Legislature(2013 - 2014)SENATE FINANCE 532

02/26/2013 09:00 AM Senate FINANCE


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09:10:37 AM Start
09:13:00 AM SB27
10:44:21 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 27 REGULATION OF DREDGE AND FILL ACTIVITIES TELECONFERENCED
Heard & Held
+ SB 26 LAND DISPOSALS/EXCHANGES; WATER RIGHTS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  SENATE FINANCE COMMITTEE                                                                                      
                     February 26, 2013                                                                                          
                         9:10 a.m.                                                                                              
                                                                                                                                
9:10:37 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer called the Senate Finance Committee meeting                                                                      
to order at 9:10 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Kevin Meyer, Co-Chair                                                                                                   
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Anna Fairclough, Vice-Chair                                                                                             
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Daniel Sullivan, Commissioner, Department of Natural                                                                            
Resources; Larry Hartig, Commissioner, Department of                                                                            
Environmental Conservation.                                                                                                     
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Joseph Sebastian, Kupreanof, Self.                                                                                              
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 26     LAND DISPOSALS/EXCHANGES; WATER RIGHTS                                                                                
                                                                                                                                
          SB 26 was SCHEDULED but not HEARD.                                                                                    
                                                                                                                                
SB 27     REGULATION OF DREDGE AND FILL ACTIVITIES                                                                              
                                                                                                                                
          SB 27 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
                                                                                                                                
Co-Chair   Meyer   clarified   that   Commissioner   Sullivan                                                                   
presented  a general  overview  on  permitting  in the  state                                                                   
that related to both bills.                                                                                                     
                                                                                                                                
9:13:00 AM                                                                                                                    
                                                                                                                                
DANIEL   SULLIVAN,   COMMISSIONER,  DEPARTMENT   OF   NATURAL                                                                   
RESOURCES,  stated  that  SB  27 was  part  of  an  important                                                                   
multi-year   effort  from  the   Parnell  administration   on                                                                   
permitting   reform  and  modernization   that  had   "strong                                                                   
bipartisan support"  from the legislature. In  addition to SB
26 and  SB 27,  the governor  introduced  SB 59  - Oil &  Gas                                                                   
Exploration/Development   Areas    that   also   dealt   with                                                                   
permitting  issues.   He  explained  that   his  presentation                                                                   
titled "Statewide  Permitting Reform" (copy on  file under SB
26) placed  the permitting  reform and modernization  efforts                                                                   
by the  Parnell administration  in a  broader perspective  of                                                                   
the three  bills, how they fit  together, and in  the context                                                                   
of trends throughout the country.                                                                                               
                                                                                                                                
9:14:24 AM                                                                                                                    
                                                                                                                                
Commissioner Sullivan discussed Slide 2:                                                                                        
                                                                                                                                
     "Importance   of   Permitting    Reform   for   Alaska's                                                                   
     Competitiveness."                                                                                                          
                                                                                                                                
     Permitting  reform has  bipartisan,  national and  local                                                                   
     recognition and support.                                                                                                   
                                                                                                                                
     •Permitting   reform   is   a   bipartisan   effort   as                                                                   
     policymakers realize  the economic benefits  of allowing                                                                   
     large-scale  development   projects  to  proceed   in  a                                                                   
     responsible, timely manner                                                                                                 
     •States   as   politically    diverse   as   California,                                                                   
     Massachusetts,  Indiana,  and Kansas  are fully  engaged                                                                   
     in modernizing their permitting processes                                                                                  
     •The Federal  government also recognizes the  issues and                                                                   
     has  undertaken initiatives  to  reduce costs,  simplify                                                                   
     the system, and eliminate redundancy and inconsistency                                                                     
     •Last year  (February 2012),  The Economist ran  a cover                                                                   
     story  called  "Over-regulated   America"  in  which  it                                                                   
     concluded  that  "America needs  a  smarter approach  to                                                                   
     regulation"  that  will "mitigate  a  real danger:  that                                                                   
     regulation   may  crush  the   life  out  of   America's                                                                   
     economy"                                                                                                                   
     •In  Newsweek   (June  2011),  President   Bill  Clinton                                                                   
     lamented  that  it  can  take three  years  or  more  to                                                                   
     permit major  economic development projects.  One of his                                                                   
     top recommendations  to put  Americans back to  work was                                                                   
     to speed  up the regulatory  approval process  and grant                                                                   
     state  waivers on  environmental rules  to hasten  start                                                                   
     times on construction projects                                                                                             
                                                                                                                                
Commissioner Sullivan  pointed out that the  administration's                                                                   
permitting reform  was part of a national,  bipartisan trend.                                                                   
After  the  economic  downturn   many  states  primary  focus                                                                   
became permitting reform and modernization.                                                                                     
                                                                                                                                
Commissioner Sullivan turned to Slide 3:                                                                                        
                                                                                                                                
     "Importance   of   Permitting    Reform   for   Alaska's                                                                   
     Competitiveness."                                                                                                          
                                                                                                                                
     Permitting  reform is  a national  issue affecting  U.S.                                                                   
     competitiveness.                                                                                                           
                                                                                                                                
     •Potential  investors  sometimes express  reluctance  to                                                                   
     pursue projects  in the U.S.  and Alaska because  of the                                                                   
     ever-present risk of permitting delays and litigation                                                                      
                                                                                                                                
     •In  2012,  the  investment firm  Behre  Dolbear  Group,                                                                   
     which  undertakes  an annual  global  survey of  mineral                                                                   
     sector investment,  ranked the United States  last (tied                                                                   
     with  Papua  New Guinea)  out  of  25 countries  in  the                                                                   
     category of "permitting delays"                                                                                            
                                                                                                                                
          o "Permitting delays are the most significant                                                                         
             risk to mining projects in the United States"                                                                      
                                                                                                                                
          o States are negatively impacted by federal rules                                                                     
            that they are bound to enforce resulting in  a                                                                      
            7- to 10-year waiting period before mine                                                                            
            development can begin                                                                                               
                                                                                                                                
          o Australia is one of the countries with the                                                                          
            fewest permitting delays                                                                                            
                                                                                                                                
     •Contrast Alcan Highway construction                                                                                       
                                                                                                                                
Commissioner Sullivan stressed that the issue was                                                                               
critically important to the administration, demonstrated by                                                                     
the introduction of three permitting bills this session.                                                                        
Commissioner Sullivan referenced Slide 4:                                                                                       
                                                                                                                                
     "Importance   of   Permitting    Reform   for   Alaska's                                                                   
     Competitiveness."                                                                                                          
                                                                                                                                
     Jobs and  the Environment  are Undermined by  Permitting                                                                   
     Delays and Overregulation                                                                                                  
                                                                                                                                
     •While  an  overly  burdensome   regulatory  system  can                                                                   
     discourage  investments and  job creation,  it can  also                                                                   
     undermine, not enhance, environmental protection                                                                           
                                                                                                                                
      •When companies  forgo investing in places  like Alaska                                                                   
     and  the   U.S.-places  with  very   high  environmental                                                                   
     standards-because  of regulatory  delays, it can  result                                                                   
     in  passing energy  and  mineral investment  to  nations                                                                   
     with  substandard environmental  regulations and  little                                                                   
     capacity or desire to protect the environment                                                                              
                                                                                                                                
          o Last  year the Associated Press estimated  that 5                                                                   
          to  20  million  tons  of  oil  leaked  a  year  in                                                                   
          Russia.  At even the lower  end, that would  be the                                                                   
          equivalent  of a  Deepwater  Horizon blowout  about                                                                   
          every two months                                                                                                      
                                                                                                                                
          o Russia experienced approximately 18,000 oil                                                                         
          pipeline ruptures in 2010 - the figure in the                                                                         
          U.S. for the same year was 341                                                                                        
                                                                                                                                
     •The  global environment  would  be much  better off  if                                                                   
     hydrocarbons and  other natural resources  were produced                                                                   
     in countries  with the  highest environmental  standards                                                                   
     rather than some of the lowest                                                                                             
                                                                                                                                
Commissioner  Sullivan  expounded that  the  administration's                                                                   
goal  was to  maintain environmental  standards and  believed                                                                   
that Alaska had  some of the highest environmental  standards                                                                   
in  the world.  Establishing  permitting  efficiency  created                                                                   
certainty and was not about "cutting corners".                                                                                  
                                                                                                                                
Commissioner Sullivan moved to Slide 5:                                                                                         
                                                                                                                                
     "Importance   of   Permitting    Reform   for   Alaska's                                                                   
     Competitiveness."                                                                                                          
                                                                                                                                
     Timely,   predictable,  and   efficient  permitting   is                                                                   
     critical to other statewide strategies                                                                                     
                                                                                                                                
     Secure Alaska's Future: Strategic & Critical Minerals                                                                      
                                                                                                                                
     I.  Undertake   a  statewide   assessment  of   Alaska's                                                                   
     strategic mineral  potential-millions budgeted  for this                                                                   
     project                                                                                                                    
     II.  Provide support  for  the development  of known  or                                                                   
     highly   prospective   strategic   mineral   occurrences                                                                   
     throughout  Alaska through  infrastructure  partnerships                                                                   
     and incentives                                                                                                             
     III.   Improve   the   structure   and   efficiency   of                                                                   
     permitting  processes  in   order  to  expedite  mineral                                                                   
     development, including strategic minerals                                                                                  
     IV.   Deepen  partnership   and  cooperation   with  the                                                                   
     federal    government,    local   governments,    Native                                                                   
     corporations,  and  other   potential  new  entrants  to                                                                   
     encourage   domestic   exploration,   development,   and                                                                   
     processing of REEs and other strategic minerals                                                                            
     V.  Attract  new  investment and  markets  for  Alaska's                                                                   
     abundant mineral resources                                                                                                 
                                                                                                                                
     Secure Alaska's Future: Oil                                                                                                
                                                                                                                                
     I.   Increase   production   by   making   Alaska   more                                                                   
     competitive                                                                                                                
     II.  Ensure the  permitting  process  is structured  and                                                                   
     efficient                                                                                                                  
     III.  Facilitate  and  incentivize  the  next  phase  of                                                                   
     North Slope development                                                                                                    
     IV. Promote  Alaska's resources and  positive investment                                                                   
     climate to world markets                                                                                                   
                                                                                                                                
Commissioner Sullivan reviewed Slide 6:                                                                                         
                                                                                                                                
     "Statewide Permitting Reform -Strategy-."                                                                                  
                                                                                                                                
     DNR has  been working with  a team from DEC,  ADF&G, and                                                                   
     LAW to develop and advance strategies that aim to:                                                                         
     I. Improve  agencies' internal  permitting structure  to                                                                   
     create a more efficient, timely, and certain process                                                                       
     II.   Enhance   coordination  within   different   state                                                                   
     departments    and   with    different   entities    and                                                                   
     stakeholders throughout the state                                                                                          
     III.  Seek input from  the public  about the  permitting                                                                   
     process  including input  from municipalities,  industry                                                                   
     and non-governmental organizations                                                                                         
     IV.  Improve  coordination  between  the state  and  the                                                                   
     federal  government-federal  permitting  issues  have  a                                                                   
     strong influence on state projects                                                                                         
     V. Anticipate  and plan for  permitting the  next phases                                                                   
     of resource development, e.g. the Shale Oil Task Force                                                                     
                                                                                                                                
     Objective:  Improve  the  State of  Alaska's  permitting                                                                   
     processes  in order  to advance the  public interest  by                                                                   
     ensuring   projects   are   permitted   in   a   timely,                                                                   
     predictable  and  efficient  manner  while  safeguarding                                                                   
     the environment.                                                                                                         
                                                                                                                                
Commissioner Sullivan emphasized that the permitting bills                                                                      
were essential for accomplishing the permitting reform                                                                          
strategies.                                                                                                                     
                                                                                                                                
9:20:26 AM                                                                                                                    
                                                                                                                                
Commissioner Sullivan turned to Slide 7:                                                                                        
                                                                                                                                
     "Statewide   Permitting  Reform  -Significant   Progress                                                                   
     Made-."                                                                                                                    
                                                                                                                                
     •In FY12,  the Legislature  provided approximately  $2.7                                                                   
     million in  operating funds for the Division  of Mining,                                                                   
     Land  &  Water  to  create  efficiency,  timeliness  and                                                                   
     certainty in the permitting process                                                                                        
                                                                                                                                
     •We utilized  capital funding  from FY12 ($2.5M  for the                                                                   
     Unified  Permit  Project  and  Document  Management)  to                                                                   
     focus on business management software and services                                                                         
                                                                                                                                
     •In FY13,  the Legislature approved the  continuation of                                                                   
     FY12  operating funds as  part of  the ongoing  base for                                                                   
     permitting and  an additional $950.0 to  cover increased                                                                   
     personnel  costs and  fill vacant  positions focused  on                                                                   
     permitting                                                                                                                 
                                                                                                                                
          o FY13  capital budget  included $3.3M  to continue                                                                   
          work on  the Unified Permit Project,  including the                                                                   
          continuation   of   IT  strategies   and   Business                                                                   
          Process Management                                                                                                    
                                                                                                                                
     •We   reclassified   and   updated  over   50   position                                                                   
     descriptions                                                                                                               
                                                                                                                                
     •Since  the  beginning of  FY12,  the backlog  has  been                                                                   
     reduced by 38.2% (1,015 authorizations)                                                                                    
                                                                                                                                
     •We have  conducted public meetings statewide  for input                                                                   
     on state permitting processes                                                                                              
                                                                                                                                
     •We are  evaluating internal  processes to identify  and                                                                   
     fix inefficiencies                                                                                                         
                                                                                                                                
Commissioner  Sullivan spoke  to Slide  8 titled,  "Statewide                                                                   
Permitting  Reform -Significant  Progress  Made-." The  slide                                                                   
depicted  a graph that  portrayed the  Department of  Natural                                                                   
Resources permitting  backlog from  FY 2006 through  FY 2012.                                                                   
He reported that  the department was focused  on reducing the                                                                   
backlog.   He  noted  that   the  backlog   was  reduced   by                                                                   
approximately  1000,  from a  high  of 2,658  in  FY 2011  to                                                                   
1,643  by the  end  of 2012.  The  department's  goal was  to                                                                   
eliminate the backlog within three years.                                                                                       
                                                                                                                                
Commissioner Sullivan addressed Slide 9:                                                                                        
                                                                                                                                
     "Statewide   Permitting  Reform  -Significant   Progress                                                                   
     Made-."                                                                                                                    
                                                                                                                                
     2012 Statutory Changes - HB 361                                                                                            
                                                                                                                                
     •The  Division  of  Mining, Land  and  Water  identified                                                                   
     over  30  statutory  changes   that  would  help  reduce                                                                   
     applicant    costs,    create    efficiencies,    reduce                                                                   
     redundancies,   and  reduce   opportunities  for   legal                                                                   
     challenges                                                                                                                 
                                                                                                                                
     •During  the  2012  Legislative  session,  the  Governor                                                                   
     introduced HB  361, which included the  highest priority                                                                   
     changes  related to leasing  and disposal programs  that                                                                   
     would  help   reduce  the   permitting  burden   on  the                                                                   
     applicant  and  free more  time  for  staff to  work  on                                                                   
     processing applications                                                                                                    
                                                                                                                                
     •The Legislature  passed HB 361  and it has  been signed                                                                   
     by the governor.                                                                                                           
                                                                                                                                
Commissioner   Sullivan  noted  that   HB  361  passed   with                                                                   
bipartisan  support but  was only  one piece  of the  ongoing                                                                   
reform effort.                                                                                                                  
                                                                                                                                
                                                                                                                                
Commissioner Sullivan identified Slide 10:                                                                                      
                                                                                                                                
     "Statewide Permitting Reform -2013 Legislature-"                                                                           
                                                                                                                                
     2013 Statutory Changes - HB 77 & SB 26                                                                                     
                                                                                                                                
     •Building  on  the  success  of 2012,  the  Division  of                                                                   
     Mining,  Land   and  Water  has  identified   additional                                                                   
     statutory   changes    that   would    help   streamline                                                                   
     permitting  requirements  for  the  public  to  use  and                                                                   
     enjoy Alaska's land and resources                                                                                          
                                                                                                                                
     •Governor  Parnell  has introduced  HB  77, which  would                                                                   
     reform   and   streamline  procedures   for   obtaining,                                                                   
     issuing,  and appealing permits,  leases, best  interest                                                                   
     findings, and other DNR authorizations                                                                                     
                                                                                                                                
     •It would  allow DNR to  establish a general  permit for                                                                   
     an   activity   on   state  land   unlikely   to   cause                                                                   
     significant and irreparable harm to the State                                                                              
                                                                                                                                
     •It would  prevent non-agency  entities from  being able                                                                   
     to  apply directly  for  a  reservation of  water;  this                                                                   
     does  not   affect  holders   of,  or  applicants   for,                                                                   
     standard  water rights, temporary  water use  permits or                                                                   
     water                                                                                                                      
                                                                                                                                
Commissioner Sullivan examined Slide 11:                                                                                        
                                                                                                                                
     "Statewide Permitting Reform -2013 Legislature-"                                                                           
                                                                                                                                
     2013 Statutory Changes - HB78 & SB27                                                                                       
                                                                                                                                
     •Section  404 of the  Clean Water  Act (CWA) requires  a                                                                   
     permit  from the  Corps of  Engineers  for discharge  of                                                                   
     dredged or fill material into waters of the U.S.                                                                           
     •Purpose is  to provide the State authority  to evaluate                                                                   
     and,  potentially,  assume  primacy  for  permitting  of                                                                   
     dredge  and fill activities  in waters  and wetlands  in                                                                   
     the State, as provided for in the CWA                                                                                      
                                                                                                                                
     •State  primacy  would  still   be  subject  to  federal                                                                   
     oversight  and  must  be  as stringent  as  the  current                                                                   
     federal  program,  but should  help  ensure funding  and                                                                   
     staffing   for  the  program,   provide  greater   state                                                                   
     participation  and control,  enable the  State to  focus                                                                   
     resources where most needed, and better insulate the                                                                       
     program from national politics                                                                                             
                                                                                                                                
Commissioner  Sullivan  voiced that  primacy  was a  critical                                                                   
element  for   permitting  modernization.  He   stressed  the                                                                   
importance  of  the  state  to take  "control  over  its  own                                                                   
destiny"  in   regards  to   projects.  He  appreciated   the                                                                   
legislature's support of permitting reform.                                                                                     
                                                                                                                                
Senator   Hoffman   cited   slide  8.   He   referenced   the                                                                   
legislature's   previous   efforts   to   help   reduce   the                                                                   
permitting  backlog through budget  appropriations.  He asked                                                                   
whether   additional   appropriations  would   expedite   the                                                                   
process. Commissioner  Sullivan cited  slide 7. He  explained                                                                   
that the  slide highlighted  the substantial budget  requests                                                                   
the  Department of  Natural Resources  (DNR)  brought to  the                                                                   
legislature  in FY  2012 and  FY 2013  to address  permitting                                                                   
reform and  the backlog. Starting  in FY 2012  the department                                                                   
filled vacant  positions and embarked  on the  Unified Permit                                                                   
Project and  Document Management.  He reported that  the $2.7                                                                   
million fundingfor the Division of Mining,  Land & Water was                                                                   
adequate. He  appreciated the  legislative support.   He felt                                                                   
that  the  "informal"  goal  of  eliminating  the  permitting                                                                   
backlog   within  three   years  was   achievable  with   the                                                                   
"significant" funding already received.                                                                                         
                                                                                                                                
9:27:51 AM                                                                                                                    
                                                                                                                                
Senator Hoffman referenced  the 5th bullet point  on slide 5,                                                                   
"Attract  new investment  and markets  for Alaska's  abundant                                                                   
mineral  resources", and  questioned what  the prospects  for                                                                   
new investments  were. Commissioner  Sullivan responded  that                                                                   
DNR  was very  aggressively promoting  the state's  "greatest                                                                   
natural  resource  basins  in  the  world"  both  within  and                                                                   
outside  the United States.  He informed  the committee  that                                                                   
over the last  two years DNR hosted a strategic  and critical                                                                   
minerals summit  in Fairbanks resulting in a  tremendous sold                                                                   
out  response. He  elaborated  that the  issue of  permitting                                                                   
reform   played  a   role  in   promoting  Alaska's   natural                                                                   
resources.                                                                                                                      
                                                                                                                                
Senator  Olson acknowledged  DNR efforts.  He questioned  how                                                                   
much   additional   revenue    the   streamlined   permitting                                                                   
processes  brought to  the state  in  the last  year or  two.                                                                   
Commissioner   Sullivan  deemed   that  the  department   had                                                                   
"enormous success"  attracting companies to Alaska.  He noted                                                                   
a "quiet  boom" in the minerals  sector. He stated  that "one                                                                   
third of all  exploration investment in the  United States in                                                                   
the  past  two  years"  occurred   in  Alaska.  Oil  and  gas                                                                   
companies  were showing  a lot  of interest.  He pointed  out                                                                   
that the  largest LNG  [liquid natural  gas] consumer  in the                                                                   
world; Korea  Gas travelled to  Alaska as a direct  result of                                                                   
the   administrations   aggressive   outreach   efforts.   He                                                                   
remarked  that  the  oil  and  gas  industry,  in  search  of                                                                   
favorable   or   more   competitive    investment   climates,                                                                   
monitored the state's  permitting and tax reform  efforts. He                                                                   
believed the strategy was "bearing fruit."                                                                                      
                                                                                                                                
Senator  Olson appreciated  DNR's  efforts  to  reach out  to                                                                   
investors and  noted that "responsible development"  fostered                                                                   
the Alaskan  lifestyle. He  noted the streamlined  permitting                                                                   
efforts and  expressed concern  over keeping industry  in the                                                                   
"realm   of   responsibility"    while   developing   natural                                                                   
resources.  He  observed  that   the  oil  industry  recently                                                                   
demonstrated   that  it  was   not  acting  responsibly.   He                                                                   
exemplified  the 2012  Shell  [Royal Dutch  Shell]  accidents                                                                   
                                                                                                                                
with the drill ship Kulluk                                                                                                      
                                                                                                                                
                                                                                                                                
[in Kiliuda  Bay, Alaska]  and noted  a natural disaster  was                                                                   
                                                                                                                                
narrowly avoided.                                                                                                               
He  wondered   how  DNR   was  finding   a  balance   between                                                                   
responsible development  and industry mistakes.  Commissioner                                                                   
Sullivan  reported   that  DNR  emphasized   Alaska's  strong                                                                   
record of  developing resources and environmental  protection                                                                   
as  part of  the department's  outreach. He  voiced that  the                                                                   
state  wasn't   interested  in   investors  who   disregarded                                                                   
environmental   standards.    Conversely,   he    cited   the                                                                   
Kensington Mine, where  it took 10 to 20 years  to permit, as                                                                   
an argument  for the streamlined  processes. He  thought that                                                                   
the  federal  government's  permitting   process  was  flawed                                                                   
[with regard to  off shore drilling permitting].  The [Artic]                                                                   
permitting effort  took five years and did not  result in any                                                                   
successful   exploration  drilling.   He   voiced  that   the                                                                   
department   agreed  with   maintaining  high   environmental                                                                   
standards.  He  thought  that  efficiencies,  certainty,  and                                                                   
timelines   in   the   permitting   process   and   sustained                                                                   
environmental  standards  were  not  mutually  exclusive  and                                                                   
attracted  more  investment  with  companies  who  wanted  to                                                                   
uphold high standards.                                                                                                          
                                                                                                                                
9:35:45 AM                                                                                                                    
                                                                                                                                
Senator  Bishop  expressed  satisfaction   with  the  reduced                                                                   
permitting   backlog.   He  inquired   whether   DNR  had   a                                                                   
methodology or  ranking of permit applications.  Commissioner                                                                   
Sullivan replied  that DNR  did prioritize applications,  and                                                                   
that   the  process   was   evolving.   The  department   was                                                                   
attempting  to  fix its  internal  permitting  processes.  He                                                                   
exemplified  DNR's prioritizing  of  Pt. Thomson  permitting.                                                                   
The department  worked closely with multiple  state agencies,                                                                   
Army  Corp  of Engineers,  and  the  North Slope  Borough  to                                                                   
achieve a  permit and avoid  further delays in  construction.                                                                   
The  department devoted  a big  portion of  its resources  in                                                                   
the  Pt.  Thompson  permitting  effort. He  stated  that  the                                                                   
department  wanted  to  create   a  balance  between  smaller                                                                   
companies  waiting for  permits and the  large developers  in                                                                   
line for  permits. The  ultimate goal was  to make  the whole                                                                   
system more efficient for all applicants.                                                                                       
                                                                                                                                
Senator Dunleavy  questioned what the state was  giving up to                                                                   
the  federal government  with  SB 27.  Commissioner  Sullivan                                                                   
replied  that  the state  stood  to  gain more  control  over                                                                   
wetland  permitting.  He  offered   that  wetland  permitting                                                                   
often  took  the longest  amount  of  time. The  state  would                                                                   
process wetland permits on its own schedule and end delays.                                                                     
                                                                                                                                
Co-Chair  Meyer   appreciated  the  department's   hard  work                                                                   
addressing   the  permitting   backlog.   He  mentioned   his                                                                   
interest in helping  small business thrive in  Alaska and not                                                                   
rely on  the major  oil companies.  He pointed  out that  the                                                                   
high cost  of doing  business in Alaska  due to location  and                                                                   
conditions  coupled  with  its   lengthy  permitting  process                                                                   
proved  challenging for  small  businesses.  He offered  that                                                                   
most small companies  could not wait years to  develop a mine                                                                   
or new  oil field.  He concluded  that making the  permitting                                                                   
process  easier   in  Alaska  helped  small   businesses  and                                                                   
diversified Alaska's economy.                                                                                                   
                                                                                                                                
SENATE BILL NO. 27                                                                                                            
                                                                                                                                
     "An  Act   establishing  authority  for  the   state  to                                                                   
     evaluate   and  seek  primacy   for  administering   the                                                                   
     regulatory  program  for   dredge  and  fill  activities                                                                   
     allowed  to  individual  states under  federal  law  and                                                                   
     relating  to   the  authority;  and  providing   for  an                                                                   
     effective date."                                                                                                           
                                                                                                                                
9:41:37 AM                                                                                                                    
                                                                                                                                
LARRY  HARTIG,  COMMISSIONER,   DEPARTMENT  OF  ENVIRONMENTAL                                                                   
CONSERVATION,   introduced  SB  27.   He  related   that  the                                                                   
legislation  authorized   the  Department   of  Environmental                                                                   
Conservation  (DEC) and  DNR to evaluate  and pursue  primacy                                                                   
for Section 404 of  the Clean Water Act, Regulation of Dredge                                                                   
and Fill Activities.                                                                                                            
                                                                                                                                
Commissioner  Hartig defined  the  404 Program  of the  Clean                                                                   
Water  Act  and  explained  the  legislation.  He  read  from                                                                   
prepared testimony,  "Senate Finance  Committee Testimony  of                                                                   
Alaska  Department  of  Environmental   Conservation"  Senate                                                                   
Bill 27 "404 Primacy", February 26, 2013 (Copy on file).                                                                        
                                                                                                                                
     What is a 404 program?                                                                                                     
                                                                                                                                
     Section  404 of the  Clean Water  Act requires  that all                                                                   
     dredge  and  fill  activities  in  surface  waters  (the                                                                   
     ocean,   lakes,  rivers,   streams)   and  wetlands   be                                                                   
     permitted.  This permitting  is  done by  the U.S.  Army                                                                   
     Corps  of Engineers  under  what is  known  as the  "404                                                                   
     program."   Per  the  Clean   Water  Act,  EPA   retains                                                                   
     oversight over the Corps' 404 program.                                                                                     
                                                                                                                                
     Wetlands   provide  valuable   functions  that   include                                                                   
     habitat  for  plants and  animals,  wildlife  corridors,                                                                   
     improvements  to  water  quality,  and flood  and  storm                                                                   
     attenuation. Wetlands  in Alaska range from  North Slope                                                                   
     tundra  to   forested  wetlands  in  the   mountains  of                                                                   
     Southeast.  With  over  174 million  acres  of  wetlands                                                                   
     (65% of all  wetlands in the nation), Alaska's  stake in                                                                   
     administering the 404 program is unlike that of                                                                            
     any other state.                                                                                                           
                                                                                                                                
     Examples  of activities  requiring  404 permits  include                                                                   
     filling in  wetlands for any  purpose such as  roads, or                                                                   
     residential    or   commercial   building    pads;   and                                                                   
     construction of  breakwaters, dams, and levees.  The 404                                                                   
     permitting  process  itself  involves an  evaluation  of                                                                   
     the dredge  and/or fill activity to identify  the "least                                                                   
     environmentally   damaging    practicable   alternative"                                                                   
     (LEDPA) for a project. An                                                                                                  
     authorization  for a  dredge  or fill  activity must  be                                                                   
     accompanied  by what is known  as 404(b)(1)  findings on                                                                   
     potential   short-term  or   long-term   effects  of   a                                                                   
     proposed discharge  of dredged  or fill material  on the                                                                   
     physical,  chemical, and  biological  components of  the                                                                   
     aquatic  environment. This  also includes an  evaluation                                                                   
     of cumulative impacts.                                                                                                     
                                                                                                                                
     The  goal of  404  permitting is  to  avoid or  minimize                                                                   
     impacts  to   aquatic  resources,  including   wetlands.                                                                   
     Where  impacts are  unavoidable,  actions  are taken  or                                                                   
     required  to mitigate  those  impacts.  The Clean  Water                                                                   
     Act intends  for states to implement (to  assume primacy                                                                   
     for) the 404 program with                                                                                                  
     the   Corps   of   Engineers   and   the   Environmental                                                                   
     Protection  Agency (EPA)  acting in  an oversight  role.                                                                   
     States  seeking  primacy  for the  404  program  require                                                                   
     EPA's approval.                                                                                                            
                                                                                                                                
     SB 27  gives the  authority to DEC  and DNR  to evaluate                                                                   
     the costs  and benefits  of a  state run program;  begin                                                                   
     the   application  development   process  and   to  seek                                                                   
     approval to  implement the program if it  makes sense to                                                                   
     do so.                                                                                                                     
                                                                                                                                
Commissioner  Hartig emphasized  that the  legislation  was a                                                                   
multi-step  process to  evaluate  the costs  and benefits  of                                                                   
assuming primacy.  The legislature would ultimately  make the                                                                   
decision  to move  forward with  primacy based  on the  costs                                                                   
and recommendations by the department.                                                                                          
                                                                                                                                
9:47:13 AM                                                                                                                    
                                                                                                                                
Commissioner Hartig continued with the testimony.                                                                               
                                                                                                                                
     How  do states  assume  the 404  program,  and what  can                                                                   
     states gain authority over?                                                                                                
                                                                                                                                
     The Clean  Water Act spells  out the requirements  for a                                                                   
     state's  application for  404 primacy.  These include  a                                                                   
     formal  request by  the governor;  a description  of the                                                                   
     program  as the state  will run  it; the state  Attorney                                                                   
     General's   declaration  that   the  state  program   is                                                                   
     consistent  with  the  federal   program;  memoranda  of                                                                   
     agreement  with  EPA and  the  Corps; a  description  of                                                                   
     staffing  and  funding;  and copies  of  all  applicable                                                                   
     state   statutes,   regulations,    and   administrative                                                                   
     procedures.  EPA  will not  approve  a program  that  is                                                                   
     less stringent than the federal program.                                                                                   
                                                                                                                                
Commissioner Hartig  informed the committee that  in 2012 the                                                                   
state  gained total  primacy over  Section 402  of the  Clean                                                                   
Water   Act,   Wastewater   Permitting    Program,   National                                                                   
Pollutant  Discharge Elimination  System (NPDS). Primacy  was                                                                   
implemented  over  a  five  year  period  with  Environmental                                                                   
Protection  Agency  (EPA) oversight.  The  department  gained                                                                   
experience  with  the  primacy application  through  the  402                                                                   
primacy process.  The agency mandated that the  state develop                                                                   
an  equivalent to  the  federal  program. He  explained  that                                                                   
during the 402  process DEC had to seek  legislative approval                                                                   
several  times for  new  authorities  or statute  changes  in                                                                   
order to  comply with EPA  requirements. The legislation  was                                                                   
the  first  step  in the  primacy  process.  He  assured  the                                                                   
committee  that the  legislature  remained the  "gatekeepers"                                                                   
to seeking primacy.                                                                                                             
                                                                                                                                
Commissioner Hartig continued with the prepared testimony.                                                                      
                                                                                                                                
     States  may  assume  primacy   for  the  permitting  and                                                                   
     compliance  program for all  waters and wetlands  except                                                                   
     tidally influenced  waters and waters that  are or could                                                                   
     be  used   for  interstate  and  foreign   commerce  and                                                                   
     wetlands  adjacent  to  those  waters.  The  Corps  will                                                                   
     retain   authority  for   permitting  dredge   and  fill                                                                   
     activities in  these waters in Alaska even  after Alaska                                                                   
     formally assumes the 404 program.                                                                                          
                                                                                                                                
     Two other states  already have primacy for  the program,                                                                   
     New  Jersey   and  Michigan,  while  other   states  are                                                                   
     considering   it.   The  Department   of   Environmental                                                                   
     Conservation (DEC)  currently plays a secondary  role in                                                                   
     the   404   program   in    Alaska,   reviewing   permit                                                                   
     applications,  in  some cases  applying  Alaska-specific                                                                   
     conditions,  and "certifying"  that  the Corps'  permits                                                                   
     meet State water quality standards.                                                                                        
                                                                                                                                
     While  I  have  described  the formal  process  for  404                                                                   
     assumption from  the Corps, there is a  second mechanism                                                                   
     where  states  can  administer Section  404  dredge  and                                                                   
     fill  permits.  This  is  done by  partnering  with  the                                                                   
     Corps  in the issuance  and administration  of what  are                                                                   
     known as  State programmatic  general permits,  or State                                                                   
     PGPs. These  permits are general permits  for dredge and                                                                   
     fill  actions  that  are  similar  in  nature  and  have                                                                   
     minimal   individual   or    cumulative   effects.   The                                                                   
     Department  likely already  has  statutory authority  to                                                                   
     administer  State  PGPs,  but the  proposed  legislation                                                                   
     and fiscal  note provide  for the  state to explore  and                                                                   
     pursue both this option and the formal primacy option.                                                                     
                                                                                                                                
     Multiple  Alaska administrations  over  many years  have                                                                   
     considered  primacy for  the 404  program with the  most                                                                   
     serious consideration  about 10 years ago.  The decision                                                                   
     at  that time  was to  first pursue  State primacy  from                                                                   
     EPA to  implement the federal  Clean Water  Act (Section                                                                   
     402),  National Pollutant  Discharge Elimination  System                                                                   
     Program -  the wastewater discharge  permitting program.                                                                   
     DEC  has completed  that  process with  EPA approval  of                                                                   
     the program in  2008 and the State's final  step to have                                                                   
     full    authority   in    2012,    when   we    accepted                                                                   
     responsibility   for  the   final  industrial   sector's                                                                   
     permits.                                                                                                                   
                                                                                                                                
     With  that recent  experience, now  is a  good time  for                                                                   
     the   Alaska  to   expand  control   over  its   waters,                                                                   
     recognizing state  priorities for prompt  permitting for                                                                   
     economic  development  while protecting  water  quality.                                                                   
     The  application   process  for  404  primacy   will  be                                                                   
     similar,    as    will     program    development    and                                                                   
     implementation.   The   lessons    learned   from   that                                                                   
     experience  will apply directly  to 404 assumption.  One                                                                   
     lesson,  however,  is that  we know  that  it will  take                                                                   
     time.  There are  multiple opportunities  along the  way                                                                   
     for the  public to  weigh in  on program development  as                                                                   
     well  as opportunities  for  the legislature  to have  a                                                                   
     say in  whether the state  proceeds with primacy  - when                                                                   
     we may seek  additional statutory changes  to ensure the                                                                   
     program  will be  consistent  with  the federal  program                                                                   
     and when we  seek the budget necessary  to implement the                                                                   
     program.                                                                                                                   
                                                                                                                                
9:55:31 AM                                                                                                                    
                                                                                                                                
     Why is assumption of the 404 program important?                                                                            
                                                                                                                                
     Almost half of  Alaska is considered wetlands  - 65 % of                                                                   
     the nation's  wetlands are  in Alaska. With  wetlands so                                                                   
     omnipresent  in  Alaska, most  major  projects  - and  a                                                                   
     very large  number of minor projects, like  housing pads                                                                   
     -   require   404   permitting.   Yet   the   Corps   is                                                                   
     experiencing  budget  cuts and  staff  reductions. In  a                                                                   
     state  like  Alaska  with   a  very  narrow  window  for                                                                   
     construction, such  delays can and do result  in project                                                                   
     delays of  a year or more.  A state-run program  that is                                                                   
     accountable  to   Alaskans  and  the   legislature  will                                                                   
     assure that  it is the State  that decides the  level of                                                                   
     resources to  devote to a  program that is  so essential                                                                   
     to the state's  economy. The state will  have control of                                                                   
     its permitting priorities.                                                                                                 
                                                                                                                                
Commissioner  Hartig elaborated  that the  state had  primacy                                                                   
over the Clean  Air Act for several decades.  Experience with                                                                   
the Clean Air  Act and Section 402 primacy  demonstrated that                                                                   
the  state   was  more   flexible  with  setting   permitting                                                                   
priorities than the federal government.                                                                                         
                                                                                                                                
Commissioner Hartig continued with his testimony.                                                                               
                                                                                                                                
     Both  DEC and DNR  have placed  significant emphasis  in                                                                   
     recent  years on  permit reform.  From automated  permit                                                                   
     application  to improved  business processes,  the State                                                                   
     is    well-poised    to   apply    these    streamlining                                                                   
     improvements   to  the   404   program.  These   faster,                                                                   
     streamlined practices  place more emphasis  on results -                                                                   
     protection  of wetlands and  water resources -  and less                                                                   
     on cumbersome processes.                                                                                                   
                                                                                                                                
     With a state-run  program, two agencies - DEC  and DNR -                                                                   
     that  have a long  history of  successful interaction  -                                                                   
     will  run the program,  rather than  the four  currently                                                                   
     involved:  The Corps, EPA,  DEC, and  DNR. Two  vs. four                                                                   
     simply means  less bureaucracy.  ADF&G will,  of course,                                                                   
     retain its  Title 16 permitting authorities  and DEC and                                                                   
     DNR will  coordinate and consult  with ADF&G as  part of                                                                   
     the 404 process.                                                                                                           
                                                                                                                                
     Other benefits of a State-administered program:                                                                            
                                                                                                                                
                                                                                                                                
     projects.                                                                                                                  
                                                                                                                                
                                                                                                                                
     for the program.                                                                                                           
                                                                                                                                
                                                                                                                                
     Alaska's  priorities and  unique conditions with  Alaska                                                                   
     specific program guidance.                                                                                                 
                                                                                                                                
                                                                                                                                
     less    apt   to   stall    projects   needlessly    and                                                                   
     indefinitely.                                                                                                              
                                                                                                                                
                                                                                                                                
     courts instead of outside federal courts.                                                                                  
                                                                                                                                
                                                                                                                                
     regime.                                                                                                                    
                                                                                                                                
                                                                                                                                
     consultation   processes   with  less   formal,   faster                                                                   
     processes  while  still   achieving  the  objectives  of                                                                   
     those programs.                                                                                                            
                                                                                                                                
     What does the legislation do?                                                                                              
                                                                                                                                
     The  legislation   before  you  provides   two  parallel                                                                   
     tracks:  Study 404  primacy and  prepare an  application                                                                   
     for the  program, and begin  capacity building  from the                                                                   
     start.  First,  it  directs  DEC  and  DNR  to  evaluate                                                                   
     costs,   benefits,  and   consequences   of  the   state                                                                   
     assuming   primacy  for   the  404  program,   providing                                                                   
     resources  to the  departments  to do  so.  At the  same                                                                   
     time  as the  agencies are  performing this  evaluation,                                                                   
     State  staff  can  partner   with  Corps  staff  in  the                                                                   
     issuance  of  state  Programmatic  General  Permits  and                                                                   
     authorizations  under these general permits,  assist the                                                                   
     Corps   with   priority   permit  issuance,   and   work                                                                   
     alongside   the   Corps   in   implementing   mitigation                                                                   
     projects  associated with  permitted projects  in a  way                                                                   
     that   works  for   Alaska's   unique  situation.   This                                                                   
     capacity  building provides  tremendous  benefit to  the                                                                   
     state  agencies when  the  state does  gain primacy  for                                                                   
     the   program,  providing   trained  staff  and   tested                                                                   
     processes    for    running    the    actual    program.                                                                   
     Additionally, it                                                                                                           
     provides  benefits  to Alaska's  permit  applicants  who                                                                   
     will  gain from  the  state staffing  addition:  shorter                                                                   
     turnaround  times for 404  permits, while continuing  to                                                                   
     protect water quality.                                                                                                     
                                                                                                                                
     In  addition, this  legislation  provides the  authority                                                                   
     for DNR and  DEC to administer the program  and provides                                                                   
     the   authority   for   DEC   to  apply   to   EPA   for                                                                   
     authorization  for  the state-run  program,  as well  as                                                                   
     providing   both  agencies   the   authority  to   issue                                                                   
     regulations needed for the program.                                                                                        
                                                                                                                                
     Because  the state  is  still early  in  the process  of                                                                   
     fully   understanding    the   ramifications    of   404                                                                   
     assumption,  this bill will likely  not be the  last 404                                                                   
     legislation  that  comes  before  you.  As  we  research                                                                   
     statutory requirements,  it is likely that  we will back                                                                   
     with   needed  changes:   Statutory   change  has   been                                                                   
     required  of  other  states seeking  authority  for  the                                                                   
     program.  In addition,  DEC and DNR  will be  evaluating                                                                   
     the  resources necessary  to implement  and run a  state                                                                   
     404  program. The  estimates  in the  fiscal notes  that                                                                   
     accompany  this  bill are  for the  application  process                                                                   
     and  to   begin  the  initial  capacity   building  I've                                                                   
     mentioned.  By  the  FY16   budget  cycle,  however,  we                                                                   
     expect  a decision  point regarding  whether to  advance                                                                   
     the  primacy effort.  At that  point, DEC  and DNR  will                                                                   
     have a much  better understanding of the  resources that                                                                   
     will be  required for the  full program. We  expect that                                                                   
     additional resources,  likely significant because  it is                                                                   
     a significant program, will be required at that time.                                                                      
                                                                                                                                
     Fiscal Impacts                                                                                                             
                                                                                                                                
     There  are three  fiscal  notes for  SB  27. The  dollar                                                                   
     amounts from  the DNR and Law fiscal notes  are includes                                                                   
     in  the services  line of  the DEC fiscal  note -  DEC's                                                                   
     fiscal  note represents  the  full  funding request  for                                                                   
     the   early   stages   of   evaluating   and   beginning                                                                   
     preparation  for a  potential  primacy application;  and                                                                   
     to  increase the  State's understanding  of the  program                                                                   
     through capacity  development. The fiscal  note does not                                                                   
     include  the  full  costs   to  implement  a  State  404                                                                   
     program.    (The    concluding   paragraphs    of    the                                                                   
     presentation are on file.)                                                                                                 
                                                                                                                                
Commissioner Hartig  commented that SB 27 did  not affect the                                                                   
EPA's study  of the  Bristol Bay  Watershed Assessment  under                                                                   
Section 404 of the Clean Water Act.                                                                                             
                                                                                                                                
10:03:43 AM                                                                                                                   
                                                                                                                                
Commissioner  Sullivan pointed  out that  404 permitting  was                                                                   
the major  and most lengthy  piece of the permitting  process                                                                   
for most of  the large development projects in  the state. He                                                                   
related that DNR  was declared a "cooperating  agency" by the                                                                   
federal  government. The  department coordinated  information                                                                   
between  other state  agencies with  federal agencies  during                                                                   
the permitting  process.  He stated that  DNR was  frustrated                                                                   
that despite its  status as a cooperating agency,  it did not                                                                   
have a  participatory role  at the  decision making  level on                                                                   
federal  permitting decisions  that  affected  the state.  He                                                                   
advised  that  primacy  granted  the  state  the  ability  to                                                                   
affect the process  and control its own destiny.  He remarked                                                                   
that recently  a number of  "vague" federal policy  decisions                                                                   
which affected the  state were made with very  little Alaskan                                                                   
input.  Assuming primacy  ensured that  the state's  policies                                                                   
would not be driven by "vague" federal regulation.                                                                              
                                                                                                                                
Senator Dunleavy  questioned what the state was  giving up to                                                                   
the federal  government and what  it was gaining  in assuming                                                                   
primacy. Commissioner  Hartig elucidated that when  the state                                                                   
took  over  permitting  responsibility  with  the  EPA  while                                                                   
assuming  Section 402 Primacy,  DEC discovered  that  the EPA                                                                   
had a permitting  backlog and unfinished  regulatory agendas.                                                                   
The  EPA   wanted  the  state   to  adopt  and   develop  the                                                                   
unfinished regulations.  The state  declined to proceed  with                                                                   
any unfinished  regulations that  were not legally  mandated.                                                                   
He offered that  if primacy meant that the state  did all the                                                                   
work at  the federal government's  direction, then  the state                                                                   
gave up  a lot. He commented  that primacy granted  the state                                                                   
direct contact  with the  permittees and  the public  and the                                                                   
ability  to  respond  more efficiently  to  their  needs.  He                                                                   
stated that  what Alaska  gave up and  what it gained  was up                                                                   
to  the  state.  He  believed   that  the  state  would  gain                                                                   
decision making control over the federal government.                                                                            
                                                                                                                                
Senator Dunleavy  believed that the State's  education system                                                                   
was  essentially   controlled   by  the  federal   government                                                                   
through funding  and mandates. He wondered whether  there was                                                                   
an   actual  gain   for   the  state.   Commissioner   Hartig                                                                   
delineated  that Alaska  would  not obtain  funding from  the                                                                   
federal  government to  run the  program. The  state had  the                                                                   
opportunity to  apply for federal  grants for  the evaluation                                                                   
and  application process.  The  assumed  404 Primacy  program                                                                   
would operate on  state funds from permitting  fees and state                                                                   
general   funds.   Without  federal   funding   the   federal                                                                   
government  would lack  the leverage  to  control or  mandate                                                                   
the process.  He concluded  that federal agencies  maintained                                                                   
a certain  amount of oversight,  but that the state  gained a                                                                   
"fair amount" of discretion.                                                                                                    
                                                                                                                                
10:11:59 AM                                                                                                                   
                                                                                                                                
Senator  Dunleavy warned  that  the state  needed to  proceed                                                                   
with caution.  Even though  federal funding was  diminishing,                                                                   
federal mandates were still enforced.                                                                                           
                                                                                                                                
Co-Chair Meyer  wondered whether  the state would  be getting                                                                   
enough  benefit to  offset $1.8  million costs  to the  state                                                                   
for assuming primacy.                                                                                                           
Co-Chair   Kelly  commended  Commissioner   Hartig   for  his                                                                   
informative   presentation.   He   referred   to   the   term                                                                   
"capacity"  in the  presentation  and questioned  whether  it                                                                   
was a  fiscal term.  He wondered  whether "capacity"  related                                                                   
to  other   general   permitting  legislation.   Commissioner                                                                   
Hartig  relayed  that  the DEC  fiscal  note  contained  five                                                                   
positions for  DEC and  two for DNR.  The positions  would be                                                                   
dedicated  to  evaluating  404  Primacy.  He  explained  that                                                                   
capacity was being  built during the evaluation  phase of the                                                                   
process.  The department  learned from  the 402 program  that                                                                   
it  needed to  start building  capacity  from the  evaluation                                                                   
stage.  If   primacy  was   assumed  experienced   staff  was                                                                   
imminently necessary  to fulfill the responsibilities  of the                                                                   
permitting process.  He anticipated  more positions  would be                                                                   
necessary.  He added  that if  primacy was  likely DEC  would                                                                   
submit a detailed  proposal to the legislature  including the                                                                   
costs to completely build the capacity to run the program.                                                                      
                                                                                                                                
Co-Chair  Kelly  inquired  whether  statutory  authority  was                                                                   
necessary  to  proceed  with   primacy  or  if  it  could  be                                                                   
achieved  through  the  appropriation  process.  Commissioner                                                                   
Hartig believed  that DEC possessed  the authority  to pursue                                                                   
primacy,  but that  DNR clearly  did not.  He indicated  that                                                                   
primacy  was  a multi-agency  effort  and  that DEC  and  DNR                                                                   
would  share  duties.  Historically,   DEC  was  the  natural                                                                   
resource   regulator  and   DNR's  expertise   was  in   land                                                                   
management and  mitigation. He thought the  arrangement would                                                                   
continue,  but that the  delineation of  duties would  evolve                                                                   
as capacity was built.                                                                                                          
                                                                                                                                
10:17:41 AM                                                                                                                   
                                                                                                                                
Senator  Bishop  shared  that  the Army  Corps  of  Engineers                                                                   
required  small  mines  to do  over  flights  and  photograph                                                                   
their properties  for mitigation  purposes. He believed  that                                                                   
placed  a  financial  strain  on  miners.  He  asked  whether                                                                   
primacy allowed  the state to  advocate on its own  behalf in                                                                   
similar  instances. Commissioner  Hartig  responded that  the                                                                   
legislation was  intended to help  small business as  well as                                                                   
large.  He  was  aware  of the  problem  with  placer  miners                                                                   
obtaining  permits.  He reported  that  one problem  was  the                                                                   
remote  locations of  the mines  and  how the  Army Corps  of                                                                   
Engineers  developed a  process  to make  determinations  and                                                                   
identify  wetlands with  a declining  budget. The  department                                                                   
was  working  with   DNR  and  the  corps  to   obtain  state                                                                   
assistance to help the miners.                                                                                                  
                                                                                                                                
10:19:54 AM                                                                                                                   
                                                                                                                                
Commissioner   Sullivan  added   that  primacy  would   allow                                                                   
consideration   of  local   insight  and   issues  into   the                                                                   
mitigation process.                                                                                                             
                                                                                                                                
Senator   Hoffman   supported   Section   402   Primacy.   He                                                                   
communicated that  Section 404 Primacy entailed  taking on 65                                                                   
percent of  the nation's wetlands.  The state's  program must                                                                   
be as  stringent as  the federal  governments. The  state did                                                                   
not  know the  total costs  of  taking over  the program.  He                                                                   
related   that  Alaska   had  some  of   the  highest   tidal                                                                   
fluctuations  in the  world. He  recalled  that Alaska  would                                                                   
not  control  tidal  influence   wetlands  with  Section  404                                                                   
primacy.  He called  for the  clear  delineation of  Alaska's                                                                   
responsibilities  in such  cases. He pointed  out that  there                                                                   
were many  unanswered questions  in seeking  404 primacy.  He                                                                   
wondered what the  exact benefits and actual  financial costs                                                                   
of  primacy were.  He cautioned  that  careful evaluation  of                                                                   
the   costs   and  benefits   of   primacy   was   paramount.                                                                   
Commissioner  Hartig replied  that  he strongly  agreed.  The                                                                   
state  was  currently  not  in the  position  to  answer  the                                                                   
unanswered   questions.    The   legislation    provided   an                                                                   
opportunity   to  proceed  methodically.   He  reminded   the                                                                   
committee  that   in  2016  a  detailed  analysis   would  be                                                                   
provided to  the legislature. He  felt that industry  and the                                                                   
public would  also weigh  in on  whether it was  advantageous                                                                   
for the  state to  assume primacy  by evaluating the  state's                                                                   
performance in permitting and regulatory oversight.                                                                             
                                                                                                                                
10:25:06 AM                                                                                                                   
                                                                                                                                
Senator   Hoffman  remarked   that   state  assumed   primacy                                                                   
required that  the state  "pay the tab"  for the  program and                                                                   
significantly  expand  its  bureaucracy   while  the  federal                                                                   
government maintained ultimate oversight.                                                                                       
                                                                                                                                
Co-Chair  Meyer judged  that  the state  was  not anxious  to                                                                   
assume  the   costs  of  the   program  but  expediting   the                                                                   
permitting  process offered  benefits.  He  relayed that  the                                                                   
state  received  federal funding  for  dredging  the Port  of                                                                   
Anchorage and other  ports. He asked whether  the legislation                                                                   
impacted  the dredging  funding  for the  port.  Commissioner                                                                   
Hartig  thought  that the  404  program  was outside  of  the                                                                   
scope of  dredging harbors  and the  Army Corps of  Engineers                                                                   
would  continue  to  provide  the  service.  He  opined  that                                                                   
primacy allowed  a maturing state  to control its  destiny on                                                                   
key programs that impacted the state.                                                                                           
                                                                                                                                
Commissioner Sullivan  agreed with Senator  Hoffman regarding                                                                   
federal  oversight and  the budgetary  impact. He  reiterated                                                                   
that primacy  established state control over  decision making                                                                   
on very important projects.                                                                                                     
                                                                                                                                
10:30:08 AM                                                                                                                   
                                                                                                                                
Co-Chair Meyer OPENED public TESTIMONY                                                                                          
                                                                                                                                
JOSEPH  SEBASTIAN,  KUPREANOF,   SELF  (via  teleconference),                                                                   
testified against  SB 27. He  shared concerns over  the total                                                                   
and  cumulative costs  of assuming  primacy  for many  years,                                                                   
expanding   state  bureaucracy,   and  the   need  for   more                                                                   
personnel   with  specialized   expertise.  He  opined   that                                                                   
assuming  primacy was  a "duplication  of  efforts" that  the                                                                   
federal government  currently provided. He did  not feel that                                                                   
the  benefits  of  primacy would  yield  benefits  that  were                                                                   
commensurate with the costs and "burden" to the state.                                                                          
                                                                                                                                
10:32:22 AM                                                                                                                   
                                                                                                                                
Co-Chair Meyer CLOSED public TESTIMONY                                                                                          
                                                                                                                                
Co-Chair  Meyer   requested  a  written  response   from  DEC                                                                   
regarding  any potential  impact from  SB 27  on the Port  of                                                                   
Anchorage dredging.                                                                                                             
                                                                                                                                
Co-Chair Meyer  asked for clarification  on the  fiscal note.                                                                   
Commissioner  Hartig  explained  the  DEC  fiscal  note.  The                                                                   
total  amount   of  $1,434,700  was  appropriated   for  five                                                                   
positions  in FY 14;  the out  years increased to  $1,854,300                                                                   
in  FY15 with  3  additional positions  and  future years  at                                                                   
$1.828.800  through 2019.  He restated  that in  FY 2016  the                                                                   
total  costs to  assume primacy  would be  known. He  pointed                                                                   
out that  the DEC  fiscal note  contained appropriations  for                                                                   
DNR  and  the  Department  of   Law  (DOL)  in  the  services                                                                   
category for $870,000  which included two positions  for DNR.                                                                   
He  added  that   two  additional  DNR  positions   would  be                                                                   
necessary in FY 15.                                                                                                             
                                                                                                                                
Co-Chair Meyer  asked what would  happen to the  positions if                                                                   
the  program was  not approved.  Commissioner Hartig  replied                                                                   
that  the  department  might  need  to  retain  some  of  the                                                                   
additional   resources  for  the   permitting  program.   The                                                                   
majority of  the additional positions  would not  be retained                                                                   
resulting  in  budget  reductions.  He  envisioned  that  the                                                                   
process would develop incrementally.                                                                                            
                                                                                                                                
Senator  Hoffman  asked  how   much  the  federal  government                                                                   
currently  spent  on  administering the  program  in  Alaska.                                                                   
Commissioner  Hartig  responded   that  he  obtained  partial                                                                   
information regarding  the full  program. He voiced  that the                                                                   
state  would   not  assume  the   full  program   because  of                                                                   
geographic  limitations. Navigable  rivers, tidal  influence,                                                                   
and  adjacent  wetlands  were not  included.  He  ascertained                                                                   
that  the  state  would  assume  20  to  50  percent  of  the                                                                   
permitting.  He did  not  know what  level  of expertise  was                                                                   
necessary.  He offered  the information  from the Army  Corps                                                                   
of Engineers.  The district  maintained  49 employees  with a                                                                   
budget   of   $7.9   million    annually.   The   amount   of                                                                   
administrative   support   was   unknown.   The   corps   was                                                                   
headquartered in  Anchorage with field offices  in Fairbanks,                                                                   
Juneau,  Kenai,  and  Sitka.  Approximately  1,500  to  1,800                                                                   
permit applications  were processed each year and  85 percent                                                                   
were Section 404 applications.                                                                                                  
                                                                                                                                
Senator Hoffman  queried how many federal positions  would be                                                                   
lost  under   state  assumed  primacy.  Commissioner   Hartig                                                                   
replied that he  did not know. Senator Hoffman  asked whether                                                                   
25  additional employees  were  necessary  for  the state  to                                                                   
accomplish  the  program. Commissioner  Hartig  thought  that                                                                   
was a ballpark estimate.                                                                                                        
                                                                                                                                
10:40:44 AM                                                                                                                   
                                                                                                                                
Co-Chair  Meyer referenced  the DEC fiscal  note and  relayed                                                                   
that  some costs  were anticipated  to be  offset by  program                                                                   
receipts.  He requested  clarification.  Commissioner  Hartig                                                                   
replied  that  permitting  fees   were  associated  with  the                                                                   
program and  provided a "mechanism"  to recover a  portion of                                                                   
the state's costs.                                                                                                              
                                                                                                                                
Co-Chair  Meyer  commented  that   he  shared  the  committee                                                                   
members concerns with the fiscal note.                                                                                          
                                                                                                                                
SB 27 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
                                                                                                                                
10:44:21 AM                                                                                                                   
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:44 a.m.                                                                                         

Document Name Date/Time Subjects
SB 27 Sectional Analysis.pdf SFIN 2/26/2013 9:00:00 AM
SB 27
SB 27 Support AOGA testimony 2013.02.04.pdf SFIN 2/26/2013 9:00:00 AM
SB 27
SB 26 - Briefing Paper.pdf SFIN 2/26/2013 9:00:00 AM
SB 26
SB 26 - Letters of Opposition.pdf SFIN 2/26/2013 9:00:00 AM
SB 26
SB 26 - Letters of Support.pdf SFIN 2/26/2013 9:00:00 AM
SB 26
SB 26 - Sectional Analysis.pdf SFIN 2/26/2013 9:00:00 AM
SB 26
SB 26 - Water Briefing Points.pdf SFIN 2/26/2013 9:00:00 AM
SB 26
SB 26 - Water Reservation Applications by a Person.pdf SFIN 2/26/2013 9:00:00 AM
SB 26
AITC Comments in Opposition on SB 26 and SB 27.doc SFIN 2/26/2013 9:00:00 AM
SB 26
SB 27
SB 26 Opposition Letter Bristol Bay Native Assoc..pdf SFIN 2/26/2013 9:00:00 AM
SB 26
SB26 - Permitting Reform Overview_2-26-13 updated.pdf SFIN 2/26/2013 9:00:00 AM
SB 26
404 Assumption Methods 1-31-13.pdf SFIN 2/26/2013 9:00:00 AM
SB 27
404 Assumption Primacy Benefits 2-22-13.pdf SFIN 2/26/2013 9:00:00 AM
SB 27
404 Assumption Public Process 2-22-13.pdf SFIN 2/26/2013 9:00:00 AM
SB 27
404 Assumption SB 27 and HB 78 FINAL.pdf SFIN 2/26/2013 9:00:00 AM
HB 78
SB 27
SB 27 DEC Testimony Senate Finance 2-26-2013.pdf SFIN 2/26/2013 9:00:00 AM
SB 27
13 039 CO Response to Senate Finance Questions re SB 27.pdf SFIN 2/26/2013 9:00:00 AM
SB 27
SB 26 TNC Opposition Letter 030413.pdf SFIN 2/26/2013 9:00:00 AM
SB 26
SB 26 Opposition Letter Bristol Bay Native Assoc..pdf SFIN 2/26/2013 9:00:00 AM
SB 26
SB26-HB78 Letter of Opposition - Heiades.msg SFIN 2/26/2013 9:00:00 AM
HB 78
SB 26
Trout Unlimited Testimony HB 77 _ SB26 .pdf SFIN 2/26/2013 9:00:00 AM
HB 77
SB 26