Legislature(2001 - 2002)
02/06/2001 10:12 AM 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
February 06, 2001
10:12 AM
TAPES
SFC-01 # 10, SIDE A
CALL TO ORDER
Co-Chair Pete Kelly convened the meeting at approximately
10:12 a.m.
PRESENT
Senator Dave Donley, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Loren Leman
Senator Lyda Green
Senator Gary Wilken
Senator Alan Austerman
Senator Lyman Hoffman
Senator Donald Olson
Also Attending: LARRY DIETRICK, Director, Division of Spill
Prevention and Response, Department of Environmental Conservation;
BRIAN ROGERS, Information Insights; GEORGE CAPACCI, General
Manager, Alaska Marine Highway, Department of Transportation and
Public Facilities; SUE SCHRADER, Alaska Conservation Voters; ERIC
BRITTEN, CSX Lines, Limited Liability Company (LLC)
Attending via Teleconference: From Anchorage: MICHELE BROWN,
Commissioner, Department of Environmental Conservation; BRECK
TOSTEVIN, Assistant Attorney General, Environmental Section,
Department of Law
SUMMARY INFORMATION
SB 16-OIL DISCH PREVENTION: NONTANK VESSELS/RR
The Committee heard from the Department of Environmental
Conservation, the Department of Transportation and Public
Facilities, the Department of Law, Alaska Conservation Voters and
members of the Task Force. The bill was held in Committee.
SENATE BILL NO. 16
"An Act regarding oil discharge prevention and cleanup involving
self-propelled nontank vessels exceeding 400 gross registered
tonnage and railroad tank cars and related facilities and
operations and requiring preparation and implementation of oil
discharge contingency plans for those nontank vessels and railroad
tank cars; amending the definition of 'response action' that
relates to releases or threatened releases of oil and thereby
amending the duties and liabilities of response action contractors;
and authorizing compliance verification for nontank vessels and for
trains and related facilities and operations; and providing for an
effective date."
COMMISSIONER MICHELE BROWN, Department of Environmental
Conservation, testified via teleconference from Anchorage,
indicating that she was the Chair of the Task Force on Motorized
Oil Transport until the passage of SB 273 and served with Senator
Drue Pearce and Representative Pete Kott on the steering committee.
She pointed out that the Task Force included a twenty-three member
cross-section of the maritime industry, the Alaska Railroad and
[indisc.]. She explained that the goal of SB 16 was simple; to
protect Alaska's renewable resources and to keep Alaska's waters
the cleanest and most pristine in the world by including the large
seagoing marine nontank vessels and the Alaska Railroad in Alaska
Safety Net for Oil Spill Prevention and Response.
Commissioner Brown noted that last year the legislature passed SB
273 and SCR 1, which asked the Task Force to work out the details
on how to implement the standards. She indicated that the Task
Force completed the work directed by the legislature and achieved
unanimous agreement to accomplish that goal. She further stated
that SB 273 established a requirement for proof of financial
responsibility for the nontank vessels and the railroad and was
made effective last year. She added that SB 273 also set out a
planning standard for the oil spill response contingency plan (c-
plan), but did not make that a formal requirement, instead the
legislature, through SB 273 and SCR 1, commissioned a Task Force to
determine how to implement those response planning standards and to
provide opportunities to streamline them.
Commissioner Brown further explained that the response planning
standard set by the legislature in SB 273 was the containment and
control of fifteen percent of the maximum oil capacity of the
nontank vessel or train within 48 hours and cleanup of the
discharge within the shortage possible time in order to minimize
the damage to the environment. Nontank vessels were defined as
self-propelled vessels over 400 gross tons not including tank
vessels, oil barges or public vessels. She said that SCR 1
specified 23 members to the Task Force to ensure a diversity of
viewpoints and adequate representation of all groups to be
regulated. She indicated that the Task Force held 11 formal
meetings over a five-month period and the members worked through a
lot of legal and technical issues on oil spill prevention,
contingency plans and response planning standards. She explained
that there were work groups setup to address specific concerns.
She asserted that the recommendations provided by the Task Force
are practical and realistic and meet the requirements implemented
by last years legislature including implementation measures that
use a market-based economy approach to keep costs down. The
recommendations are based on Alaska's existing oil spill response
infrastructure and provide maximum flexibility for meeting the
requirements. She said that private sector initiatives have
already been fostered that significantly increases the resources
that will be brought to bear on a spill. She pointed out that
alliances have been formed between ship agents, stevedoring
companies and spill response cooperatives and a new marine exchange
coving the entire State of Alaska is being created. The members of
the Task Force were extremely intent and assimilated a tremendous
amount of information. She noted that all of the meetings were
very well attended.
Commissioner Brown continued, saying that the Task force
unanimously agreed to support 31 separate recommendations. She
added that it is the Task Force's recommendation to adopt the bill
without amendment since the legal nuances and details have been
reviewed and an enormous amount of effort has gone into formulating
this legislation. She asserted that SB 16 is straight forward in
its' approach and basically makes SB 273 effective, while including
enabling language for regulation detailing out the implementation.
The regulation has effectively been negotiated through the Task
Force proceedings and will be drafted consistent with the 31
recommendations in the report. She summarized that the Task Force
has successfully completed the work requested by the legislature
and has produced unanimous agreement of the reported
recommendations for rule making to allow them to participate in a
oil spill safety net without facing a number of pre-spill
requirements. She expressed her gratitude for the leadership of
Senator Pearce and Representative Kott on the Task Force.
BRIAN ROGERS, Principle of Information Insights and Task Force
facilitator, stated that the Task Force went through a public
process on how to implement the legislation adopted by the
legislature last year. The group reached unanimous agreement on
the recommendations. He noted that most of the recommendations
were not statutory in nature, but rather a guidance for the
departments setting limits on the regulatory process. He indicated
that SB 16 contained the minimum changes in statute that were
necessary to activate the process; basically three things: first,
to activate the contingency planning process; second, to limit
liability for certain participants in the process; third, to enable
the adoption of the regulation.
Mr. Rogers pointed out that the recommendations contained in the
report cover four basic areas: the response planning standard, the
contingency plan process, the prevention and the Alaska railroad.
The Task Force, in unanimously adopting this report, recommended
this legislation with the attached letter of intent. He explained
that the letter of intent is designed to insure that the regulatory
process, that would follow the adoption of this legislation,
follows the intent of the Task Force. The approach chosen by the
Task Force is a market-based approach providing several alternative
means for compliance in order to meet the needs of the different
sectors of the regulated industry. Also, to provide for fazed
implementation, allowing time for response and time for investment
by the regulated community in the expenses necessary to meet the
terms of the bill. He believes the process shows that negotiated
rule making can work; involving industry in writing the rules
together with the regulators can be a successful process.
Mr. Rogers pointed out that the group started with four goals
(listed on page 8 of the report): that the recommendations be
realistic, effective, economically feasible and flexible.
Mr. Rogers indicated that the recommendations in the report, first
on the response planning standard, calls for the vessels to have a
boom three times their length and the ability to deploy it.
Second, cleanup in the shortage time possible, which means there
needs to be a skimmer in the area or the ability to get a skimmer
appropriate to the type of oil to the area within 24 hours. Third,
the standard is fifteen percent of vessel capacity and in the
recommendations they are reducing the standard for a vessel that is
never carrying the full capacity.
Mr. Rogers explained that the second area is the contingency plan,
which has three basic requirements. First, that the vessel has
shown its financial responsibility and has a qualified individual
to make the decisions binding the company. Second, that they have
a response action plan consisting of their procedures for
notification of a spill and that they have a contract with a
primary response action contractor and a contract with an incident
management team to manage a spill should one happen. Third, that
they meet the international maritime requirement. He noted that
alternatives to the contract with cooperatives or primary response
action contractors the vessels provide their own equivalent
resources or can use part of their own resources and part contract
resources, providing owners some flexibility on how they meet the
requirements for contingency planning.
Mr. Rogers said that in addition the recommendations provide for a
generic plan to be developed by the vessel agents for those spot
charters that enter Alaska waters on short notice who are not going
to be in a position to develop a whole plan. The generic plan is
faxed to the owner and signed and faxed back. He further explained
that they have provided for fleet plans that might cover a group of
vessels; an owner of a group of vessels or a group of vessel owners
can ban together to form their own alternative compliance. He
pointed out that recommendations set tight timeframes for
Department of Environmental Conservation review of the
applications. He explained that the initial applications would be
deemed acceptable and then reviewed over a cycle, rather than
vessels having to wait for Department of Environmental Conservation
to approve them in the first place. The recommendations provide
for oil spill drills and for review of compliance by the Department
of Environmental Conservation. He noted that the prevention
measures are all voluntary under international maritime law, but
there is a process set out with a potential reward for vessels that
undertake methods to prevent oil spills. He added that for the
Alaska railroad the group endorsed the railroad's risk analysis
process and basically said that the railroad should go through the
same c-plan process.
Mr. Rogers briefly discussed the sectional analysis of the bill.
· Sections 1 - 3 limits civil liability of oil response action
contractors.
· Section 4 amends the definition of "response action" to
clarify the limitations on civil liability for incident
management team services and response plan facilitator
services.
· Section 5 relates to the proof of financial responsibility and
basically makes the language for nontank vessels identical to
that for tank vessels.
· Section 6 extends the existing innocent passage exemptions to
all of the requirements for nontank vessel c-plans.
· Section 7 sets up the c-plan process. Assuming passage of
legislation this year there will be roughly a year to adopt
regulations and then six months following the adoption of
regulations would be when the c-plan would be due. He noted
that the equipment would not be due for another year and a
half to allow for fazing of capital expenditures.
- (f) requires approved c-plans
- (g) sets forth the contents of those plans
- (h) lays out the alternatives to having contracts
- (i) extends the c-plan provisions of existing law to the
nontank vessels
- (j) & (k) relate to the railroad tank cars that transport
oil
- (l) directs the Department of Environmental Conservation to
adopt the regulations to implement the legislation
· Section 8 is the compliance section that allows the Department
of Environmental Conservation to verify compliance.
· Section 9 is the certification of the effective date of the
statute and the implementing regulation.
· Section 10 provides the immediate effective date of the bill.
Co-Chair Kelly wondered if the private industry is able to respond
to the new need created by the legislation.
Mr. Rogers said yes, in part. He explained that there are three
existing oil spill cooperatives. He indicated that they have a
fazed schedule of moving into areas of Western Alaska and
establishing a hub with equipment. The process designed by the
Task Force was designed to dovetail with that system, so by the
time this is effective there would be equipment ready to respond in
Western Alaska where they do not currently have equipment. He
added that the general feeling is that there are sufficient
contractors.
Co-Chair Kelly wondered if there was a federal requirement hanging
over their head and if there have been a number of spills.
Mr. Rogers responded that there have been a number of spills. He
indicated that the Department of Environmental Conservation could
speak to that in terms of numbers. He noted that there do exist
federal requirements that effect oil spill prevention and response
and this would be an enhancement to that within state waters.
Senator Austerman requested clarification on whether the agencies
would be setting up their own response.
Mr. Rogers clarified that vessels or groups of vessels can set up
their own response.
Senator Hoffman wondered, in the legislation, where it speaks to
when the c-plans and contracts are required.
Mr. Rogers referred to Section 7(j), page 5, line 14, for railroad
and Section 7(f), page 4, line 7, for marine vessels. He explained
that it is the time at which the c-plan has to have been filed with
the Department of Environmental Conservation in order for a vessel
to operate, which is 180 days after the adoption of the
regulations.
Senator Hoffman wondered if they have an indication of the
timeframe?
Mr. Rogers responded that they have anticipated the regulatory
process would take approximately 12 months following the signing of
the legislation; it has to go through whole public process.
Senator Hoffman wondered if it would be some time in 2003.
Mr. Rogers responded that they anticipate the c-plans would be due
in January 2003.
Senator Hoffman asked when the contracts would have to be signed?
Mr. Rogers stated that the contracts would have to be in place at
that time. In order to have a valid c-plan they either need to
have a contract with a response action contractor in place or they
have to certify that they have their own resources to meet the
requirement.
Co-Chair Kelly wondered what happens if the plans are not in place
at that time.
Mr. Rogers responded that the nontank vessel would not be able to
be operated in state.
Co-Chair Kelly asked what the fines were relating to that.
Mr. Rogers deferred the question to the Attorney General's office.
Senator Green requested a glossary of all the terms.
Mr. Rogers understood Senator Green's concern and would add it for
the Committee.
BRECK TOSTEVIN, Assistant Attorney General, Environmental Section,
Department of law, said that he did not have any specific
testimony, but would address any questions. He indicated that
under statute providing for civil assessment the fine ranges from
$500 to $100,000 per day and $5,000 for each day violation
continues.
Co-Chair Kelly added that it seems they would be pretty motivated
to comply.
Senator Hoffman wondered what types of rates are going to be
required with such steep fines.
Mr. Tostevin indicated that in current law and in last years
legislation, SB 273, there was proof of financial responsibility
required.
Senator Hoffman wondered if there was going to be required bonding.
He pointed out that even with a simple filling station there is
substantial bonding required. He noted that it seemed this would
put an additional burden particularly on the small carriers.
Co-Chair Donley requested clarification on whether there was
insurance available to cover people for fines.
Mr. Tostevin responded that some insurance would cover people for
these fines. He clarified that vessels need to have proof of
financial responsibility already in law.
Mr. Rogers indicated that each vessel has to file proof of
financial responsibility, basically, a letter of credit stating
that they could cover the cost of the spill. He explained that
failing to file a response plan would be separate from insurance
that was available in case there was a spill. He noted that most
vessels would insure against those kinds of catastrophes. He did
not believe that Mr. Tostevin was suggesting that insurance would
be available for failing to meet administrative requirements. He
further clarified that the administrative penalty of $500 to
$100,000 per day would be for failing to operate under the law not
for a spill, which has a different set of calculations.
Senator Ward referred to senator Hoffman's question about insurance
and requested clarification that in existing law it requires a
letter of credit that indicates that the entity is financially able
to clean up a spill.
Mr. Rogers responded correct.
Senator Ward remarked that there is already some cost to create
that document.
Mr. Rogers said that the existing letters of credit would impose
costs on the regulated industry. He explained that this
legislation would cover the contingency and prevention side, which
would lower the cost of the spill. He further explained that if
the regulated industry were ready for a spill it would reduce the
overall costs of dealing with a spill and lower costs of insurance
against spills because they would be less likely to happen if
people are prepared for them. Therefore, while it does impose some
costs in terms of the contracts being in place over time the costs
of preparation should save money compared to the cost of a spill.
LARRY DIETRICK, Director, Division of Spill Prevention and
Response, Department of Environmental Conservation. He explained
that the fiscal note projection was taken out to FY07. He pointed
out that they tried to look at the resources that would be required
to implement the plan in the long run, recognizing that the task
force would need a startup window of a couple years. Those couple
years, he stated, would allow for the accommodation of the
promulgation of the rule, which they estimated would be about a
twelve-month process and the completion of that process would
trigger submission of the plans, which would be required 180 days
after the effective date of the regulations. He added that there
is another window to accommodate the capitalization of the
equipment items to bring the whole thing to completion. He
indicated that FY03 and FY04 are the peak years when they would be
receiving the plans and registering the primary response action
contractors for the incident management teams.
Mr. Dietrick further noted that the system is heavily dependent on
the private sector resources to assemble the plans and facilitate
them with the various shippers and return them to the department.
He pointed out that there is a training component that the task
force wants them to perform that would help educate the regulated
community, there is the prevention credit program and they were
also asked to post the contingency plan on a website. He
reiterated that the peak years for accomplishing that would be FY03
and FY04. He explained that the FY02 amount of $78,000 was for the
one position to get started and put the regulation packet together.
He noted that they also increased that with one additional full-
time person for FY03 and FY04 and backed that up with two temporary
positions that may be needed to deal with that peak. He said that
they converted the positions to temporary status so they would not
linger on after they were finished with the review and approval
process, which means they go away in FY05, FY06 and FY07. He
pointed out that two positions or $141,000 is what they believe to
be the minimum cost necessary to process approximately 500
applications accounting for approximately 900 vessels. He
specified that the estimate on the vessels was coming from the
financial responsibility requirement that was imposed in SB 273
last year and became effective on September 1. He informed the
Committee that the bulk of the plans would be done on the private
sector side in terms of the arrangements for the qualified
individuals, the incident commander; in essence the response team
and the response resources. He reported that they estimating that
very few companies will want to develop their own. The
efficiencies using market forces, he thinks, will tend to drive
participation and the sharing of resources the way it was done to
date. He noted that the three cooperatives in the state,
currently, have evolved over the past ten years meeting the state's
new oil spill requirements that were imposed in 1990 based on the
need to meet the requirements. He indicated that the three
cooperatives now provide that capability.
Co-Chair Kelly requested clarification on what happens to the
person brought on to promulgate the regulations after the
regulation process is done.
Mr. Dietrick responded that the person would subsequently become
one of the reviewers of the plan.
Senator Hoffman wondered why they did not use a combination of user
fees, instead of wholly relying upon the oil spill response fund.
Mr. Dietrick explained that the task force did "rassle" with the
funding issue. He referred to Recommendation 31 and indicated that
it was one of the many ways the task force tried to hold the cost
down for everybody; they made a recommendation that the industry
not be charged a user fee. He noted that the recommendation
actually suggested that the response fund and/or general fund be
used. In view of the concerns over the general fund they
interpreted that to mean that the first choice would probably be
the response fund, so they directed that account as the funding
source.
Senator Hoffman wondered what the difference was between user fee
and the one time initiation fee.
Mr. Dietrick deferred the question to the representative from the
Department of Transportation and Public Facilities.
GEORGE CAPPACCI, General Manager, Alaska Marine Highway System,
Department of Transportation and Public Facilities, indicated that
the funding source for all the contingency planning is the spill
response fund for the Alaska Marine Highway. He noted that there
is a fee to sign up with contracting agencies to have those
resources and join the cooperative.
Senator Ward wondered if there was any discussion to have the
industry contract out to private contractors without using any
state employees.
Mr. Cappacci indicated that there was a heavy alliance to use the
current marine infrastructure that has been created in the state
for response as the primary response vehicle. He explained that
the discussion with the Task Force was to not charge user fees for
the regulated community for participating.
Senator Ward wondered why.
Mr. Cappacci indicated that one of the goals of the Task Force was
the affordability of the whole package for the regulated industry;
therefore, the piece about charging a user fee to pay for the cost
to implement the program was discussed and the recommendation of
the Task Force was not charging a user fee to keep the cost down.
Senator Ward wondered if there was analysis on that.
Mr. Cappacci responded that the documentation was included in the
Task Force report and the transcript of the proceeding was also
available.
Co-Chair Kelly asked for the testimony specifically on the bill
itself.
SUE SCHRADER, Alaska Conservation Voters, indicated that they are
pleased with the Task Force and support the requirements of SB 16.
She urged the Committee to support the bill.
ERIC BRITTEN, Manager of planning and development, CSX Lines,
indicated that he was a member of the Task Force created by SB 273
and SCR 1.
SFC-01 # 10, SIDE B 10:59 a.m.
Mr. Britten continued that it was a phenomenal process. He
understood that there is a degree of concern about a lack of
opposition to the bill and the regulations. He indicated that
whether that is true or not, he thinks, the way all parties came to
the table and the interactions were pretty phenomenal. He pointed
out that the report before them is indicative of where they arrived
and it was by consensus. He noted that it took a lot of hard work
and late evenings to work through it; the members of the Task Force
were very dedicated. He said that he personally received several
e-mails of support. The process is working here and the
regulations that have been proposed are focused on cost. He asked
for the Committee's support for SB 16.
ADJOURNED
Co-Chair Kelly adjourned the meeting at 11:00 a.m.
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