added that currently, if  one is transporting                                                               
a  refined product,  there is  no requirement  for a  contingency                                                               
plan.                                                                                                                           
                                                                                                                                
MS. RYAN confirmed SPAR does  not regulate trucks hauling refined                                                               
fuel products; however, companies  are required to have insurance                                                               
and meet  certain safety standards established  by the Department                                                               
of  Transportation  &  Public Facilities  (DOTPF).    Contingency                                                               
plans are not required for  trucks carrying refined fuel or crude                                                               
oil.  The bill would  require SPAR to regulate the transportation                                                               
of crude oil.                                                                                                                   
                                                                                                                                
CO-CHAIR  JOSEPHSON   related  concern  from   some,  questioning                                                               
whether  it  is fair  -  as  affects  companies' economics  -  to                                                               
[regulate] crude oil in a different manner.                                                                                     
                                                                                                                                
MS. RYAN observed crude oil is  thicker and can be easier to pick                                                               
up,  but  it is  also  more  persistent  and  more toxic  in  the                                                               
environment  thus, from  SPAR's perspective,  crude oil  presents                                                               
more  risks to  the  environment and  human  health than  refined                                                               
fuel.  This  is the basis of SPAR's concern  about the increasing                                                               
occurrences of crude oil hauled by tanker [truck].                                                                              
                                                                                                                                
REPRESENTATIVE  DRUMMOND expressed  dismay about  the absence  of                                                               
regulation  over spills  of refined  products such  as jet  fuel,                                                               
aviation gas, and gasoline.                                                                                                     
                                                                                                                                
CO-CHAIR JOSEPHSON  clarified SPAR  does not  require contingency                                                               
plans for  refined products and  asked whether  contingency plans                                                               
are required by DOTPF or the U.S. Department of Transportation.                                                                 
                                                                                                                                
1:32:07 PM                                                                                                                    
                                                                                                                                
MS.  RYAN  said  no;  however,   DOTPF  does  require  insurance.                                                               
Furthermore, the  trucking companies,  in response  to increasing                                                               
spills from  fuel trucks, have  been working with SPAR  to reduce                                                               
accidents;  accidents  are  usually  due to  operator  error,  so                                                               
additional driver  training has reduced the  number of accidents.                                                               
She pointed  out after  the closure  of a  refinery on  the North                                                               
Slope,  the  number  of [tanker  trucks]  carrying  refined  fuel                                                               
across the state has increased.                                                                                                 
                                                                                                                                
CO-CHAIR TARR noted the industry  is regulated through mechanisms                                                               
such  as the  Clean  Water Act,  stormwater pollution  prevention                                                               
plans,  which  work  to  capture   discharges.    She  asked  for                                                               
clarification on the aforementioned tankers.                                                                                    
                                                                                                                                
MS. RYAN  said the  increased transportation  of refined  fuel by                                                               
truck is  commonly occurring  across the state.   She  agreed the                                                               
industry  complies with  many requirements,  but not  contingency                                                               
plans;  further, if  a spill  occurs, SPAR  requires an  adequate                                                               
response  from  the  company.    She  pointed  out  the  response                                                               
standard  exists, but  not the  prevention aspect  of contingency                                                               
plans.                                                                                                                          
                                                                                                                                
MS.  RYAN clarified  federal and  state  regulations require  oil                                                               
tanker vessels in  Prince William Sound to  be double-hulled, but                                                               
her reference [during today's hearing] was to tanker trucks.                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  pointed out Alaska is  transporting refined                                                               
low-sulfur fuel  from Valdez  to the North  Slope even  though it                                                               
can be  produced on the  North Slope  with modest changes  to the                                                               
"sulfur requirements."  He urged for sanity in this regard.                                                                     
                                                                                                                                
MS.  RYAN said  the  U.S. Environmental  Protection Agency  (EPA)                                                               
requires low-sulfur fuel  and companies on the  North Slope chose                                                               
not to  meet the new  standard, and  instead to buy  refined fuel                                                               
from Valdez, and truck the fuel to the North Slope.                                                                             
                                                                                                                                
1:37:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  suggested Alaska should seek  a waiver from                                                               
EPA for  low-sulfur fuel.   He directed  attention to HB  322 [on                                                               
page 4, lines 19-20] which read:                                                                                                
                                                                                                                                
       (4)  the need for enhanced civil penalty to deter                                                                        
     future noncompliance.                                                                                                      
                                                                                                                                
REPRESENTATIVE  BIRCH  questioned  whether SPAR  has  encountered                                                               
willful noncompliance  with state regulations that  would warrant                                                               
increasing a penalty from $5,000 per day to $25,000 per day.                                                                    
                                                                                                                                
MS.  RYAN said  she could  not recall  an incident  of a  company                                                               
paying a  penalty and  continuing its  violations.   However, the                                                               
penalties are  "pretty small, compared  to modern  economics" and                                                               
present no  concerns for a  company.   She returned to  slide 13,                                                               
which   listed   socio-economic   examples  of   spill   impacts.                                                               
Instances  where the  state  has taken  a lead  role  - when  the                                                               
responsible party was  unable to pay - have cost  the state about                                                               
$12 million in the current  fiscal year and "penalties could help                                                               
us in those  scenarios, we think."  The current  fine and penalty                                                               
structure addresses less than 5  percent of the average oil spill                                                               
response and cleanup costs (slide 14).                                                                                          
                                                                                                                                
CO-CHAIR  JOSEPHSON  returned  attention  to  the  Response  Fund                                                               
"spill portion,"  which has a  balance of about $44  million, and                                                               
asked whether  the aforementioned $12  million will be  paid from                                                               
the Response Fund.                                                                                                              
                                                                                                                                
MS. RYAN  advised SPAR  can use prevention  account money  to pay                                                               
for  cleanup, and  pays for  small  spills out  of its  operating                                                               
budget,  but  cleanup for  big  spills  comes from  the  response                                                               
account.                                                                                                                        
                                                                                                                                
CO-CHAIR  JOSEPHSON  surmised  if  the  Response  [Fund]  account                                                               
balance reaches $50 million, the funding stops.                                                                                 
                                                                                                                                
MS. RYAN said correct.  The  [Response Fund] account is funded by                                                               
a surcharge on oil of a penny per barrel.                                                                                       
                                                                                                                                
CO-CHAIR  JOSEPHSON  suggested  the  bill  could  replenish  [the                                                               
account and  keep the  balance at $50  million] so  oil companies                                                               
would not have  to pay a surcharge for spills  for which they are                                                               
not responsible.                                                                                                                
                                                                                                                                
MS. RYAN said yes.                                                                                                              
                                                                                                                                
REPRESENTATIVE  RAUSCHER   questioned  whether  the   state  sues                                                               
offenders for  costs uncollected through [fines],  penalties, and                                                               
the recovery of cleanup costs, and if not, "why?"                                                                               
                                                                                                                                
1:42:55 PM                                                                                                                    
                                                                                                                                
MS. RYAN said SPAR holds  statutory authority to pursue recouping                                                               
its  costs, but  the amounts  are  so low,  complete recovery  of                                                               
costs  is not  assured.   In further  response to  Representative                                                               
Rauscher, she  said recovery  would be  civil action  through the                                                               
court process.                                                                                                                  
                                                                                                                                
CO-CHAIR JOSEPHSON inquired as to  whether the bill creates a new                                                               
set of  administrative penalties  so that SPAR  does not  have to                                                               
"go to the court in the first instance?"                                                                                        
                                                                                                                                
MS. RYAN  stated the bill  follows examples from  other divisions                                                               
within  DEC  that  have  administrative  penalty  authority;  for                                                               
example,  SPAR would  have the  authority to  issue a  ticket for                                                               
serious   and  repeat   offenses,  and   the  penalty   would  be                                                               
administered by DEC rather than  through the court system - which                                                               
is  less  expensive -  and  an  administrative penalty  would  be                                                               
limited  by the  bill to  a spill  of 18,000  gallons or  less in                                                               
volume.                                                                                                                         
                                                                                                                                
REPRESENTATIVE RAUSCHER  asked whether  the bill affects  one who                                                               
spills fuel oil on the neighboring property.                                                                                    
                                                                                                                                
MS. RYAN  said the bill  increases penalty authority  for refined                                                               
fuel  spills.   In further  response to  Representative Rauscher,                                                               
she said  the bill would  direct that a  spill of 500  gallons of                                                               
refined fuel would receive an administrative penalty.                                                                           
                                                                                                                                
CO-CHAIR JOSEPHSON  noted one  may also bring  a cause  of action                                                               
for nuisance  and trespass,  seeking damages  in addition  to the                                                               
penalties imposed by the state.                                                                                                 
                                                                                                                                
MS. RYAN acknowledged often neighbors seek damages in court.                                                                    
                                                                                                                                
REPRESENTATIVE  PARISH returned  attention to  the second  bullet                                                               
point  on slide  14  and asked  how  the state  comes  to be  the                                                               
leading  investigator and  responsible  party for  cleaning up  a                                                               
spill.                                                                                                                          
                                                                                                                                
1:47:10 PM                                                                                                                    
                                                                                                                                
MS. RYAN said  the state becomes the leading  investigator and is                                                               
authorized to  use state funds  only when statutory  criteria are                                                               
met,  such as  a response  to an  imminent threat,  or a  serious                                                               
threat to  the environment  or to public  health.   An additional                                                               
criterion  requires cost  recovery,  thus if  there  is a  viable                                                               
responsible  party it  behooves the  company to  pay for  cleanup                                                               
directly.  She gave an example  of a situation which threatened a                                                               
neighborhood  in  Wrangell  and  on which  the  state  has  spent                                                               
several million dollars to contain the contamination.                                                                           
                                                                                                                                
REPRESENTATIVE PARISH  asked whether other state  funds have been                                                               
used in spill response or mitigation.                                                                                           
                                                                                                                                
MS. RYAN said SPAR used  to have undesignated general funds (UGF)                                                               
to pay for  engineering work for leak detection  that was related                                                               
to  pipelines; however,  to reduce  state  cost, SPAR  eliminated                                                               
UGF, cut several positions and  combined programs, and now relies                                                               
on the prevention accounts.                                                                                                     
                                                                                                                                
REPRESENTATIVE  LINCOLN  asked  how   often  SPAR  leads  cleanup                                                               
efforts.                                                                                                                        
                                                                                                                                
MS. RYAN advised  rarely; 95 percent of the  time the responsible                                                               
party is the  lead.  If the responsible party  is an oil company,                                                               
SPAR is assured  the cleanup will be done right;  however, if the                                                               
responsible  party  is  a  homeowner, SPAR  will  work  with  the                                                               
homeowner  because  they are  not  a  knowledgeable party,  their                                                               
insurance will not help them, and the costs are very high.                                                                      
                                                                                                                                
REPRESENTATIVE LINCOLN  questioned whether HB 322  seeks to deter                                                               
homeowners and  private citizens from taking  risks by increasing                                                               
fines and penalties.                                                                                                            
                                                                                                                                
MS. RYAN opined the bill would  not have an impact on homeowners;                                                               
releases by homeowners are always  unintended and the actual cost                                                               
of response acts as a huge deterrent.                                                                                           
                                                                                                                                
REPRESENTATIVE  LINCOLN returned  attention to  the third  bullet                                                               
point  on  slide  14  [the current  fine  and  penalty  structure                                                               
addresses less than  5 percent of the average  oil spill response                                                               
and  cleanup costs]  and asked  if this  applies to  instances in                                                               
which the state is the lead in the cleanup.                                                                                     
                                                                                                                                
MS. RYAN said correct.                                                                                                          
                                                                                                                                
REPRESENTATIVE  LINCOLN surmised  there may  be some  recovery of                                                               
costs through  lawsuits and court settlements  that would augment                                                               
the fine and penalty structure.                                                                                                 
                                                                                                                                
MS. RYAN agreed and will provide additional information.                                                                        
                                                                                                                                
1:53:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  questioned whether  there is  the potential                                                               
of  any of  the  fines  being levied  against  a  homeowner or  a                                                               
commercial enterprise.   He  gave examples  of spills  because of                                                               
theft or vandalism.                                                                                                             
                                                                                                                                
MS.  RYAN directed  attention to  the criteria  in the  bill that                                                               
must be considered  to determine a penalty; one  of the criterion                                                               
is to consider what economic benefit  occurred as a result of the                                                               
spill, for example,  a company that caused a  release by deciding                                                               
to  save  money.    She  said a  homeowner  would  not  meet  the                                                               
criterion related to economic benefit.                                                                                          
                                                                                                                                
CO-CHAIR  JOSEPHSON recalled  Ms. Ryan  estimated SPAR  collected                                                               
approximately $100,000 per year in  fines and penalties and asked                                                               
how  much  of  that  was  collected  from  individuals  who  were                                                               
responsible for a spill.                                                                                                        
                                                                                                                                
MS. RYAN said  the amount is small.  Homeowners  are reluctant to                                                               
report a  spill because  SPAR is required  to recover  its costs,                                                               
and the  delay in reporting  affects the outcome of  the cleanup.                                                               
As director,  she said she  has never penalized a  homeowner, and                                                               
none of  the aforementioned $100,000  was related to  a homeowner                                                               
spill.   For  a  homeowner,  paying to  cleanup  a  spill is  the                                                               
penalty.                                                                                                                        
                                                                                                                                
MS. RYAN  directed attention to  slide 15 and observed  there are                                                               
two companies  that are moving  oil by tanker truck  from Nikiski                                                               
to the refinery,  crossing several waterbodies.   There have been                                                               
no compliance issues with BlueCrest  Energy Inc. (BlueCrest), and                                                               
the bill would require the companies to file a contingency plan.                                                                
                                                                                                                                
1:58:07 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOSEPHSON  questioned  whether drafting  a  contingency                                                               
plan is a burden.                                                                                                               
                                                                                                                                
MS. RYAN explained a contingency  plan contains two main aspects,                                                               
one is a prevention  plan such as how to mitigate  the risks of a                                                               
certain  route, and  BlueCrest has  a prevention  plan.   Also, a                                                               
contingency includes  the actions  that would  be taken  after an                                                               
oil spill:   how to clean  it up; the location  of equipment; the                                                               
deployment of  booms in water.   The point of a  contingency plan                                                               
is to be prepared for what  could happen; she opined they are not                                                               
a significant  amount of  work and  are a  part of  good business                                                               
practice.  The bill requires companies  to provide plans to DEC -                                                               
in a  specific format -  and to drill  and exercise the  plans to                                                               
prepare for implementation.                                                                                                     
                                                                                                                                
CO-CHAIR  TARR  asked whether  travel  by  the tanker  trucks  is                                                               
limited by restrictions such as the time of day.                                                                                
                                                                                                                                
MS. RYAN said  limitations on travel are outside the  bounds of a                                                               
contingency plan and deferred to  DOTPF.  Ms. Ryan stated another                                                               
provision  of  HB 322  would  include  produced water  when  SPAR                                                               
calculates  the volume  of  a  spill for  a  penalty.   Slide  16                                                               
provided two examples,  and she explained as  fields have matured                                                               
on  the  North  Slope,  more  saltwater  is  pulled  out  of  the                                                               
reservoir with the oil.   In current statute, saltwater cannot be                                                               
considered  by  SPAR as  a  factor  in  the penalty  volume,  yet                                                               
saltwater is  toxic to  the tundra environment  and hard  to wash                                                               
away.   [SPAR]  feels the  damage  to the  environment caused  by                                                               
produced water  is significant  and should  be considered  in the                                                               
volume calculations for penalties.                                                                                              
                                                                                                                                
CO-CHAIR JOSEPHSON  asked how  this aspect  of the  bill compares                                                               
with that of other states.                                                                                                      
                                                                                                                                
MS. RYAN was unsure and will provide the information.                                                                           
                                                                                                                                
CO-CHAIR  JOSEPHSON  returned  attention  to  slide  16  and  the                                                               
example of  produced water in  penalty volume.  He  asked whether                                                               
the  responsible  parties  [in  the  examples]  could  have  been                                                               
penalized administratively under HB 322.                                                                                        
                                                                                                                                
MS. RYAN said  correct, noting that volumes in  the example would                                                               
have been  at the  threshold where the  penalties would  be less.                                                               
For  example,  there  have  been recent  spills  with  "a  couple                                                               
gallons of oil  but hundreds of thousands of  gallons of produced                                                               
water ... the formula has shifted on what's being spilled."                                                                     
                                                                                                                                
REPRESENTATIVE PARISH asked  for a comparison of the  impact of a                                                               
gallon of produced water to that of a gallon of oil.                                                                            
                                                                                                                                
MS. RYAN stated  the proportion of salt in  produced water varies                                                               
by each spill and there is  no standard; further, SPAR lacks good                                                               
tools for the cleanup of highly saline water.                                                                                   
                                                                                                                                
2:05:32 PM                                                                                                                    
                                                                                                                                
THOMAS  ATKINSON, Staff,  Representative  Andy Josephson,  Alaska                                                               
State  Legislature, on  behalf of  Representative Josephson,  co-                                                               
chair  of  the House  Resources  Committee,  sponsor, provided  a                                                               
PowerPoint presentation entitled,  "HB 322 The Spill  Bill."  Mr.                                                               
Atkinson informed the committee the  first change proposed by the                                                               
bill  is to  Section 1,  on page  1, line  7, which  deletes text                                                               
"recent  information  discloses that."    On  page 2,  there  are                                                               
changes to grammar,  and on line 15, "but not  punitive" would be                                                               
deleted  because  civil  and administrative  penalties  could  be                                                               
considered  punitive.   On  line  16,  "civil" would  be  deleted                                                               
because the  bill proposes to  add administrative  penalties, and                                                               
on line  17, "judicial" would  be deleted because fines  would be                                                               
judicial  fines  assessed  by a  court  or  administrative  fines                                                               
assessed by the  department (slide 1).  Section  2 would increase                                                               
penalties  for  non-crude oil  spills  over  18,000 gallons  into                                                               
aquatic environments or on public land.  Section 2 read:                                                                        
                                                                                                                                
     Sec. 2.  AS 46.03.758(b) is  amended to read: (b)   The                                                                    
     [NO LATER  THAN THE  10TH DAY AFTER  THE CONVENING   OF                                                                    
     THE  SECOND SESSION  OF THE  TENTH ALASKA  LEGISLATURE,                                                                    
     THE]  department  shall  establish in  [SUBMIT  TO  THE                                                                    
     LEGISLATURE] regulations   [ESTABLISHING] the following                                                                    
     schedule  of fixed  penalties  for  discharges of  oil:                                                                    
     (1)  subject  to (2) of this  subsection, the penalties                                                                    
     for   the   following       categories   of   receiving                                                                    
     environments may not exceed                                                                                                
          (A)   $20  [$10] per  gallon of  oil that  [WHICH]                                                                    
     enters  an   anadromous  stream  or   other  freshwater                                                                    
     environment with significant aquatic resources;                                                                            
          (B)   $5 [$2.50]  per gallon  of oil  that [WHICH]                                                                    
     enters an  estuarine, intertidal or  confined saltwater                                                                    
     environment; and                                                                                                           
          (C)  $2 [$1] per gallon of oil that [WHICH]                                                                           
     enters  an  unconfined  saltwater  environment,  public                                                                    
     land  or  freshwater  environment  without  significant                                                                    
     aquatic resources;                                                                                                         
     (2)   for  discharges of  oil  that are  caused by  the                                                                    
     gross negligence or intentional  act of the discharger,                                                                    
     or when  the court  finds that  the discharger  did not                                                                    
     take reasonable  measures to contain  and clean  up the                                                                    
     discharged  oil, the  penalty  shall  be determined  by                                                                    
     multiplying the  penalty established under (1)  of this                                                                    
     subsection by a factor of five.                                                                                            
                                                                                                                                
MR. ATKINSON  stated [subparagraphs] (A)  and (B) are  related to                                                               
aquatic releases and [subparagraph]  (C) relates to releases into                                                               
an unconfined saltwater  environment or public land.   He pointed                                                               
out penalties in existing law are  more severe for a release into                                                               
an  anadromous  stream,  or  other  freshwater  environment  with                                                               
significant aquatic  resources; fines  decrease as  the receiving                                                               
environments  are   less  biologically  important.     Also,  the                                                               
existing  penalties were  first  imposed in  1977  and have  been                                                               
undercut by inflation;  for example, the 2018  equivalent for the                                                               
1977 penalty  of $10 is  $39.70, and the bill  proposes penalties                                                               
of $20 (slide 2).                                                                                                               
                                                                                                                                
2:09:59 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOSEPHSON  called  attention  to slide  2,  noting  the                                                               
penalties would  be higher if  adjusted to actual  inflation from                                                               
1977.                                                                                                                           
                                                                                                                                
CO-CHAIR  TARR   questioned  whether  the  penalty   amounts  are                                                               
supported by DEC.                                                                                                               
                                                                                                                                
MR. ATKINSON  confirmed the amount  of the penalties  in [Section                                                               
2] were suggested  by DEC.  Continuing to Section  3, he said the                                                               
intent  of  Section  3  is   to  automatically  inflation  adjust                                                               
penalties annually to  the Consumer Price Index  (CPI), Bureau of                                                               
Labor Statistics, U.S. Department of Labor.                                                                                     
                                                                                                                                
REPRESENTATIVE BIRCH  questioned whether Alaska  Statutes contain                                                               
other instances of penalties that are annually adjusted.                                                                        
                                                                                                                                
CO-CHAIR  JOSEPHSON  provided  the  example  of  Senate  Bill  91                                                               
[passed  in the  Twenty-Ninth Alaska  State Legislature]  and the                                                               
value of property relative to C felonies.                                                                                       
                                                                                                                                
MR. ATKINSON offered to provide additional examples.                                                                            
                                                                                                                                
CO-CHAIR   TARR  expressed   her   belief  [automatic   inflation                                                               
adjusting]  will be  pursued by  various divisions  that seek  to                                                               
avoid   the   necessity   of  legislation   solely   to   address                                                               
administrative tasks.                                                                                                           
                                                                                                                                
REPRESENTATIVE  JOHNSON   cautioned  the  CPI  does   not  always                                                               
increase.   She stated  her understanding  the bill  would double                                                               
the  base amount  of the  [penalties] and  then use  the base  to                                                               
adjust to CPI.  She asked  for the basis upon which the penalties                                                               
were doubled.                                                                                                                   
                                                                                                                                
CO-CHAIR JOSEPHSON suggested DEC may wish to comment.                                                                           
                                                                                                                                
2:16:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PARISH  returned attention to Section  2 (slide 2)                                                               
and  said although  the proposed  [base]  penalties are  doubled,                                                               
they approximate  one-half of what the  inflation-adjusted amount                                                               
would be.                                                                                                                       
                                                                                                                                
REPRESENTATIVE BIRCH  restated his objection to  the introduction                                                               
of HB  322 as  a committee  bill.  He  directed attention  to the                                                               
bill on page 4, line 8, which read in part:                                                                                     
                                                                                                                                
     nor more than $25,000[$5,000] for each day after                                                                           
                                                                                                                                
REPRESENTATIVE BIRCH remarked:                                                                                                  
                                                                                                                                
     ... the  daily fine  rate can be  a maximum  of $25,000                                                                    
     rather  than  $5,000,  so somebody  suggested  $25,000,                                                                    
     which is five times $5,000  and ... where did that come                                                                    
     from?                                                                                                                      
                                                                                                                                
There followed brief  discussion on the drafting of  the bill and                                                               
the  source of  proposed  fines that  double  and/or increase  by                                                               
five-fold.                                                                                                                      
                                                                                                                                
MR.  ATKINSON  responded that  in  general  the proposed  penalty                                                               
amounts came  from DEC and  some were adjusted  by Representative                                                               
Josephson's  staff  to  reflect  the  CPI.    The  only  proposed                                                               
penalties that were  quintupled came from DEC and  are related to                                                               
continuing spill  violations by  a responsible  party, not  to an                                                               
initial violation.  In further  response to Representative Birch,                                                               
he restated the quintupled penalties were proposed by DEC.                                                                      
                                                                                                                                
REPRESENTATIVE JOHNSON  surmised the  quintupling of  the penalty                                                               
is explained on line 19, [paragraph 4] which read:                                                                              
                                                                                                                                
      (4)  the need for an enhanced civil penalty to deter                                                                      
     future noncompliance.                                                                                                      
                                                                                                                                
REPRESENTATIVE JOHNSON recalled discussion  [unrelated to HB 322]                                                               
that  concluded  increasing  penalties  is  not  a  deterrent  to                                                               
criminal behavior.                                                                                                              
                                                                                                                                
MR. ATKINSON continued  to Section 4, noting  the civil penalties                                                               
in Section 4 were enacted in  1989 and are unchanged.  He pointed                                                               
out the  1989 $8.00 penalty for  a spill under 420,000  gallons -                                                               
when based  on the CPI calculator  for 2018 - equals  $15.64, and                                                               
would be  rounded up in the  bill to $16.00; similarly,  the 1989                                                               
$12.50 penalty  for a  spill exceeding  420,000 gallons  would be                                                               
raised to $25.00 (slide 4).                                                                                                     
                                                                                                                                
2:22:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PARISH asked  where the bill reflects  the cost of                                                               
environmental  damages to  the  fishing  industry and  supporting                                                               
data.                                                                                                                           
                                                                                                                                
MR. ATKINSON said he did not provide data in this regard.                                                                       
                                                                                                                                
There followed a brief discussion  on civil action brought by the                                                               
state that does or does not address environmental damages.                                                                      
                                                                                                                                
2:25:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PARISH recalled  following the  Exxon Valdez  oil                                                               
spill in  1989 there were certain  direct costs to the  state for                                                               
damages and  cleanup, and  considerable costs  to members  of the                                                               
public, which can  be mitigated by civil court action.   He asked                                                               
whether  the  state can  seek  redress  for indirect  costs,  for                                                               
example, job  training for those  whose jobs were displaced  by a                                                               
spill.                                                                                                                          
                                                                                                                                
CO-CHAIR JOSEPHSON advised  under [Alaska Statutes:   AS 09. Code                                                               
of Civil Procedure],  after proving liability, a  person can seek                                                               
compensatory  damages;  however,  the   bill  does  not  directly                                                               
address this question.                                                                                                          
                                                                                                                                
MR.  ATKINSON returned  attention to  the sectional  analysis and                                                               
said Section  5 calculates penalty  amounts by  counting produced                                                               
water mixed  with crude  oil, as  crude oil,  and directs  DEC to                                                               
increase civil penalties annually as  indicated by the CPI (slide                                                               
5).  Section  6 addresses penalties unchanged  since 1976 related                                                               
to  the illegal  discharges of  oil  and crude  oil under  18,000                                                               
gallons,  including  discharges  of other  hazardous  substances.                                                               
The  bill  would  double  the maximum  penalty  for  the  initial                                                               
violation,   quintuple  the   maximum   penalty  for   continuing                                                               
violation, and allow a court to  increase the maximum penalty.  A                                                               
comparison  of  1976  and 2018  equivalent  penalty  amounts  for                                                               
certain violations was provided (slide 6).                                                                                      
                                                                                                                                
2:29:1 5 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE JOHNSON  pointed out  most oil  spills are  not as                                                               
catastrophic as  the oil spill  in 1989; she provided  an example                                                               
of a relatively small accident  that a small company could afford                                                               
to clean  up, but  cautioned that a  $25,000 daily  penalty could                                                               
bankrupt a small operation in a short period of time.                                                                           
                                                                                                                                
MR.  ATKINSON said  the penalty  applies to  all spills,  but the                                                               
bill "allows a court to  increase maximum penalty to deter future                                                               
spills."   Therefore, the court  is not required to  increase the                                                               
maximum  and  can  review  efforts  to  stop  the  spill  by  the                                                               
responsible party; however, a large  company, when oil prices are                                                               
high, may decline to respond when  penalties are low.  In further                                                               
response  to  Representative  Johnson, he  restated  the  maximum                                                               
penalty does  not have to be  applied, but the minimum  does; the                                                               
proposed minimum is $1,000 for the entire spill.                                                                                
                                                                                                                                
REPRESENTATIVE RAUSCHER  questioned whether the bill  would apply                                                               
to a gas leak in Cook Inlet.                                                                                                    
                                                                                                                                
MS. RYAN  said DEC has  concluded a gas leak  in Cook Inlet  is a                                                               
release of  a hazardous substance  into the environment  thus the                                                               
bill would allow DEC to apply penalties.                                                                                        
                                                                                                                                
CO-CHAIR  JOSEPHSON  asked  whether   DEC  sought  to  apply  the                                                               
existing minimum $500  fines during the release [of  gas] in Cook                                                               
Inlet that occurred about one year ago.                                                                                         
                                                                                                                                
MS. RYAN  said DEC did not  seek penalties.  In  further response                                                               
to Co-Chair  Josephson, she  confirmed because  natural gas  is a                                                               
hazardous substance when  released into a waterbody,  DEC has the                                                               
authority to issue penalties.                                                                                                   
                                                                                                                                
CO-CHAIR JOSEPHSON recalled Hilcorp tried to act responsibly.                                                                   
                                                                                                                                
2:35:05 PM                                                                                                                    
                                                                                                                                
MS. RYAN noted  existing statute directs DEC  to consider certain                                                               
criteria when  calculating penalties, such  as the intent  of the                                                               
responsible  party  to  stop the  spill;  in  the  aforementioned                                                               
example, Hilcorp  acted as  a responsible  operator and  thus DEC                                                               
found no grounds to initiate penalties.                                                                                         
                                                                                                                                
CO-CHAIR  JOSEPHSON recalled  winter weather  conditions affected                                                               
the response to the release.                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAUSCHER  inquired  as  to the  identity  of  the                                                               
person referred to [in the bill on page 4, line 2].                                                                             
                                                                                                                                
MS. RYAN deferred to the  Department of Law; from the perspective                                                               
of  DEC,  the responsible  party  is  the  owner of  the  product                                                               
released.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  RAUSCHER  asked  whether [Section  6,  subsection                                                               
(a)] allows for the state to be charged.                                                                                        
                                                                                                                                
MS.  RYAN acknowledged  sometimes  the state  is the  responsible                                                               
party;  for example,  the Department  of Transportation  & Public                                                               
Facilities may  be responsible  for a fuel  spill and  she opined                                                               
DEC holds the authority to penalize sister agencies.                                                                            
                                                                                                                                
REPRESENTATIVE PARISH directed attention to  the bill on [page 4,                                                               
lines 10-16, which read:                                                                                                        
                                                                                                                                
     (1)     reasonable  compensation   in  the   nature  of                                                                    
     liquidated  damages   for  any   adverse  environmental                                                                    
     effects  caused  by  the   violation,  which  shall  be                                                                    
     determined  by the  court  according  to the  toxicity,                                                                    
     degradability,  and  dispersal characteristics  of  the                                                                    
     substance discharged, the  sensitivity of the receiving                                                                    
     environment,  and the  degree  to  which the  discharge                                                                    
     degrades existing environmental quality;                                                                                   
     (2)    reasonable  costs  incurred   by  the  state  in                                                                    
     detection, investigation,  and attempted  correction of                                                                    
     the violation;                                                                                                             
                                                                                                                                
REPRESENTATIVE PARISH expressed his  belief the term "reasonable"                                                               
is used to protect against  the assessment of unreasonable fines,                                                               
which  may be  subject to  custom.   He asked  whether the  fines                                                               
assessed by DEC err on the side of aggression or caution.                                                                       
                                                                                                                                
2:38:48 PM                                                                                                                    
                                                                                                                                
MS.  RYAN opined  DEC is  very  reasonable in  its assessment  of                                                               
penalties; in fact,  last year $82,000 in  penalties was received                                                               
by  DEC; [the  penalties in  the  bill] recommended  by DEC  were                                                               
based on models by other states and are below those of EPA.                                                                     
                                                                                                                                
CO-CHAIR  JOSEPHSON  asked  whether  other  jurisdictions  impose                                                               
additional fines after a [responsible  party] fails to respond to                                                               
an initial violation.                                                                                                           
                                                                                                                                
MS.  RYAN  said  correct,  for the  purpose  of  encouraging  the                                                               
responsible party to stop a release.                                                                                            
                                                                                                                                
REPRESENTATIVE  LINCOLN  returned attention  to  slide  3 of  the                                                               
earlier  SPAR presentation  and  asked whether  large spills  are                                                               
defined as over 18,000 gallons.                                                                                                 
                                                                                                                                
MS.  RYAN  said  yes.   In  further  response  to  Representative                                                               
Lincoln, she explained processed  water is associated with mining                                                               
activities and is used in a  slurry to remove elements from rock;                                                               
produced water comes up in the wellhead during oil exploration.                                                                 
                                                                                                                                
REPRESENTATIVE  LINCOLN  observed   there  are  many  incremental                                                               
changes  in the  bill which  are hard  to evaluate  because their                                                               
effects are compounded;  he asked for modeling of  the changes in                                                               
a combined  way, "so that we  can have a better  understanding of                                                               
the, the magnitude of the changes taken together."                                                                              
                                                                                                                                
MS.  RYAN  said SPAR  has  good  historical  data on  spills  and                                                               
offered to  provide data  on penalties  that have  been assessed.                                                               
She added  the existing statute  as written is  complicated which                                                               
has necessitated HB 322 include multiple similar changes.                                                                       
                                                                                                                                
2:43:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   BIRCH  surmised   the  state   entrusts  Alyeska                                                               
Pipeline  Service Company  (APSC) and  the Trans-Alaska  Pipeline                                                               
System (TAPS) to transport its royalty  share of oil; in the case                                                               
of  a  crude  oil  spill,  he asked  how  the  royalty  share  is                                                               
represented "in the fining process, or the penalty process."                                                                    
                                                                                                                                
MS. RYAN  said ownership  of the  oil is  not complicated  by the                                                               
royalty portion  that goes  to the state  and which  is accounted                                                               
for by the Department of Revenue;  DEC regulates APSC and the oil                                                               
companies that are the  responsible parties managing exploration,                                                               
production, and processing of the  product, and that own and hold                                                               
the contingency plans.                                                                                                          
                                                                                                                                
REPRESENTATIVE BIRCH  concluded the  shared ownership of  the oil                                                               
is not a factor when penalties are considered by DEC.                                                                           
                                                                                                                                
MS. RYAN  pointed out all the  oil in TAPS is  comingled and APSC                                                               
is the responsible party in the case of a release.                                                                              
                                                                                                                                
CO-CHAIR TARR returned attention to  the bill in Section 2, which                                                               
relates to  non-crude discharges over 18,000  gallons, Section 4,                                                               
which  relates  to  crude discharges  over  18,000  gallons,  and                                                               
Section  6,  which  relates  to  crude  discharges  under  18,000                                                               
gallons; she  clarified a responsible  party is penalized  in one                                                               
applicable category, but not in each of the categories.                                                                         
                                                                                                                                
MS. RYAN said correct.                                                                                                          
                                                                                                                                
MR. ATKINSON returned attention to [the  bill on page 4, line 19,                                                               
which read:                                                                                                                     
                                                                                                                                
      (4) the need for an enhanced civil penalty to deter                                                                       
     future noncompliance.                                                                                                      
                                                                                                                                
MR. ATKINSON  said the  aforementioned language  mirrors language                                                               
on page  6, lines 22-23,  related to spills addressed  in Section                                                               
9,  thus there  is already  an  enhanced civil  penalty to  deter                                                               
future noncompliance.                                                                                                           
                                                                                                                                
MR.  ATKINSON  continued to  Section  7,  which is  a  conforming                                                               
amendment  (slide  7).   Section  8  affects penalties  unchanged                                                               
since  enacted  in  1984  by doubling  the  minimum  penalty  for                                                               
discharges of hazardous wastes,  doubling the maximum penalty for                                                               
initial  violation,  and  multiplying  the  maximum  penalty  for                                                               
continuing violation by  2.5 (slide 8).  Section  9 affects civil                                                               
penalties enacted by  a voter initiative in 2006  by doubling the                                                               
maximum penalty  for discharges under 18,000  gallons from cruise                                                               
ships, doubling  the maximum penalty  for the  initial violation,                                                               
and multiplying  the maximum penalty for  continuing violation by                                                               
2.5 (slide 9).                                                                                                                  
                                                                                                                                
2:49:04 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOSEPHSON  noted an  error on slide  9:   1984 penalties                                                               
should read 2006 penalties.                                                                                                     
                                                                                                                                
REPRESENTATIVE  RAUSCHER inquired  as  to where  new language  is                                                               
found in HB 322.                                                                                                                
                                                                                                                                
CO-CHAIR JOSEPHSON said new subsubsections  are added in Sections                                                               
3, 5, and 11, and Section 12 is a new section.                                                                                  
                                                                                                                                
MR. ATKINSON  continued to Section  10 which describes  factors a                                                               
court  may   consider  when  determining  economic   benefits  of                                                               
noncompliance, such as deferred  and avoided costs of compliance,                                                               
competitive advantage gained, and income derived.                                                                               
                                                                                                                                
CO-CHAIR JOSEPHSON advised "economic savings"  is a legal term of                                                               
art and  opined its usage in  HB 322 is not  the first occurrence                                                               
in Alaska law.                                                                                                                  
                                                                                                                                
MS. RYAN nodded in affirmation.                                                                                                 
                                                                                                                                
REPRESENTATIVE  JOHNSON  questioned  whether  it  is  common  for                                                               
responsible  parties to  decline to  clean up  spills "under  our                                                               
fine schedule or fee schedule."                                                                                                 
                                                                                                                                
CO-CHAIR  JOSEPHSON  called attention  to  reports  in the  media                                                               
[documents not provided].                                                                                                       
                                                                                                                                
REPRESENTATIVE JOHNSON opined committee  members seek to know the                                                               
vision behind a committee bill.   She expressed her understanding                                                               
the  bill changes  fees and  sets higher  caps on  penalties, and                                                               
asked who wrote the bill and  why; she pointed out the bill would                                                               
not fix  the shortfall in the  state's revenue and asked  for the                                                               
purpose of the bill.                                                                                                            
                                                                                                                                
2:54:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOSEPHSON explained it was  brought to his attention the                                                               
affected statutes need updating.                                                                                                
                                                                                                                                
MR. ATKINSON continued to Section 11 and remarked (slide 10):                                                                   
                                                                                                                                
     I did want  to bring the committee's  attention to line                                                                    
     12 on  page 7, "other  penalties assessed for  the same                                                                    
     violation" ...  and the  idea there  is that  the court                                                                    
     must take  into consideration,  actually not  just take                                                                    
     into consideration any  administrative penalties levied                                                                    
     by the  department, but must  offset the  court's civil                                                                    
     penalty;  in other  words, subtract  the administrative                                                                    
     penalty from the civil penalty.                                                                                            
                                                                                                                                
CO-CHAIR  JOSEPHSON pointed  out  also  on page  7,  [line 7]  in                                                               
subsection (h),  are included opportunities to  argue for factors                                                               
to mitigate penalties.                                                                                                          
                                                                                                                                
MR. ATKINSON  continued to Section 12  which is a new  section to                                                               
authorize DEC to assess new  administrative penalties in addition                                                               
to civil  penalties for serious  or repeated  illegal discharges,                                                               
as defined elsewhere in statute.   For the initial violation, DEC                                                               
could penalize a  responsible party no less than  $1,000, no more                                                               
than  $10,000, and  no  more than  $24 per  gallon  spilled.   He                                                               
restated  the   new  penalty  amounts  were   suggested  by  DEC.                                                               
Further, the  bill describes factors  that must be  considered by                                                               
DEC,  allows  DEC to  sue  a  responsible party  for  nonpayment,                                                               
prohibits  a  court   from  adjusting  administrative  penalties,                                                               
requires  the award  of prevailing  party's  attorney's fees  and                                                               
collection  costs,  and  must subtract  administrative  penalties                                                               
from  any  civil  penalty.    Section  12  incorporates  previous                                                               
provisions such  as including water  mixed with oil  to determine                                                               
spill  volume,  directs  DEC  to  inflation-proof  administrative                                                               
penalties,  and  for Section  12  only,  defines oil  to  include                                                               
crude, petroleum, and any substance  refined from oil (slide 11).                                                               
Sections 13-18 are related to  the trucking of crude, and require                                                               
commercial motor vehicles used to  transport crude oil to have an                                                               
approved  contingency  plan  (slide  12).    Section  19  repeals                                                               
legislative disapproval of  regulations governing civil penalties                                                               
for oil discharges - which is  a separation of powers issue - and                                                               
repeals  prohibition  against   punitive  penalties  for  illegal                                                               
discharges  of  ballast  water, pesticides,  paints,  underground                                                               
storage tanks, cruise  ships, and illegal drug  sites (slide 13).                                                               
Finally,  Sections  20-22  provide  authority  to  DEC  to  adopt                                                               
regulations before  the bill  takes effect,  and if  enacted, the                                                               
bill would take effect 1/1/19.                                                                                                  
                                                                                                                                
[HB 322 was held over.]                                                                                                         
                                                                                                                                
3:01:14 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Resources Standing Committee meeting was adjourned at 3:03 p.m.                                                                 

Document Name Date/Time Subjects
HB 322 HRES PwrPt for Feb 2.pdf HRES 2/2/2018 1:00:00 PM
HRES 2/9/2018 1:00:00 PM
HRES 2/12/2018 1:00:00 PM
HB 322
HB 322 Sponsor Statement.pdf HRES 2/2/2018 1:00:00 PM
HB 322
HB 322 Sectional Analysis.pdf HRES 2/2/2018 1:00:00 PM
HRES 2/12/2018 1:00:00 PM
HB 322
HB 322 DEC Spill Penalties Overview 2.2.18.pdf HRES 2/2/2018 1:00:00 PM
HRES 2/9/2018 1:00:00 PM
HRES 2/12/2018 1:00:00 PM
HB 322