Legislature(1993 - 1994)
11/12/1993 01:45 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
November 12, 1993
1:45 p.m.
Anchorage, Alaska
MEMBERS PRESENT
Representative Bill Williams, Chairman
Representative Bill Hudson, Vice-Chairman
Representative Con Bunde
Representative Pat Carney (via teleconference)
Representative John Davies (via teleconference)
Representative Joe Green
Representative Jeannette James
MEMBERS ABSENT
Representative Eldon Mulder
Representative David Finkelstein
OTHER LEGISLATORS PRESENT
Representative Jerry Sanders
COMMITTEE CALENDAR
HB 238: "An Act relating to the oil and hazardous
substance release response fund, repealing the oil
and hazardous substance municipal impact
assistance program and the authority in law by
which marine highway vessels may be designed and
constructed to aid in oil and hazardous substance
spill cleanup in state marine water using money in
the oil and hazardous substance release response
fund, amending requirements relating to the
revision of state and regional master prevention
and contingency plans, altering requirements
applicable to liens for recovery of state
expenditures related to oil or hazardous
substances, relating to a restoration standard in
certain state environmental laws, modifying
definitions of related terms, amending the manner
of computing the amounts required for the
suspension and reimposition of the oil
conservation surcharge, relating to fees to be
charged and collected by the Department of
Environmental Conservation, and annulling a
regulation related to costs for certain site
restorations."
HEARD AND HELD IN COMMITTEE
WITNESS REGISTER
REPRESENTATIVE JOE GREEN, Chair
House Special Committee on Oil and Gas
Alaska State Legislature
Alaska State Capitol, Room 114
Juneau, Alaska 99801-1182
Phone: 465-4931
Position Statement: Testified on the intent of HB 238
JEFF LOGAN, Legislative Assistant
House Special Committee on Oil and Gas
Alaska State Capitol, Room 114
Juneau, Alaska 99801-1182
Phone: 465-4931
Position Statement: Discussed HB 238
MEAD TREADWELL, Deputy Commissioner
Department of Environmental Conservation (DEC)
410 Willoughby Ave., Suite 105
Juneau, Alaska 99801-1795
Phone: 465-5010
Position Statement: Presented facts to work toward a
consensus
SHELBY STASNEY, Director
Office of Management and Budget
Office of the Governor
P.O. Box 110001
Juneau, Alaska 99811-0001
Phone: 465-3568
Position Statement: Reviewed response fund financial
figures
CRAIG TILLERY, Assistant Attorney General
Department of Law
1031 W. 4th Ave., Suite 200
Anchorage, Alaska 99501-1994
Phone: 269-5100
Position Statement: Legal concerns with HB 238
MICHAEL CONWAY, Director
Division of Spill Prevention and Response
Department of Environmental Conservation
410 Willoughby Ave., Suite 302
Juneau, Alaska 99801-1795
Phone: 465-5250
Position Statement: Commented on implications of HB 238 on
his department
PREVIOUS ACTION
BILL: HB 238
SHORT TITLE: OIL/HAZARDOUS SUBS. RELEASE RESPONSE FUND
SPONSOR(S): SPECIAL COMMITTEE ON OIL AND GAS
JRN-DATE JRN-PG ACTION
03/19/93 707 (H) READ THE FIRST TIME/REFERRAL(S)
03/19/93 708 (H) RESOURCES, STATE AFFAIRS
03/24/93 (H) RES AT 08:00 AM CAPITOL 124
03/24/93 (H) MINUTE(RES)
04/07/93 (H) MINUTE(RES)
04/07/93 (H) MINUTE(JUD)
04/14/93 (H) MINUTE(RES)
04/16/93 (H) MINUTE(RES)
04/17/93 (H) RES AT 10:00 AM CAPITOL 124
04/17/93 (H) MINUTE(RES)
ACTION NARRATIVE
TAPE 93-53, SIDE A
Number 000
The House Resources Committee was called to order by
Chairman Bill Williams at 1:45 p.m. Members present at the
call to order were Representatives Williams, Hudson, Bunde,
Green, and James. Members absent were Representatives
Carney, Davies, Finkelstein and Mulder.
HB 238 - OIL/HAZARDOUS SUBS. RELEASE RESPONSE FUND
CHAIRMAN BILL WILLIAMS announced that the meeting was on
teleconference for listen only in Juneau, Soldotna,
Ketchikan and Fairbanks. He stated the committee had
several hearings on HB 238 last session and that it was a
complex and controversial bill which generated a lot of
public comment.
CHAIRMAN WILLIAMS stated that HB 238 was introduced by
Representative Joe Green's Oil and Gas Committee regarding
the Oil and Hazardous Substance Release Response fund, the
so-called "470 Fund." He said the purpose of the meeting
was to give the committee an opportunity to look at the
latest draft of the bill, hear from the sponsor and the
affected departments about what is being proposed, determine
how the present version differs from previous versions, and
how the administration feels about the bill.
CHAIRMAN WILLIAMS stated no public testimony would be heard
and that no action would be taken on HB 238. He requested
that members of the committee, the public and industry
interest groups review the ideas discussed in the meeting
and think about the direction the committee should take on
the bill.
CHAIRMAN WILLIAMS explained the folders contained only new
information; that is, a new proposed version M of the bill,
a sectional analysis of that version, and information and
comments that had been submitted since the last hearing in
April.
Number 070
REPRESENTATIVE JOE GREEN explained that the original intent
of HB 238 was fiscal responsibility and accountability. He
stated that the earlier version was too severe because it
attempted to confine all the expenditures made from the 470
Fund. He explained the 470 Fund was established in 1989 and
imposed an assessment of five cents per barrel on the oil
industry to generate the fund.
REPRESENTATIVE GREEN stated that HB 238 was revised to
provide for a reasonable oversight for oil spill contingency
by taking three cents from the five cents assessment to fill
the original objective of generating a reserve of $50
million. He said when the reserve is full, the three cent
charge will be deleted similar to the elimination of the
five cents charge under the original HB 470.
REPRESENTATIVE GREEN advised there is a significant problem
in the way the fund is administered and explained the intent
of the revised version of HB 238 is to give guidelines to
the legislature, confine expenditures to those which the
fund was intended--to prevent, if possible, clean up if
needed and curtail expenditures which do not directly affect
crude oil spills.
Number 135
JEFF LOGAN, LEGISLATIVE ASSISTANT, HOUSE OIL & GAS
COMMITTEE, informed the committee that after the initial
version of HB 238 was introduced, there was a significant
amount of input both from the Department of Environmental
Conservation (DEC) and the Department of Law, initiating a
process of meetings where a list of revisions needed to the
bill was generated, resulting in version M.
MR. LOGAN explained that version M splits the five cents
assessment into two funds, hopefully a more equitable
solution. He said version M funds DEC oversight operations
and fills a $50 million fund.
MEAD TREADWELL, DEPUTY COMMISSIONER, DEPARTMENT OF
ENVIRONMENTAL CONSERVATION, said he would attempt to state
the facts as they are and work to build a consensus on the
issue. He explained DEC has met with public interest groups
and representatives of companies who are primary taxpayers
of the tax and in both cases, it was agreed that continued
discussions toward a consensus were necessary. Mr.
Treadwell would be making his comments from a talking paper
(available from House Resources).
MR. TREADWELL pointed out that spill prevention response
programs are vital to the public's health, safety,
environment and economic future and the size of DEC programs
to meet those ends is one debate. He told the committee
that today's perception of secure but unequitable funding is
another debate. He said finding secure, equitable and
appropriate funding for needed spill prevention response
programs is an achievable goal.
MR. TREADWELL relayed that the general goal is to maintain a
strong, state led spill prevention and response program. He
noted that Representative Green mentioned the nickels
collected were for crude oil prevention response. Mr.
Treadwell reminded everyone that most of the spills in the
state are non-crude spills.
MR. TREADWELL gave examples of various spill sites around
the state where DEC was the sole responder. He said DEC
feels it very important to build and maintain a $50 million
spill reserve and agrees that an attempt should be made to
achieve a greater equity in funding sources for the non-
crude and hazardous substance prevention and response. He
remarked an argument has been made that the source of
funding is all nickels coming from crude oil and reiterated
that there are large spill risks from non-crude oil, gas
clouds and other substances that pose a threat which the
fund is paying for now.
MR. TREADWELL stated that the first strategy is to expand
response fund sources including cost recovery, using
recovered spill costs to ensure that the fund is
replenished. He said the second strategy is to simplify the
accounting mechanism, to impose or suspend the crude oil
surcharge. He explained that originally when the nickel tax
was assessed, a spill prevention response program was
initiated, a spill reserve was established, and when the
reserve reached $50 million, the tax would be eliminated
until it is needed again, at which time a tax would be
assessed only for the amount needed to run an appropriate
spill program. He noted that as the law was written, there
can be an excess of $50 million in the spill reserve, with
the tax still collected at the full amount and it was agreed
that there is an appropriate change needed in the way the
surcharge is imposed and suspended.
MR. TREADWELL maintained that the response fund's capability
to fund the necessary programs should not be diminished
until other sources are in place for non-crude or hazardous
substance prevention response. He said that in discussions
with various interest groups, specific concerns were
addressed regarding the application of the strategy, the
first being that even though the spill reserve today
approaches $37 million and thus only $13 million would be
necessary to reach a reserve figure of $50 million, the
current law's formula for suspending the tax requires at
least $65 million more to be collected, above additional
expenditures, before the tax is suspended. He felt that was
not what the legislature meant to do.
MR. TREADWELL stated there currently are no built-in
incentives for the legislature to credit repayments to the
state from fund expenditures back to the fund. He said a
third concern is the perception that some authorized fund
expenditures should be unauthorized or further limited. He
explained the checks and balances built into the department
before the spill reserve can be accessed. He further stated
there are numerous examples where people have asked for
funds and the department has declined, as there are no
expenditures out of the spill reserve greater than $25,000
without the commissioner or acting commissioner's
permission.
Number 251
MR. TREADWELL said there is a perception that the size of
the spill prevention and response program seems to grow to
match funds available from the tax, and should instead be
set to meet needs for the environment and safety and funded
from an equitable series of sources on the "polluter pays".
He gave numerous examples of contaminated sites around the
state with many responsible parties cleaning up their own
contamination.
MR. TREADWELL said many cleanups are not part of the
response fund activities but often have come out of the
mitigation account. He said DEC feels it appropriate for
the legislature to look at alternate funding for these
problems, when the state needs to get involved in funding,
and not put them in the response fund.
MR. TREADWELL reviewed four other possible funding sources
for the fund: First, receipts from cost recovery or
reimbursement; second, mitigation including damages, fines,
etc.; third, fees including fees for contingency plan
review by non-crude facilities, financial responsibility
submissions and loading fees; finally, substitution of
general funds such as interest on the spill reserve, use of
other tax revenues, etc.
Number 294
MR. TREADWELL said suggested methods to suspend the tax and
involve other sources, include amend the tax law to state,
simply, that the tax is collected when the balance of the
fund, less the obligations appropriated by the legislature
or spent from the spill reserves provided by law, is less
than $50 million. He added that another consideration is an
incentive clause stating the tax will not be collected in a
year unless other named sources are also appropriated to the
fund.
MR. TREADWELL reviewed methods which would further limit
fund expenditures including the removal of full funding for
the State Emergency Response Commission (SERC) by making an
all-hazards SERC; repeal the provision that allows ferries
to be built with the fund; further checks and balances, such
as requiring review of capital and operating expenditures by
a body such as the SERC in case of spill prevention and
response plan, and the Hazardous Substance Spill Technology
Review Council (HSSTRC) in case of research.
Number 310
MR. TREADWELL noted that projected trends in current cost
components for the program are likely to change. He said if
the fiscal 1994 program is reviewed, the response fund
projected expenditures are approximately $18 million and the
amount expected to remain in the spill reserve at the end of
the year is approximately $37 million. He observed that with
the change in policy, it is possible that the legislature
could appropriate $14 million from this point forward, a $4
million change above and beyond a policy that would put the
funding for the tanks program out of the mitigation account
and would in effect, accomplish the goal of building a spill
reserve faster.
Number 348
MR. TREADWELL said that DEC has looked at an alternative
proposal which does not split the five cents but tries to
accomplish the same goals. Referring to page 12 of his
talking paper, Mr. Treadwell reviewed the response fund
summary including the calculation of the fund based on the
current law. He also reviewed the actual response fund
based on the appropriation. He said the calculation for
suspending the tax under the current law shows there is a
deficit of $15.1 million but in reality, there is $37
million and the amount needed to get to $50 million is very
small. He mentioned that the way the law is written, it
takes into account expenditures that may not have come from
the fund.
Number 381
CHAIRMAN WILLIAMS acknowledged Representative Pat Carney was
on teleconference in Mat-Su.
Number 394
SHELBY STASTNY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
referred to page 12 of the talking paper, and said the
response fund summary was prepared to show a simple
calculation on how the law specifies to calculate the report
that is required quarterly from the Department of
Administration, what is currently available and the real
amount in the response fund. He explained that the law
includes all expenditures but in considering the income, the
law only includes the income which has been generated from
the five cents a barrel tax.
MR. STASTNY stated there has been a significant amount of
money spent out of the fund from sources other than the
nickel a barrel tax; therefore when all the expenditures are
considered against just the nickel a barrel, a negative
number will result. He said in order for the figure in the
left column (calculation) to reach $50 million, the number
in the right column (response fund) has to be approximately
$125 million. Mr. Stastny pointed out that in the right
column, there are $75 million in general fund contributions
and program receipts which are large amounts not used in the
calculation currently required by law.
MR. STASTNY noted the $30 million is the amount reimbursed
to the state by Exxon and the $44 million is also
prepayments from Exxon before the actual expenditures had
been incurred. He stated that the balance of $37 million
has increased during the current administration from $9
million, therefore it is incorrect to state there is a
deficit. Mr. Stastny said the fund is increasing but if it
is to reach $50 million and eliminate the tax, the law needs
to be changed.
Number 449
VICE-CHAIRMAN BILL HUDSON asked what the amount of the
annual collection is.
Number 451
MR. STASTNY replied $ (inaudible).
Number 452
VICE-CHAIRMAN HUDSON asked the amount outstanding in
reimbursements.
MR. TREADWELL replied (referring to page 7 of the talking
paper), that approximately $5.3 million to be paid by Exxon
will be available for fiscal 1995 expenditures, climbing to
$9 million in fiscal year 1999. He said the figures also
include approximately $l million per year in cost recovery.
VICE-CHAIRMAN HUDSON questioned whether the current law
provides for those funds to flow into the same income stream
or do the funds go into the general fund.
MR. TREADWELL stated the funds go into the mitigation
account wherein the legislature can and has appropriated
money into the response fund.
MR. TREADWELL said receipts from Exxon are dependent on an
agreement made on an annual basis between the state of
Alaska and the federal government, negotiated by the
attorney general and the Department of Justice.
Number 535
REPRESENTATIVE GREEN asked what the current total DEC budget
is.
MR. TREADWELL stated the $14.1 million is DEC's estimate of
the oil and hazardous substance prevention and response fund
program needs for future years. He said the entire DEC
budget including all the divisions, without the capital
appropriations, is approximately $45 million.
REPRESENTATIVE GREEN inquired if the $45 million budget
includes the $14.1 million.
MR. TREADWELL replied that it does and also includes federal
funds and various program receipts.
Number 568
VICE-CHAIRMAN HUDSON stated that prior to the grounding of
the Exxon Valdez, most of the spill prevention monies came
from the general fund. He inquired since the spill, whether
the need has shifted from the general fund to the general
fund.
MR. TREADWELL replied that was correct and stated there have
also been several major pieces of legislation since the
spill which have created many new tasks for the department.
REPRESENTATIVE JEANNETTE JAMES asked for a clarification on
other tax revenues.
MR. TREADWELL said that many other states fund this type of
prevention and response activity through fees, taxes, etc.
He acknowledged that was not being proposed presently but
other options should be looked at.
REPRESENTATIVE JAMES inquired if a tax on refineries was
being considered and stated that many of the non-crude
spills would be occurring even if the oil industry was not
present in the state.
MR. TREADWELL responded if the oil industry was not present
in Alaska, many of the contaminated sites and non-crude
spills would in fact be there and further stated that the
royalty portion of the state's oil, which is the source for
much of the state's refining, does not pay into the response
fund directly.
Number 650
MR. TREADWELL said DEC reviewed what would be available if
the surcharge was split and reviewed projections of oil
through the pipeline, which are used in other revenue
projections. He stated that revenue estimates for this year
and future years were also reviewed. He advised that by the
end of December, $26 million will have been collected and
available to the legislature for appropriation next fiscal
year, to be distributed as they wish.
MR. TREADWELL explained that in future years, the amount of
through put the pipeline will likely go down and thus the
number of nickels collected will go down. Therefore, he
asserted that if the five cents per barrel is split and the
two cents in the nickel goes to pay for prevention and
response programs and the three cents is used to pay for a
spill reserve, a situation will occur where the amount in
the two cent fund does not cover the $14 million collected
presently.
MR. TREADWELL said if what is needed to reach the $50
million level is reviewed, and assume $1 million is spent
annually out of the spill reserve on small emergencies, the
three cents would not be collected for a large portion of
the year. He said that if a $14 million per year spill
program is to be funded and the two cent fund is the only
source, other funding sources are required immediately.
Number 722
MR. TREADWELL said that a point made was that as crude oil
through put falls, maybe spill risk falls and stressed that
just as the oil industry has fixed and variable costs,
government has fixed and variable costs as well. He said
variable costs do not go down if the amount of oil goes down
and those costs are based on the number of facilities
overseen.
MR. TREADWELL pointed out that as the department moves
further down the production curve, cost cutting does take
place and often cost cutting in the spill prevention area
means properly using the department's role as a regulator to
make sure that certain things are done.
MR. TREADWELL stated that not only does the program cover
crude and non-crude, it also covers exploration and in his
position as a deputy commissioner, there have been several
instances of intense negotiations with various groups to
determine what spill prevention measures are necessary
during an offshore exploration program.
TAPE 93-53, SIDE B
Number 000
MR. TREADWELL stated that the two cent/three cent option
will not work on its own. He said DEC suggests that the
nickel be calculated by looking at what is needed to build
the spill reserve to $50 million and then collect an amount
necessary each year to cover the cost of the program and if
the program is $14 million, less taxes would be collected in
the early years of the Exxon receipts and in later years,
perhaps after the year 2000, the tax would be $13 million.
The question becomes, how can we ensure that the legislature
is only going to appropriate the $14 million and not look at
the fact that the nickel is available.
MR. TREADWELL stated DEC suggests an incentive clause that
states do not go back and reimpose the tax unless other
funding sources are available and added that DEC is
uncomfortable with splitting the nickel until there is an
understanding with the legislature that the basic needs have
a good funding source presently.
Number 025
REPRESENTATIVE GREEN said after four years of operation,
there should be $56 million in the fund, yet over $100
million has been collected. He asked if $14 million is a
just charge to people who produce and ship crude and cited
that going beyond the year 2000, the fund will eventually
not have $14 million and the question becomes, do you
increase the fund by charging the crude oil producers to
continue something that is predominantly non-crude oil
related.
REPRESENTATIVE GREEN felt that the purpose is to keep the
fund full of dollars if there is a crude oil spill emergency
but many years would be needed to achieve that under DEC's
proposal. He stated the intent of his proposal is to get
the fund full and then utilize the other portion to cover
tasks performed by DEC which are crude oil or hazardous
related but not cover all necessary evils from one source.
He further stated there is no guarantee that the
$14 million could be curtailed if DEC's program was used and
observed that point could never be reached and that $50
million would be available when needed.
Number 063
MR. TREADWELL responded over $100 million has been collected
in the past four years and reminded everyone of the large
expenditure on the Exxon Valdez cleanup, plus the $30
million expenditure attaining a settlement of $1 billion.
He reminded everyone there have been two years of a liberal
legislature and now in the second year of a conservative one
and an abuse of large amounts of money has not occurred.
MR. TREADWELL continued regarding the question of one fund
or two. He said the kinds of training needed, the types of
financial responsibility analysis needed, the kinds of
drills done, the kinds of "how clean is clean" questions
asked at cleanups are all are very similar whether they are
crude or non-crude. If two funds were set up, the two cents
would not cover costs for non-crude issues. He said the $50
million reserve is also a deterrent and gave examples of
people taking responsibility in cases where they would not
have a few years ago. He declared that if the spill reserve
can only be used for a major crude oil catastrophe, the
state would be losing much.
Number 130
REPRESENTATIVE GREEN stated that the starting point was
approximately $160 million and with a reduction of $80
million, $80 million remains, which means a lot of ferries,
etc. He noted that without the five cents a barrel
assessment that would not be possible. He added that other
states seem not to continually tax the crude oil business
and felt in this state particularly, it is not proper
because much of the state's other income is dependent on the
oil industry.
REPRESENTATIVE GREEN remarked that all but five major
companies have left the state because of excessive taxing
but also added that what is being done with 470 fund dollars
is not solely responsible for the downturn of the oil
industry in Alaska but is one of many issues.
Number 135
REPRESENTATIVE GREEN suggested that in ten years, there will
not be enough dollars even if the five cents a barrel
assessment continues because if it is $14 million presently
it will probably be $20 million in ten years. He remarked
that the nickel assessment will not fund all the programs
desired by DEC and suggested that other funding sources need
to be looked at rather than continue to take funds from a
fund which was designed to clean up oil spills.
Number 143
MR. TREADWELL responded that DEC is doing what is mandated
and doing the best job possible to protect the environment
and public health with the funds available and agreed that
the issue of equity and other funding sources need to be
addressed. He noted that there is a secure source of
funding in place for one of the best oil spill prevention
response programs in the country and if that secure source
of funding is eliminated, alternative sources need to be
determined.
Number 160
REPRESENTATIVE GREEN said he is still concerned that under
DEC's proposal, there would be an erratic condition within a
year which is not a desirable situation. He continued that
if HB 238 were to pass, with an effective date of one year,
the amount of funds needed to get to $50 million would be
reached and then the two cents/three cents split would go
into effect and everyone would be satisfied.
Number 200
MR. TREADWELL referred to the spreadsheet on page 8 of the
talking paper, line 3, "five cents surcharge necessary to
maintain spill reserve" and stated that it takes into
account the presumption that the $14 million program would
be funded in future years. It shows a tax necessary in
fiscal year 1996 of 0 because it assumes that the Exxon
receipts are put back into the fund; fiscal year 1997 it
will be $7.7 million; fiscal year 1998 it will be $5.2
million; and in the year 2000 $13 million. He added that if
there were other funding sources available such as interest,
etc. then perhaps the tax would be $4 million. He said the
proposal is a talking proposal and there actually may be
less tax collected than the three cents/two cents taxes but
the equity would be there.
Number 237
REPRESENTATIVE JAMES commented that what she heard was that
in a few years, the $14 million need could be greater and
felt that there should be some sort of prevention program
where the cost would go down instead of up. She also
wondered if it was possible that many expenditures would be
in a catch up situation resulting in less need.
Number 245
MR. TREADWELL replied that scenario would be best and
pointed out that great strides have been made in prevention
and stressed DEC has tried to enforce the law requiring
every facility to have a contingency plan. He added there
are facilities with less than 10,000 barrels without
contingency plans and DEC feels it important to do
prevention work in those areas.
MR. TREADWELL said that DEC was told by the legislature,
upon reviewing the budget last year not to do prevention
work in some areas. He added that the democratic process
and the legislature will waste money just because it is
there to spend.
Number 282
CRAIG TILLERY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, stated he would comment on possible legal concerns on
specific sections of version M. He stated that in Section 5
of HB 238, there is no definition of what a catastrophic oil
release is which becomes a bigger problem because in HB 238,
there is a definition of catastrophic oil release under
46.04 and 43.55 and the two definitions are not the same.
He added that in 46.08 there is also no definition of
catastrophic oil release.
Number 300
MR. TILLERY stated that in regard to the Exxon Valdez
reimbursements, HB 238 would credit the amounts which came
from the response fund into the newly created oil and
hazardous substance release contingency and abatement
account. He said that account is available for expenditures
and felt a dedicated fund had been created because something
had been moved without appropriation. He suggested using
the contingency and abatement mitigation account from which
funds could be appropriated into that account.
Number 328
VICE-CHAIRMAN HUDSON asked what specific part of the
language dedicates the funds.
MR. TILLERY replied under Section 8, part B, lines 14-17.
He stated it previously provided that the percentage be
credited to the mitigation account; then other statutory
language provided that the legislature could appropriate
from the mitigation account to reach the response fund,
which is fine. He further said version M credits it
directly to the abatement account which still needs an
appropriation to something.
REPRESENTATIVE GREEN asked if every time catastrophic spill
is used in the proposal whether it should be redefined.
Number 380
MR. TILLERY said the problem is if you compare the
definition in Section 15 with the definition in Section 26,
they are not the same and each of the definitions are
limited to use in the chapter; therefore neither would fit
AS.26 or AS.46.08
MR. TILLERY stated in Section 12 regarding the lifting of
the surcharge; the surcharge would be suspended on a
cumulative basis, where items subject to deposit were not
deposited would result in a situation where even if the fund
was filled and the surcharge was not being collected and a
cost recovery went into the fund, and it was not felt the
money needed to be put into the fund because the fund had
sufficient money, the fund would still operate. He felt
that would be a problem because it still would be credited
against the surcharge and the amount may eventually be
depleted.
MR. TILLERY continued in Section 13, the language implies a
cut into the $50 million because it would include amounts in
the abatement account.
MR. TILLERY stated in Sections 17 and 18, line 28 "has
access to sufficient resources to protect environmentally
sensitive areas", now reads "and to contain, clean up, and
mitigate" which makes three distinct actions that can be
taken. He felt the change would mean taking containment,
clean up and other necessary actions to mitigate which could
be read to say that containment, clean up and other
necessary actions all modify and mitigate, substantially
cutting back clean up, as once the discharge is mitigated,
nothing else happens. He remarked that it might be a
language problem needing review so there are no
misunderstandings as to its intent.
Number 498
MR. TILLERY said language in Section 23 basically deletes
the provision for public review of the preparation of
statewide plans, which may be acceptable if all plans to be
prepared have been completed.
MR. TILLERY continued that the language in Section 26, lines
13 and 14, "and for which the Governor has issued a
proclamation declaring a condition of disaster emergency",
means the Governor's proclamation is a trigger. He felt
that people may argue in the future that the catastrophic
discharge lasts only as long as that emergency lasts, which
is only 30 days.
Number 551
JEFF LOGAN clarified that the committee was in favor of
setting a trigger in which the Governor did have to make a
declaration thinking that if there was such a disaster after
30 days the legislature would be in session and could
appropriate the money.
Number 564
MR. TILLERY noted that in Section 27, the legislature is
changing the current finding in 46.08.005 from "that the
release of hazardous substance presents a real and
substantial threat to public health and welfare, to the
environment, and to the economy of the state" to one where
only a catastrophic release presents that threat. He said
that is not the legal position his department takes. He
stated there is a lot less than a catastrophic release
creating threats.
MR. TILLERY continued that Section 33 appears to delete the
ability to use the funds for restoration purposes but on the
other hand it can be used to take containment, cleanup and
other necessary actions of those which are defined as
including restoration activities. He said the ability to
use the fund for restoration purposes is not affected but
the fact that it is deleted could be used to argue that the
ability to use the fund for restoration is eliminated.
Number 640
REPRESENTATIVE GREEN suggested that Mr. Tillery talk to the
drafting attorney to ensure that the language avoids the
conflicts pointed out.
MR. TILLERY noted in all the sections he commented on, the
words containing clean up are a problem.
Number 669
REPRESENTATIVE JAMES stated restoration is a nebulous term
and if that word can be avoided there is an advantage. She
said if it cannot be avoided the definition needs to be more
specific because restoration can go on forever by whose
definition restoration is needed.
Number 717
MR. TILLERY stated Section 37, line 11 reads "an oil or
hazardous substance spill" and the suggested change would
add the words "release or spill". He said spill is included
within the definition of release and therefore a better
change might be to substitute release for the word spill.
He noted that the change made does make another change, as
the word release contains an exception for acts of nature,
etc. and as it is written now, a lien for a release which
would have an exception and a spill which would not be
subject to that exception would be allowed.
MR. TILLERY said Section 44 strengthens the law and pointed
out that the one fault it has (tape ended)
TAPE 93-54, SIDE A
Number 00
MR. TILLERY said in looking at the history of HB 238, the
spill reserve account began in 1980 as a $1 million oil
spill reserve account for specific oil spill related
expenses and six years later, the legislature in HB 470
changed it to an oil and hazardous substance release fund,
they supplemented the account and provided the response
funding for both oil and non-oil hazardous substance
cleanups.
MR. TILLERY continued that in 1989, following the Exxon
Valdez spill, there were a number of pieces of legislation
introduced including the five cents a barrel surcharge which
was specifically included in the statutory scheme allowing
both oil and non-oil to be funded out of it. In addition,
he said that most of the programs funded out of the
surcharge fund were included.
MR. TILLERY stressed there is no doubt that the legislature
which enacted the statutes, intended for non-oil hazardous
substance problems as well as oil spills be funded from the
surcharge.
Number 022
MR. TREADWELL said in regard to catastrophic versus non-
catastrophic spill, the proposal sets up a fund which is
funded from two cents of the nickel for non-catastrophic
spills and for operating programs and three cents from the
nickel for catastrophic spills. He gave an example of a
crude oil spill that was less than 100,000 barrels which
involved a department response. Mr. Treadwell stressed that
the response took longer than 30 days, the legal effort
which was initiated and paid for out of the response fund
took far longer than 30 days; restoration efforts took
longer than 30 days and he doubted it would have been
necessary to call the legislature back into session because
of the spill.
MR. TREADWELL said the spill is an example of why DEC feels
it not necessary to divide the nickel but rather, have other
funding sources to address the equity issues raised. He
stressed that the practical application of the law is going
to be a lot easier, and more sensible the way it is running
now.
Number 056
JEFF LOGAN stated that every nickel goes into the general
fund and to say the nickel is being split is a mental and
accounting convenience.
Number 073
CHAIRMAN WILLIAMS pointed out that the reason for the
meeting is to gather information and no decision will be
made.
Number 079
MICHAEL CONWAY, DIRECTOR, DIVISION OF SPILL, PREVENTION AND
RESPONSE, DEC, commented that currently managers make
determinations if the use of the spill reserve is proper and
it starts with state on-scene coordinators, adding that
currently there is no distinction on what kind of spills.
He felt there is a philosophical problem of splitting the
fund and having two different accounts for responding to
spills and creating a political process creating situations
where people will be second guessing and may not respond to
spills they should.
MR. CONWAY stated the department's daily work is done in
less than catastrophic spills. He stated strategically, $1
million annually is used out of the spill reserve for the
less than catastrophic spills.
MR. CONWAY noted that in the proposed HB 238, costs will
come from an amount of money also available for operating
the program, so depending on the uncertainty of the number
of non-catastrophic spills responded to, programs would have
to be cut back and an unknown amount would be appropriated
each year, making it difficult to determine the number of
employees needed, etc.
MR. CONWAY said the language regarding the imminent
substantial threat determination makes him uncomfortable as
again it sets up the state's on scene coordinators for
second guessing. He asked that the fund not be split.
MR. CONWAY clarified that most sites presenting a threat to
public health are from crude oil related industries and
attempts are made to recover the cost from the responsible
parties, so if all of the costs are recovered, there should
be no cost; however, up front money is needed to start an
operation.
MR. CONWAY stressed the non-crude oil industry is not
represented at the meeting and the department is having
problems with that industry getting in compliance with
existing programs. He stated if the non-crude oil industry
is faced with increased costs that are phenomenal with no
catch all or safety net, there may be parts of the state
which may be cut off from non-crude oil.
Number 177
VICE-CHAIRMAN HUDSON asked for a clarification on non-crude
activities.
MR. CONWAY said in Alaska there is a requirement for
contingency plans and non-crude industry has been able to
meet those requirements but open 90 increased the pressure
on that industry.
Number 190
REPRESENTATIVE GREEN questioned if a non-crude activity
could lead to pollution but because it is a shallow pocket
the costs are born by the crude oil producers.
MR. CONWAY said he could not answer for the non-crude
industry and does not know how shallow their pockets are.
Number 201
VICE-CHAIRMAN HUDSON stated he was present when the five
cents a barrel assessment was established and the intent was
to tax the crude oil industry for catastrophic spills
primarily. He said later when the money was flowing and
there were not many (inaudible) on it, legislators began to
see it as a source of funds for leaking underground storage
tanks, helping smaller communities draw up their plans to
fund agencies, etc.
VICE-CHAIRMAN HUDSON further stated in order to get the
accounting to the responsible party correct, there needs to
be a recognition that needs are not going to be fully funded
by the three cents or two cents a barrel, etc. He said as
policy-makers, they need to be aware there are additional
costs which need to come from somewhere else.
Number 240
REPRESENTATIVE GREEN stated that under the two cents/three
cents split, the lion's share of what is needed to take care
of non-crude oil spills is still borne by the crude oil
producers and it is gradually phasing out as the crude oil
phases out. He said DEC is doing a wonderful job but they
are charging the wrong place and by not having a split, not
giving a guideline, it is expedient to continue to charge
against the nickel.
Number 293
VICE-CHAIRMAN HUDSON stated he did not disagree with the
concept of splitting the nickel but suggested that as
policy-makers, they have to be aware that if the source is
cut off, they either have to fund it out of the general
fund, elsewhere or create a new two cent gasoline
(inaudible).
Number 301
REPRESENTATIVE JAMES agreed that the oil producers should
not be charged and what is needed is some kind of provision
to replace that funding source. She felt what needs to be
discussed is how to cover the other side and stressed there
needs to be a more fair policy.
Number 328
CHAIRMAN WILLIAMS said that DEC is aware of the nickel split
and they are trying to develop a plan which satisfies both
industry and the problem being discussed.
Number 335
MR. TREADWELL replied that was correct and as DEC runs the
program, they would like to see the convenience of having
one fund. He added that if different funding sources are
looked at, DEC would cooperate in trying to address the
issues and determine the plan. He said in terms of the
operating issues, DEC asks they not be in a situation where
a special session of the legislature is needed to clean up
an oil spill.
Number 371
REPRESENTATIVE GREEN said one of the reasons for splitting
the nickel was to ensure fiscal responsibility, and he is
concerned about funding under existing conditions if it is
not done. To look and say that $14 million is necessary may
not in fact be true, and whether it is crude or non-crude
oil (inaudible) mindset. He added there may be a lot of
things in the $14 million which are not necessary.
Number 420
MR. TREADWELL reiterated that DEC wants to spend money where
it is needed and DEC wants to ensure that needs are met.
VICE-CHAIRMAN HUDSON asked if the nickel a barrel part of
the expenses of the transport of the pipeline itself.
MR. CONWAY replied it is deducted as a transportation
expense.
(Inaudible)
VICE-CHAIRMAN HUDSON reaffirmed that it is not a part of the
transportation cost or part of the off set of the oil head
value.
MR. TREADWELL replied no.
MR. LOGAN stated the first version of the bill did include
some fees and perhaps those fees should be reinstated in the
next version.
Number 455
REPRESENTATIVE JAMES requested to be included in discussions
on possible fees.
CHAIRMAN WILLIAMS stated the committee needs to decide what
direction to take.
VICE-CHAIRMAN HUDSON said it would be helpful if plain
language graphs were developed showing the nickel split and
the amounts available and the shortfalls in the various
areas being discussed.
Number 526
REPRESENTATIVE JOHN DAVIES stated he agreed with Vice
Chairman Hudson on the need to clarify how the program will
continue and how the funding will be accounted for.
Number 543
REPRESENTATIVE PAT CARNEY asked to be sent a new version of
the bill.
CHAIRMAN WILLIAMS thanked everyone for participating in the
meeting.
ADJOURNMENT
There being no further business to come before the House
Resources Committee, Chairman Williams adjourned the meeting
at 3:30 p.m.
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