Legislature(1993 - 1994)
04/07/1994 05:10 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 7, 1994
5:10 p.m.
TAPES
SFC-94, #54, Side 1 (000-end)
SFC-94, #54, Side 2 (575-269)
CALL TO ORDER
Co-chair Drue Pearce reconvened the meeting at approximately
5:10 p.m.
PRESENT
In addition to Co-chairs Pearce and Frank, Senators Kelly,
Rieger, and Sharp were present. Senator Jacko arrived soon
after the meeting began. Senator Kerttula did not attend.
ALSO ATTENDING: Senator Miller; John Sandor, Commissioner,
Dept. of Environmental Conservation; David Rogers,
Contractual Legal Counsel to Senate Finance; Jack
Chenoweth, Legal Services Division, Legislative Affairs
Agency; Bob Poe, Director, Information and Administrative
Services, Dept. of Environmental Conservation; Mike Conway,
Director, Division of Spill Prevention and Response, Dept.
of Environmental Conservation; Russell Heath, Alaska
Environmental Lobby; Ginny Faye, representing the Regional
Citizens Advisory Council; and aides to committee members
and other members of the legislature.
SUMMARY INFORMATION
SENATE BILL NO. 215
An Act relating to and redesignating the oil and
hazardous substance release response fund and to its
use in the event of a disaster emergency; repealing 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; amending the authority to
contract to provide personnel to respond to a release
or threatened release of oil or a hazardous substance
and to contract to conduct spill related research;
reassigning responsibility for the oil and hazardous
substance response corps and for the emergency response
depots to the Department of Environmental Conservation,
and for the operation of the state emergency response
commission and its attendant responsibilities for the
local emergency planning commissions to the Department
of Military and Veterans' Affairs; and modifying
definitions of terms relating to the preceding
provisions; terminating the nickel-per-barrel oil
conservation surcharge; levying and collecting two new
oil surcharges; and providing for the suspension and
reimposition of one of the new surcharges; and
providing for an effective date.
CSSB 215 (work draft "V") was adopted as a working
document. Additional amendments were proposed and
adopted for incorporation within the work draft. CSSB
215 (Finance) was REPORTED OUT of committee with a "do
pass" recommendation and zero fiscal notes from the
Dept. of Environmental Conservation, Dept. of Public
Safety, etc.
Upon reconvening the meeting, Co-chair Pearce directed that
SB 215 be brought on for discussion and directed attention
to work draft (8-LS1107\V, Chenoweth, 4/6/94). Co-chair
Frank MOVED for adoption of CSSB 215 (Version V) and
requested unanimous consent. No objection having been
raised, CSSB 215 (Fin), the "V" version was ADOPTED.
DAVID ROGERS, Contract Counsel to the Senate Finance
Committee, and JACK CHENOWETH, Legal Services, Legislative
Affairs Agency, came before committee to speak to major
changes within the new draft. Mr. Rogers noted changes in
order of importance.
The prevention account conservation surcharge was increased
from 2.5 cents to 3 cents per barrel, and the response
account conservation surcharge was reduced from 2.5 cents to
2 cents per barrel (Secs. 13 and 17).
Money in the response account can be used to respond to a
release or threatened release of oil or hazardous substance
when the governor declares a disaster emergency or, if
within 120 hours of initiating a response action, the
commissioner of DEC reports to the governor on the release,
the state's action, and the anticipated cost of the response
action. The governor may, at any time during the state's
response, approve, disapprove, or amend the action (Sec.
30). In previous versions of the bill, the commissioner's
action had to be approved by the governor in order for the
commissioner to continue use of the response fund.
The response account inflation proofing provision has been
deleted.
The threshold for municipal impact grants remains 2,500
barrels or more or the equivalent of hazardous substances
(Secs. 2 through 7). Grants could be made from either
account, depending upon the type of spill. School districts
are now eligible for grants.
Co-chair Pearce voiced her understanding that school
districts suffer most of the spills in rural Alaska.
Further, there are no municipalities to receive grants in
some areas.
Fines, penalties, and interest earned on various accounts
accrue to the prevention mitigation account. Under the
prior version, some interest on the response account was
deposited into the response account for inflation proofing,
and fines and penalties and damages were split, depending
upon the type of the spill. Cost recovery moneys remain
split in accordance with the source of the funds used.
Mr. Rogers acknowledged an additional change to Sec. 24 that
may pose a potential problem. It relates to replacement of
the words "equal to" with "not to exceed." Mr. Chenoweth
directed attention to page 16, line 23, and advised members
that "not to exceed" could be construed by the court as
raising either a question of legislative ability to make
appropriations or a violation of dedicated fund
prohibitions. "Not to exceed" sets a maximum limitation
statutorily. Mr. Chenoweth referenced the recent case of
Sonneman v. Hickel where the court implied that statutory
limitations on the ability of the legislature to make
appropriations could be construed as an extension of the
dedicated fund argument. There is no definitive decision on
the issue. Mr. Chenoweth told members he was merely
flagging the wording because of his concerns. Mr. Rogers
explained that the language change was made at the request
of DEC. It would allow the legislature to appropriate less
than the full amount into the prevention account. "Equal
to" may or may not provide that flexibility.
Language relating to hazardous substances is added to the
matching fund provision (Sec. 26). Current law limits it to
oil releases only. Sec. 26 also limits applicability of the
"Pearce Amendment," that deals with emergency response and
preparedness measures, only to oil and hazardous substance
purposes. The amendment was unintentionally drafted too
broadly and allowed use for any disaster emergency purpose.
The section also allows underground storage tank fund
assistance to come from the general prevention account as
opposed to just the portion of the account relating to EXXON
VALDEZ reimbursements.
A new amendment allows local emergency planning committee
costs to be paid out of the prevention fund, subject to a 3%
limit on the estimated annual balance (Sec. 28).
The cost of pursuing cost recovery efforts may be paid out
of either fund, depending on the type of the spill.
Subject to appropriation, the prevention fund can be used to
fund the citizen's oversight council.
Secs. 31, 32, 33, 34, and 35, implement audit
recommendations relating to reporting and interagency
reimbursement requirements.
The last significant change pertains to Sec. 45 (the so
called blackmail clause). Under the prior version of the
bill, the suspension is permanent if the balance is not
appropriated this year. Under the new approach, the
suspension would only last for one year if that amount is
not appropriated this year.
The bill also contains a clarification of what is meant by
spill reserve. Mr. Chenoweth advised that it is described
as the unencumbered, unexpended portion of the oil and
hazardous substance release response fund.
JOHN SANDOR, Commissioner, Dept. of Environmental
Conservation, next came before committee, accompanied by BOB
POE, Director, Administrative Services, Dept. of
Environmental Conservation. The Commissioner voiced support
for the "V" version of the bill which he said meets the
requirements and objectives of both spill prevention and
response.
Co-chair Pearce requested additional information on grant
provisions within the bill. Bob Poe explained that
municipal grants are allowed from both the prevention
account and the response account. Most grants have been
made under an emergency spill situation responded to from
the response account. Under the proposed bill the grant
would be made from the account used to respond to the spill.
Co-chair Pearce next asked how the department determines
whether or not a grant should be made. MIKE CONWAY,
Director, Division of Spill Prevention and Response, Dept.
of Environmental Conservation, explained that in the event
of a spill, the commissioners of DEC and DC&RA would
collaborate on the response effort. DEC is the state on-
scene coordinator for all spills for all state agencies.
The collaborative effort of the two commissioners would
determine whether a grant should be made. An amount would
be set aside from the account utilized to respond to the
spill, and the commissioner of the Dept. of Community and
Regional Affairs would handle disbursement of grant funds.
Senator Sharp inquired concerning the number of ongoing
situations that could be classified as an immediate threat
to the aquifer of people living in a particular area and
could, through collaboration of the commissioners and the
governor, open financing from the response fund rather than
the prevention fund. Mr. Conway told members he knew of no
sites where communities have come to the Dept. of Community
and Regional Affairs or DEC for assistance funds. He
acknowledged that the state has approximately 250
contaminated sites. Most are being addressed through
responsible parties and the state lead program.
Co-chair Pearce stressed that grants would only be used for
release of 2,500 barrels or more (105,000 gallons). The
spill would thus have to be large and probably threaten more
than the aquifer before application for a grant could be
made. Mr. Conway concurred that that was the intent. That
type of spill in a coastal community would place huge
stresses and demands on the community. Under the national
contingency plan, 105,000 is classified as a major spill.
At that point, even at the national level, the Coast Guard
would be involved.
Senator Sharp raised questions concerning a large release
that accumulated over a substantial period of time. Mr. Poe
advised that the 2,500 barrel limit has been in state
statutes for many years and has never been used. Senator
Sharp voiced his understanding that the reason for
establishing a separate account and contributing a 3-cent
surcharge is to "take care of situations like that." He
registered concern over use of a fund for cleanup of massive
spills to "potentially make loans and grants to school
districts and municipalities all over the state . . . ."
Mr. Conway explained that contamination of an aquifer would
fall under the contaminated sites state lead program. That
is provided for in the prevention account.
Mr. Conway cited examples of cases where drinking water
supplies have been contaminated, and a new source must be
found. The proposed bill would allow use of funds for an
alternative source of water. Prior law limited use of fund
moneys for capital purchases. Language within the proposed
bill would "allow that to happen." He stressed that
problems with contaminated aquifers are within the
contaminated sites program that would flow from the 3-cent
prevention account. Bob Poe reiterated that, under the
current 2,500 "trigger," these grants have not been made.
The proposed change was not requested in an effort to offer
more grants, it was included so that smaller corrections
could be made from the prevention account. If grants were
"all on the prevention side," the 3 cents would not be
adequate. Co-chair Pearce advised that provisions allowing
grants to flow from both accounts were incorporated within
CSSB 215 (Res). If the spill is catastrophic, response
flows from the response account, if it is not, response
derives from the prevention account. The change effected by
the "V" version adds school districts and makes them
eligible for grants if the spill meets the 2,500 threshold.
It was not the intent to include release from a slow leaking
tank that spilled 2,500 barrels over a 20-year period.
Senator Kelly suggested that a spill "event" would not have
to occur. All that would be necessary would be for the
commissioner to concur that "this could happen some day in
the future" in order to access the fund. The Senator then
asked how much would flow to the prevention account each
year. Mr. Poe responded that for 1995 the accumulation of
nickels would total $25.8. Sixty percent of the three cents
is approximately $13.5 million. He stressed that the
legislature would determine how this funding is spent
through its appropriation power. Mr. Poe acknowledged
language allowing for use of funding to respond to an
"imminent substantial threat" when the commissioner
determines that response must be undertaken. Through the
history of the fund, less than 1% has been expended in that
manner. All other expenditures have been made through
appropriation. There is no change from that approach in the
proposed bill.
Discussion of the grant process followed between Senator
Kelly and Mr. Poe. Further discussion followed regarding
audit findings relating to use of response fund moneys. Mr.
Poe stressed that audit results indicate the department has
never abused use of the fund. Response to emergencies have
totaled $200.0 to $225.0 a year.
Senator Kelly asked why school districts were included.
Senator Miller voiced his understanding that in some areas
where large spills could occur, school districts are often
the strongest governmental unit in the area. The school
district may thus be the logical candidate to receive the
grant to assist with community services.
Senator Kelly asked if the bill contains provisions
requiring that the Legislative Budget and Audit Committee be
notified when money from the response account is used. Mr.
Poe directed attention to Sec. 34, page 24, lines 18 through
25, and noted report requirements for use of the response
account.
In response to a further question from Senator Kelly
concerning the governor's role in response, Mr. Poe
referenced Sec. 30, page 22, subsection (b). Senator Kelly
MOVED to amend language at page 22, line 27, by adding "and
the legislative budget and audit committee" to provisions
requiring a written report to the governor within 120 hours
of use of response account moneys. Co-chair Pearce asked
that amendments to the bill be held until after public
testimony.
Co-chair Pearce directed attention to written testimony from
the Regional Citizens' Advisory Council (RCAC) and asked if
representatives wishes to testify. GINNY FAYE, advised that
she was available to respond to questions.
RUSSELL HEATH, Executive Director, Alaska Environmental
Lobby, came before committee. He advised that the latest
version of the bill represents a "great improvement over the
earlier versions" and reflects a greater understanding of
the state's prevention and response programs. The following
concerns remain:
1. Splitting of the nickel. While 3 cents will now
be
devoted to prevention, keeping the nickel whole is
clearly in the best interest of the public. The
reason for splitting the nickel is to restrict
fund expenditures to quickly reach the $50 million
cap. The Lobby agrees that the formula for
determining the $50 cap was unfair to the oil
industry and should be change. Changing it to
enable producers to reach the cap sooner, does not
require a split nickel.
2. Distribution of the current $37 million balance of
the fund. Mr. Heath voiced his belief that there is
no moral or rational defense for putting the
entire amount into the response account. Much of
the funding came from the general fund. It should
be split 60/40 between the two accounts. The
consequences of not doing so are that some
programs (corps and depots were cited) may never
be established.
3. Equity. It has been argued that an oil company
should
not pay for things (such as contaminated sites)
over which it has no control or responsibility.
The Lobby has argued that cleanup of contaminated
sites is one of the original purposes of the fund,
and, like all taxpayers, the oil industry cannot
pick and choose the services it wants its taxes to
pay for.
4. The Lobby has also argued that the legislature
should
not removed funding for a critical program without
providing an alternative source.
CSSB 215 (Fin) adds the underground storage tank program to
the list of legal appropriations from the 470 fund. While
it is critical and necessary, it is not part of the purpose
of the fund, and alternative sources of funding exist. The
prevention account, the source of the funds, does not have
the resources to pay for it as well as current programs. It
should be removed from the bill.
In his closing comments, Mr. Heath voiced his hope that the
above-cited concerns could be remedied prior to passage of
the bill from committee.
Co-chair Pearce called for additional testimony. None was
forthcoming. She then called for amendments.
Senator Kelly restated his MOTION to include the legislative
budget and audit committee in notice requirements for use of
response fund moneys (page 22, subsection (b). Co-chair
Pearce called for objections to Amendment No. 1. No
objection having been raised, Amendment No. 1 was ADOPTED.
Co-chair Pearce next directed attention to a memorandum from
Mr. Chenoweth suggesting that language at page 16, line 23,
revert from "not to exceed" back to current law which states
"equal to." Senator Jacko MOVED to effect the change.
Senator Sharp objected. Co-chair Pearce called for a show
of hands. The motion CARRIED, and Amendment No. 2 was
ADOPTED.
Co-chair Pearce explained that in Senate Resources
Committee, Senator Leman added language to the bill
providing a mechanism for inflation proofing the response
fund. Evolution of the 3/2 split included provisions
whereby all interest flows to one particular fund, and there
is no way to use the interest for inflation proofing. She
then said that if the committee intends to inflation proof
the fund, language could be added saying that the
legislature may appropriate funds to do so. Under present
law, the response fund caps at $50 million, and the
legislature may not adds funds for inflation even if it
wanted to. Senator Leman's proposal for inflation proofing
would allow the fund to exceed the $50 million cap. Senator
Kelly voiced his belief that inflation proofing funds would
be needed for other things. He suggested that the $50
million cap remain in place.
End: SFC-94, #54, Side 1
Begin: SFC-94, #54, Side 2
Discussion followed among members concerning accumulated
interest from all four accounts. Senator Miller noted
language within Sec. 24 providing that the legislature "may"
appropriate the interest to the prevention fund. In the
absence of that appropriation, interest earnings would
remain in the general fund.
In response to a question from Senator Kelly concerning the
purposes of the accounts, Bob Poe explained that the
prevention mitigation account collects fines, penalties, and
other types of payments. The response mitigation account
would collect cost recovery on use of the fund.
Appropriations to and from these accounts is made in the
front section of the annual operating budget.
Discussion followed between Mr. Poe and Senator Sharp
regarding cost recovery associated with the response
mitigation account. Mr. Poe noted that the fund could
possibly "go slightly above $50 million" through cost
recovery of "old nickels" and subsequent appropriation of
that recovery, by the legislature, from the mitigation
account to the response account. Mr. Poe voiced his
understanding that the $50 million balance is merely a
trigger mechanism to determine when the 2-cent surcharges is
or is not levied.
Senator Sharp asked if avenues for use of the response
mitigation account are more liberal than for use of funds
from the response account. Mr. Poe explained that funds in
the response mitigation account are technically in the
general fund. Historically, the legislature has taken funds
from the mitigation account and used them for other
purposes.
Senator Sharp next referenced language in Sec. 3 and
suggested that allowing grants to derive from both the
prevention fund and the response fund negates the splitting
of the nickel. He voiced his belief that since the
prevention fund will receive the majority of the surcharge,
language referencing the response fund should be removed.
He then MOVED to remove "and response" at page 4, line 11.
He further MOVED to remove the word "response" and replace
it with "prevention" at page 5, lines 9 & 10, 16, 19, 22.
Senator Kelly voiced his understanding that if there is
imminent danger of a major spill, the other account could be
utilized. Mr. Rogers said that for 045 spills, the grant
would flow from the response account. If it is a non-045
spill, funding would derive from prevention moneys. Mr.
Rogers then voiced his understanding of Senator Sharp's
amendment to be that all grants should flow from the
prevention account, regardless of the type of spill
involved. Senator Sharp concurred. Mr. Rogers advised that
municipalities, villages, and school districts are all
treated the same under the proposed bill. In the course of
further discussion, Mr. Rogers clarified that the 2,500
barrel limitation only applies to eligibility for receipt of
a grant. Expenditures from the 045 account are not grants.
Mr. Poe said that the amendment proposed by Senator Sharp
would have an "extremely detrimental" effect on state
ability to maintain a spill prevention response program.
Past history evidences that grants have never been utilized.
They are intended for large spills--EXXON VALDEZ size.
While provisions for grants have been in statute for many
years, division of funding between prevention and response
efforts is new to CSSB 215 (Fin). In attempting to take an
equitable approach, the department envisioned possible need
for grants for both large and small spills. The department
did not argue for bifurcation of grants. The department
approach supports availability of grants only in cases where
communities are severely impacted by a large spill. If
grants are tied to prevention funding only, and the response
account cannot be used to response to community needs, grant
funding would flow from ongoing operations.
Responding to further comments by Senator Sharp, Mr. Poe
observed that $15 million from the 3-cent surcharge would
accrue to the prevention account the first year. That
decreases over time as production deceases. In addition,
the account would accrue approximately $2 million in
interest. Mr. Poe noted that the proposed bill also allows
capital projects and storage tank assistance funding to flow
from the prevention account. Additional new pressures are
thus levied on prevention funding.
Senator Kelly inquired concerning use of prevention funding
for capital projects. Mr. Rogers pointed to page 20,
subsection (E), language covering costs to acquire, repair,
or improve an asset. He further referenced depot language,
as well. Senator Kelly asked what the language relates to.
Mr. Poe responded, "The emergency response center for
Military and Veterans' Affairs"--the capital project that
caused problems last year. Passage of SB 33 also allows the
Dept. of Military and Veterans' Affairs to incur "some
expenses using the prevention account," providing the
activities are related to spill prevention and response.
Senator Kelly asked if the funds would have to be
appropriated, and Mr. Poe responded affirmatively.
Senator Kelly asked if subsection (F) language at page 20,
allowing use of the prevention fund to pay costs incurred by
local emergency planning committees, was new. Mr. Poe and
Mr. Rogers acknowledged that it was new. Mr. Rogers added
that it is subject to a 3% limitation (Sec. 28). Mr. Poe
explained that while the new language appeared in Senate
Finance drafts, the department has paid for "this kind of
activity, in the past, using the response fund." The 3%
target is based on historical expenditure patterns. In
response to an additional inquiry from Senator Kelly, Mr.
Rogers and Co-chair Pearce advised that the language was
proposed by Senator Leman.
Senator Kelly voiced his understanding that use of funding
for capital purposes is narrowly limited. Co-chair Pearce
concurred. She explained that it was deliberately limited.
Funding must be provided by appropriation. She said that
she sought to ensure that if there is a legitimate use (the
emergency center at the Anchorage armory was cited), funding
from this source makes sense. It responds to Dept. of Law
denial of use of the appropriation to the armory, last year.
Further discussion of current funding for local emergency
planning followed. Mr. Poe said that the current budget
request totals $400.0. Mike Conway explained that 18 local
planning committees are at various stages of completion of
their plans. He further described the method utilized by
local committees to secure funding.
Senator Rieger called for a vote on Amendment No. 3,
proposed by Senator Sharp (see page 9 of these minutes).
Senator Sharp advised that he wished to WITHDRAW his
amendment. He expressed concern that existing language
would provide greater access to the $50 million response
account, but suggested that if that is the case, corrective
legislation could be introduced at a future time. Co-chair
Pearce said she would share his concern had the department
audit evidenced misuse. A total of $120 million has flowed
to the fund, and the department has not "made huge grants
like we're concerned about." No objection having been
raised, Amendment No. 3 was WITHDRAWN.
Senator Sharp next directed attention to page 3, line 21,
and MOVED to add "is spontaneous and" following the word
"release." Co-chair Frank concurred in the amendment,
advising that it describes a large release "all at once" as
opposed to something that has leaked over time. Senator
Rieger MOVED to amend the motion to "was spontaneous and."
He then called for the question. Co-chair Pearce called for
objections. No objection having been raised, the motion on
the amendment to Amendment No. 4 carried. Co-chair Pearce
called for a show of hands on Amendment No. 4. No objection
having been raised, Amendment No. 4 was ADOPTED.
Senator Kelly directed attention to page 20, line 14, and
voiced need to provide oversight of local emergency planning
committee costs by adding "approved by the Commissioner"
following "costs" and before "incurred." He then so MOVED.
Senator Rieger again called for the question on Amendment
No. 5. Co-chair Pearce requested a show of hands. No
objection having been raised, Amendment No. 5 was ADOPTED.
Senator Kelly referenced page 20, lines 30 and 31
(subsection (J)), and page 21, line 1, and MOVED to delete
language providing for reimbursement of the Alaska
Legislative Council for expenditures for operation of the
Citizens' Oversight Council on Oil and Other Hazardous
Substances. Mr Chenoweth noted need to delete associated
language within Sec. 29 as well (page 21, lines 30 and 31,
and page 22, lines 1 through 3). Senator Kelly noted that
the oversight council was established soon after the EXXON
VALDEZ spill. It was subsequently found to be duplicative
and was never funded. Senator Kelly restated his MOTION to
delete all references to the council from the bill. Co-
chair Pearce OBJECTED. She then called for a show of hands.
The motion CARRIED on a vote of 4 to 1, and Amendment No. 5
was ADOPTED.
Senator Jacko MOVED that CSSB 215 (Fin) pass from committee
with individual recommendations. No objection having been
raised, CSSB 215 (Fin) was REPORTED OUT of committee with an
indeterminate fiscal note from the Dept. of Law and zero
notes from the Dept. of Environmental Conservation, Dept. of
Public Safety, Dept. of Revenue, and Dept. of
Administration. Co-chairs Pearce and Frank and Senators
Jacko, Kelly, and Sharp signed the committee report with a
"do pass" recommendation. Senator Rieger signed "no
recommendation."
ADJOURNMENT
The meeting was adjourned at approximately 6:30 p.m.
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