Legislature(1999 - 2000)

02/21/2000 03:12 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   SENATE RESOURCES COMMITTEE                                                                                 
                        February 21, 2000                                                                                       
                            3:12 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Rick Halford, Chairman                                                                                                  
Senator Robin Taylor, Vice Chairman                                                                                             
Senator Pete Kelly                                                                                                              
Senator Lyda Green                                                                                                              
Senator Georgianna Lincoln                                                                                                      
MEMBERS ABSENT                                                                                                                
Senator Sean Parnell                                                                                                            
Senator Jerry Mackie                                                                                                            
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 175                                                                                                             
"An  Act relating  to state  mining  law, to  methods of  locating                                                              
mining claims,  to the  granting of larger  mining claims  using a                                                              
legal subdivision  based on  rectangular survey descriptions,  and                                                              
to mandatory rental payments for prospecting rights."                                                                           
     -MOVED SB 175 OUT OF COMMITTEE                                                                                             
SENATE BILL NO. 226                                                                                                             
"An Act  relating to  stranded gas  pipeline carriers  and  to the                                                              
intrastate regulation  by the Regulatory  Commission of  Alaska of                                                              
pipelines  and  pipeline  facilities   of  stranded  gas  pipeline                                                              
     -HEARD AND HELD                                                                                                            
CS FOR HOUSE CONCURRENT RESOLUTION NO. 9(RES) am                                                                                
Relating to Take a Young Person Hunting Week.                                                                                   
     -MOVED CSHCR 9(RES)am OUT OF COMMITTEE                                                                                     
SENATE BILL NO. 273                                                                                                             
"An Act requiring  oil discharge prevention and  contingency plans                                                              
and proof  of financial  responsibility  for non-tank vessels  and                                                              
railroad  tank cars;  authorizing inspection  of non-tank  vessels                                                              
and trains; and providing for an effective date."                                                                               
     -HEARD AND HELD                                                                                                            
PREVIOUS SENATE COMMITTEE ACTION                                                                                              
SB 175 - No previous action to record.                                                                                          
SB 226 - No previous action to record.                                                                                          
HCR 9 - No previous action to record.                                                                                           
SB 273 - No previous action to record.                                                                                          
WITNESS REGISTER                                                                                                              
Mr. Steve Borell, Executive Director                                                                                            
Alaska Miners Association                                                                                                       
3305 Arctic #202                                                                                                                
Anchorage, AK 99503                                                                                                             
POSITION STATEMENT: Supported SB 175.                                                                                         
Mr. Bob Loeffler, Director                                                                                                      
Division of Mining and Water Management                                                                                         
Department of Natural Resources                                                                                                 
3601 C Street, Ste 800                                                                                                          
Anchorage, AK 99503                                                                                                             
POSITION STATEMENT: Supported SB 175.                                                                                         
Mr. Michael Hurley                                                                                                              
ARCO Alaska Inc.                                                                                                                
Alaska North Slope LNG Sponsor Group                                                                                            
700 G Street                                                                                                                    
Anchorage, AK 99501                                                                                                             
POSITION STATEMENT: Supported SB 226.                                                                                         
Mr. Mike Barnhill, Assistant Attorney General                                                                                   
Department of Law                                                                                                               
P.O. Box 110300                                                                                                                 
Juneau, AK 99811                                                                                                                
POSITION STATEMENT: Commented on SB 226.                                                                                      
Mr. Scott Petsel                                                                                                                
Aide to Representative Gail Phillips                                                                                            
State Capitol Bldg.                                                                                                             
Juneau, AK 99811                                                                                                                
POSITION STATEMENT: Testified for the sponsor of HCR 9.                                                                       
Senator Drue Pearce                                                                                                             
Alaska State Capitol                                                                                                            
Juneau, AK 99811-1182                                                                                                           
POSITION STATEMENT:  Sponsor of SB 273.                                                                                     
Mr. Pat Carter                                                                                                                  
Aide to Senator Drue Pearce                                                                                                     
Alaska State Capitol                                                                                                            
Juneau, AK 99811                                                                                                                
POSITION STATEMENT:  Commented on SB 273.                                                                                     
Ms. Wendy Lindskoog, Director                                                                                                   
External Affairs                                                                                                                
Alaska Railroad Corporation                                                                                                     
P.O. Box 107500                                                                                                                 
Anchorage, AK 99510                                                                                                             
POSITION STATEMENT: Supported SB 273.                                                                                         
Mr. Ernie Piper, Assistant Vice President                                                                                       
Health, Safety, and Environmental Compliance                                                                                    
Alaska Railroad Corporation                                                                                                     
P.O. Box 107500                                                                                                                 
Anchorage, AK 99510                                                                                                             
POSITION STATEMENT: Supported SB 273.                                                                                         
Mr. Bob Doll, General Manager                                                                                                   
Alaska Marine Highway System                                                                                                    
Department of Transportation                                                                                                    
12175 Glacier Hwy.                                                                                                              
Juneau, AK 99801                                                                                                                
POSITION STATEMENT: Supported SB 273.                                                                                         
ACTION NARRATIVE                                                                                                              
TAPE 00-03, SIDE A                                                                                                            
Number 001                                                                                                                      
CHAIRMAN HALFORD called the Senate  Resources Committee meeting to                                                            
order at  3:12 p.m.   Present were  Senators Lincoln,  Pete Kelly,                                                              
Green, Taylor  and Halford.  The  first order of business  to come                                                              
before the committee was SB 175.                                                                                                
                     SB 175-STATE MINING LAW                                                                                
MR.  STEVE  BORELL,  Executive  Director   of  the  Alaska  Miners                                                              
Association, said  that SB 175 is  the result of several  years of                                                              
work between  the mining  industry and  the Department  of Natural                                                              
Resources  (DNR).   The  changes  in it  only  affect the  process                                                              
required to locate and stake mining  claims.  They do not increase                                                              
or decrease  the rights that are  established by the claims.   The                                                              
primary  catalyst for  the review  was the  on-going state  budget                                                              
challenge  combined  with technological  advances  regarding  land                                                              
records, Internet  access to land records, and  global positioning                                                              
systems (GPS).                                                                                                                  
The advances  make  it easier  to post  the data  in a timely  and                                                              
efficient manner,  which was  the primary issue  for DNR.   Mining                                                              
claims  will be  put  into a  format  that can  be  electronically                                                              
entered  on the  state  land status  plats,  which should  improve                                                              
accuracy, accessibility,  and timeliness  of the  data.   From the                                                              
standpoint of the  mining industry, the changes  will simplify the                                                              
claim staking process  and reduce errors.  They will  also make it                                                              
possible  to use  global positioning  systems  to establish  claim                                                              
corners in the field.                                                                                                           
SB 175 will also  allow the use of a larger size  of mining claim,                                                              
which will decrease  the amount of "pick work" for  both the miner                                                              
and DNR.  The  existing claim location system will  continue to be                                                              
available for  situations in which  the new positioning  method is                                                              
not practical.   The  bill also establishes  rent for  prospecting                                                              
sites which do not  have a rental rate on them now.   It also adds                                                              
some restrictions  on using  the new  system: Meridian,  Township,                                                              
Range, Section,  and Claim, (MTRSC).   If that system is  used, it                                                              
must be done  in a way that  will facilitate the process  for DNR.                                                              
Mr.  Borell  said  the  mining  industry  believes  SB  175  makes                                                              
appropriate changes.                                                                                                            
Number 115                                                                                                                      
CHAIRMAN  HALFORD asked  if the  bill allows  for claim  locations                                                              
that are not posted on the ground.                                                                                              
MR. BORELL  answered no, the post  in the ground is  the essential                                                              
starting point  according to  the state mining  law.  SB  175 does                                                              
not change that.                                                                                                                
SENATOR  TAYLOR asked,  if it  doesn't change  the requirement  to                                                              
post on the ground, what savings  are involved and how SB 175 will                                                              
improve the system.                                                                                                             
MR.  BORELL explained  that an  aliquot grid,  based on  meridian,                                                              
township, range and section, covers  the entire state.  If a miner                                                              
goes out and establishes claim corners  and tells DNR the location                                                              
defined  by MTRSC,  DNR's  cost is  significantly  less because  a                                                              
draftsman will  no longer  have to enter  it onto the  land status                                                              
plats.  The claim can be highlighted  on the appropriate plat with                                                              
a computer  cursor. DNR staff would  confirm the data and  hit the                                                              
enter button; the claim would then  be on the land status plat and                                                              
almost instantaneously available anywhere in the state or world.                                                                
SENATOR TAYLOR commented that DNR  is willing to use aliquot parts                                                              
and GPS with  mining claims but  it has been totally  resistant to                                                              
do anything like that when it comes to land sales in the state.                                                                 
SENATOR LINCOLN requested a fiscal note.                                                                                        
MR. BOB LOEFFLER,  Division of Mining, DNR, stated  support for SB
175.   The  Division  has a  problem  providing  the services  the                                                              
mining industry relies  upon.  This bill is a  partial solution to                                                              
that problem.   In the  early '90s, the  Division did  about 3,000                                                              
mining claim  stakings per year.   In FY99, there were  15,000 and                                                              
in the late '90s  there have been 10,000 to 11,000.   The Division                                                              
expects that  number to  continue.  The  Division is  pleased with                                                              
that level but when it receives more  than 10,000 applications per                                                              
year, the Division  can't turn them around fast enough.   It has a                                                              
four to six month back log in terms  of creating a record for each                                                              
mining  claim.   This bill  solves the  problem in  two ways:   it                                                              
allows for  larger mining claims,  which will require fewer  to be                                                              
processed and  it allows the miners  to stake the claims  in a way                                                              
that helps the division automate the system.                                                                                    
MR. LOEFFLER  said the  fiscal note  is a bit  odd and  he doesn't                                                              
want  to   mislead  the  committee.   SB  175  applies   rents  to                                                              
prospecting  sites.  The  Division believes  it will generate  new                                                              
revenue of about $150,000; half would  go to the treasury and half                                                              
to the Permanent Fund.  At the same  time, the Division isn't able                                                              
to  provide the  services to  make use  of this  information.   To                                                              
reduce the backlog,  the Division will need  approximately $75,000                                                              
to process the  claims.  The Division attempted  to demonstrate in                                                              
the fiscal  note that the  bill will  create a new  revenue source                                                              
but it  will need to  capture some of  those funds to  provide the                                                              
services to  generate the  funds.  He  said DNR would  support the                                                              
bill in any form.                                                                                                               
Number 598                                                                                                                      
SENATOR TAYLOR asked  Mr. Loeffler if he ever talked  to anyone in                                                              
the Division  of Lands  regarding  the sale of  land, because  the                                                              
allowance  to stake  a claim  is a  conveyance of  an interest  in                                                              
state  real   property.     He  thought   there  should   be  some                                                              
coordination  between the  Division of  Land and  the Division  of                                                              
Mining.  He applauded  Mr. Loeffler for the changes  he worked out                                                              
with the miners  and for using technology to locate  these points.                                                              
He questioned  why the  Division  of Lands couldn't  use the  same                                                              
method of aliquot parts and location by GPS for land sales.                                                                     
MR.  LOEFFLER answered  that  the Division  of  Mining, Land,  and                                                              
Water is  now one  division.  He  explained that  when a  claim is                                                              
staked on  aliquot parts, the  record will reflect  aliquot parts;                                                              
however, the on-the-ground post prevails.   Therefore, if the post                                                              
is off the aliquot  parts by 100 feet, the location  on the ground                                                              
may not be the aliquot parts.  The  mining industry was willing to                                                              
say that the record may reflect the  aliquot parts, but the actual                                                              
on-the-ground location is, in fact,  whatever the post says it is.                                                              
Therefore, if you want to know exactly  where that mining claim is                                                              
on  the  ground,  you  have  to  survey  it.    The  aliquot  part                                                              
reflection is  just a paper  location.  The  same is true  of land                                                              
sales.   While  the  use  of GPS  is  very helpful,  the  physical                                                              
location on-the-ground prevails.                                                                                                
SENATOR  TAYLOR  said he  understands  that,  but the  land  sales                                                              
section has  not been willing  to even  talk about GPS  or aliquot                                                              
parts.  They  are insisting on on-site surveys  before anything is                                                              
actually noticed.  He thought the  same system could be applied to                                                              
land  sales.   He encouraged  Mr. Loeffler  to work  with them  to                                                              
utilize the aliquot  parts and GPS to provide  notification to the                                                              
public of  lands available for sale  and then require the  land to                                                              
be surveyed before any transaction takes place.                                                                                 
CHAIRMAN  HALFORD   said,  based  on  the  way   DNR  handled  the                                                              
unallocated  cuts in  its  last budget,  he  isn't  sure he  would                                                              
encourage the Finance Committee to  give it any more money, but he                                                              
said this does look like a proposal that could work.                                                                            
CHAIRMAN  HALFORD  noted  one  section  of the  bill  deletes  the                                                              
requirement that  boundaries of the  claim remain  clearly marked.                                                              
He asked how sections 7 and 8 work,  as well as the prohibition on                                                              
the prior locator, and how that applies  to both prospecting sites                                                              
and claim locations.  He said he  was wondering how it would apply                                                              
to a  person who did not  submit all of  the paperwork and  can no                                                              
longer locate on that prospecting site, while anyone else can.                                                                  
MR. LOEFFLER  responded  if a person  does not  complete the  work                                                              
required  to keep a  prospecting site  in good  order, he  may not                                                              
stake the prospecting  site for a year but the person  can stake a                                                              
claim.  That  is consistent with existing law and  was designed to                                                              
prevent  people  from  staking  prospecting  sites  or  claims  on                                                              
Number 1959                                                                                                                     
MR. BORELL explained that under current  law, a person can stake a                                                              
prospecting site  and not pay  rent and, at  the end of  one year,                                                              
automatically  extend it for  a second  year.  At  the end  of the                                                              
second year,  if the individual  was unable  to get the  work done                                                              
because of  extenuating circumstances,  the law allows  the person                                                              
to request another extension from  DNR.  The fact of the matter is                                                              
that every time  DNR receives such a request, it  involves quite a                                                              
bit work of work to decide if an extension appropriate.                                                                         
During the discussions between DNR  and the industry, they decided                                                              
to  set the  life  of  a prospecting  site  at  two years  and  to                                                              
prohibit any extensions.   At the end of the  two-year period, the                                                              
owner of the prospecting site can  stake a mining claim or a lease                                                              
hold location  on top  of that  prospecting site  and convert  the                                                              
site into  a mining claim.   That conversion  must occur  prior to                                                              
the expiration  of the prospecting  site's two-year life.   Anyone                                                              
holding a prospecting site who fails  to convert to a mining claim                                                              
would be prohibited  from staking another prospecting  site.  They                                                              
could stake  a mining  claim, but  not a  prospecting site.   They                                                              
could stake a mining  claim, however.  The idea behind  it is that                                                              
there is a two-year  period in which you have to  follow the rules                                                              
for a prospecting site and, after  that, if you don't convert, you                                                              
are out of luck for a year.  If no  one else has staked it after a                                                              
year, the person can come back and stake it.                                                                                    
CHAIRMAN  HALFORD asked  if they  could do anything  to provide  a                                                              
valid discovery on  a piece of property on which  one doesn't have                                                              
a prospecting site.                                                                                                             
MR. BORELL  answered yes.  You can  do work on any ground  that is                                                              
not  restricted.   The prospecting site provides  legal protection                                                              
against someone  else who  would come along  and stake  the claim,                                                              
which does happen.                                                                                                              
Number 2198                                                                                                                     
SENATOR  TAYLOR  moved   to  pass  SB  175  from   committee  with                                                              
individual recommendations.   There were no objections  and it was                                                              
so ordered.                                                                                                                     
              SB 226-STRANDED GAS PIPELINE CARRIERS                                                                         
CHAIRMAN HALFORD announced SB 226 to be up for consideration.                                                                   
MR.  MIKE HURLEY,  ARCO Alaska  ANS  Gas Commercialization  Group,                                                              
said  he has  been assigned  to manage  the commercial  regulatory                                                              
efforts of  the Alaska North  Slope Sponsor Group,  which supports                                                              
SB  226.   For  the  last year  and  a  half, the  sponsor  group,                                                              
comprised  of ARCO Alaska,  BP Amoco,  Foothills Pipelines,  Ltd.,                                                              
Phillips Petroleum,  and Marubeni  Corporation, has  been actively                                                              
pursuing the development  of a new design for a  market viable LNG                                                              
export project.   It will  include a commercial  regulatory regime                                                              
to provide long  term customers with regulatory  certainty and, at                                                              
the same  time, it will meet  state and federal  regulators' needs                                                              
for adequate access and commercial  oversight.  SB 226 strikes the                                                              
balance that  provides the Regulatory  Commission of  Alaska (RCA)                                                              
with   clear  and   unambiguous   oversight   of  intrastate   gas                                                              
MR. HURLEY explained the provisions of SB 226 as follows.                                                                       
Section  1 clarifies  that the  current  Right-of-way Leasing  Act                                                              
common  carriage requirements  apply  only to  the intrastate  gas                                                              
shipments. Sections  2 and 3 clarify that a stranded  gas pipeline                                                              
system's  intrastate  shipments   would  be  regulated  under  the                                                              
Pipeline Act  (AS 42.06) rather than  under the Utilities  Act (AS                                                              
Section 4 adds  a new subsection to the Pipeline  Act that creates                                                              
a process in RCA's existing certification  procedures to determine                                                              
the  amount of  pipeline  capacity that  should  initially be  set                                                              
aside  for  intrastate  transportation.   That  process  sets  out                                                              
distinct criteria  for capacity  for local distribution  companies                                                              
that must  submit their  gas purchase contracts  to the  RCA under                                                              
the  current  regulations.    It   contains  a  different  set  of                                                              
procedures  for  industrial gas  users  who must  provide  written                                                              
commitments   to  transport  intrastate   gas  volumes   that  are                                                              
supported by  take-or-pay purchase  commitments with  stranded gas                                                              
Under Section 5, an expansion of  the stranded gas pipeline may be                                                              
ordered  by  the  RCA,  only  if   such  requests  for  additional                                                              
intrastate   capacity   are   supported    by   firm   contractual                                                              
Section 6 allows the RCA to consider  and approve a reservation or                                                              
similar  charge  in  the intrastate  tariff  for  firm  intrastate                                                              
Finally, section 7  contains the definitions of  terms referred to                                                              
in other  sections of the  bill in an  effort to increase  clarity                                                              
and understanding.                                                                                                              
In  closing, MR.  HURLEY  said the  companion  bill,  HB 290,  was                                                              
recently amended in  its first committee of referral  in the other                                                              
body.   He  offered  to answer  questions about  the  bill or  the                                                              
CHAIRMAN HALFORD asked him to review the amendments.                                                                            
MR.  HURLEY  stated the  first  amendment  that  the Oil  and  Gas                                                              
Committee  took up  changed  the reference  to  "stranded gas"  to                                                              
"North Slope  natural gas (NS gas)"  throughout the bill.    There                                                              
was  concern  about the  use  of the  term  "stranded  gas" as  it                                                              
applied to  HB 393 (the  stranded gas  development act,  which was                                                              
discussed a couple of years ago.                                                                                                
Number 2504                                                                                                                     
The second amendment that was adopted  made a change to Section 4.                                                              
It was based  on discussions with the RCA about  the standards for                                                              
building capacity  in the  initial build  of the pipeline  system.                                                              
The concern  was that  the standards  for small communities  along                                                              
the  line were  too  high  to meet.    The amendment  changed  the                                                              
standards  so  that  there  are  no  take-or-pay  commitments  for                                                              
communities, but there  would still be a fairly  high standard for                                                              
large industrial consumers.                                                                                                     
CHAIRMAN HALFORD asked  if it was a rewrite of  the entire section                                                              
and it limits take-or-pay to large customers.                                                                                   
MR.  HURLEY  said  that  is  correct.     He  explained  that  the                                                              
definition  was set  at 20 million  standard cubic  feet per  day.                                                              
Anything larger  than that still has  a high bar to it.   Only two                                                              
facilities in Alaska use more than  20 million cubic feet a day of                                                              
gas; the  Beluga Power  Plant and  ML&P's main  plant.   They were                                                              
interested in  making sure that  any large industrial  usage would                                                              
have  some kind  of commitment  in place  before space  for it  is                                                              
built in the system.                                                                                                            
Amendment 2(b) added  a new section to the bill at  the request of                                                              
the chairman. It  changes the determinations that need  to be made                                                              
under the AS 38.05 royalty statutes.   It changes the requirements                                                              
for the commissioner of the Department  of Natural Resources (DNR)                                                              
when determining whether to take  royalty in kind or in value.  It                                                              
then  provides for  legislative approval  before the  commissioner                                                              
can take action with regard to taking royalty in value.                                                                         
CHAIRMAN HALFORD commented that was a significant rewrite, too.                                                                 
MR.  HURLEY responded  it  was and  it required  a  change in  the                                                              
MR. HURLEY stated  that Amendment three was written  with the RCA.                                                              
It addresses  section five  of the  bill.   The RCA was  concerned                                                              
that  some language  in the  bill created  a hybrid  that was  not                                                              
under AS 42.06  or AS 42.05.   The amendment stripped out  some of                                                              
the  language  in 310.(d)1(A)  and  revised  (B),  so that  it  is                                                              
clearly under the Pipeline Act.                                                                                                 
A fourth amendment was proposed,  but did not pass.  It referenced                                                              
the changes in AS 38.35.                                                                                                        
The fifth  amendment, which  did pass, was  the addition of  a new                                                              
section to  the bill  that changes the  rate structure,  such that                                                              
tariffs  for  the  North  Slope  natural  gas  pipeline  would  be                                                              
calculated as if it was a public utility.                                                                                       
SENATOR LINCOLN  referenced Mr. Ross Coen's letter  dated February                                                              
21, 1000, which  asks for the removal of language  on line 9, page                                                              
8, which excludes marine terminal  facilities, including pollution                                                              
control  equipment.   She  asked  Mr. Hurley  to  comment on  that                                                              
MR.  HURLEY  explained   that  the  intent  behind   changing  the                                                              
definition of a pipeline to exclude  those facilities was that the                                                              
sponsor  group  recognized  that   gas  will  be  transported  for                                                              
intrastate use  all along the pipeline  system.  The  actual plant                                                              
that makes LNG  is expected to be dedicated to  the export market.                                                              
The  existing  intrastate  usage, under  the  proposed  regulatory                                                              
regime,  is a  regular  common carriage  system.    If the  entire                                                              
system was kept common carriage,  the plant, which is dedicated to                                                              
export,  would  be  accessible  to  people who  want  to  use  LNG                                                              
instate.   That  would  impinge on  the  export  volumes and  they                                                              
wouldn't be able to satisfy contracts  for export of LNG overseas.                                                              
It doesn't  prevent anyone  from building  another LNG  plant next                                                              
door and barging  LNG around the state.  The group  wanted to keep                                                              
the  plant  and the  marine  terminal  out  of a  common  carriage                                                              
situation so  they defined the  system subject to  common carriage                                                              
so that it included only the pipeline and the upstream pieces.                                                                  
The  State  Pipeline   Coordinator's  Office  (SPCO)   has  become                                                              
concerned  that   this  definition   will  eliminate   the  SPCO's                                                              
oversight of that  plant.  The group's intent was  never to change                                                              
SPCO's  regulatory authority  one  way  or the  other.   They  are                                                              
working  with the  Department of  Law and  the SPCO  to find  some                                                              
other language to take care of that.                                                                                            
Number 2909                                                                                                                     
MR. MIKE BARNHILL,  Department of Law, said he  is also testifying                                                              
for   Roger   Marks,   Department   of   Revenue,   who   is   the                                                              
Administration's  lead on  the  bill.   He  circulated Mr.  Marks'                                                              
written comments.                                                                                                               
MR. BARNHILL said  the Administration applauds the  efforts of the                                                              
sponsor group and  others to bring the commercialization  of North                                                              
Slope natural gas closer to reality.   The Administration supports                                                              
that  intent.    Nevertheless,  the   Administration  has  certain                                                              
concerns that he hoped could be resolved.                                                                                       
He read the comments of Roger Marks:                                                                                            
     This    represents   a    preliminary    analysis   by    the                                                              
     Administration,  including the  Departments of Law,  Revenue,                                                              
     and  Natural  Resources,  and the  Regulatory  Commission  of                                                              
     Alaska, and the State Pipeline Coordinator's Office.                                                                       
     Instate use of  natural gas would be a very  valuable benefit                                                              
     of  an Alaska  North  Slope  liquefied natural  gas  project.                                                              
     However,  if the gas  is commercialized,  most of  the volume                                                              
     will  be for  export.   The financing  of this  multi-billion                                                              
     dollar  project  will  require  establishment  of  long  term                                                              
     contracts with  buyers. The  set amount of pipeline  capacity                                                              
     will need to be reserved for contractual obligations.                                                                      
     At  the  same time,  the  economics  of the  proposed  export                                                              
     projects appear  to be financially marginal.   They could not                                                              
     afford to take the North slope  gas to market if they have to                                                              
     bear the cost of pre-investing  to provide substantial excess                                                              
     capacity  if there were  a risk  the instate excess  capacity                                                              
     would not be used.  To do so  would affect the economics such                                                              
    that there would be no project and no one would get gas.                                                                    
MR. BARNHILL said the desire of the  Administration is to maximize                                                              
the instate access to natural gas  without jeopardizing the export                                                              
economics  of the  project.   He  thought the  goal  of this  bill                                                              
should  be to  strike  that balance.    He continued  reading  Mr.                                                              
Marks' comments.                                                                                                                
     Whereas  it  is  straightforward   to  arrange  for  pipeline                                                              
     capacity   and  gas  supplies   for  intrastate   use  before                                                              
     construction  starts,   attaining  pipeline   capacity  after                                                              
     operation   begins   may   be    difficult   and   expensive.                                                              
     Consequently, the  question of how to allocate  space and gas                                                              
     needs to be addressed before the line is built.                                                                            
TAPE 00-03, SIDE B                                                                                                            
MR. BARNHILL continued.                                                                                                         
     What this bill  does is provide a possible way  to reduce the                                                              
     potential gas  supply risks perceived by the  foreign market,                                                              
     facilitating  the marketing  of  the gas,  while providing  a                                                              
     mechanism   for   communities    to   procure   gas.      The                                                              
     Administration supports this broad intent.                                                                                 
     This said,  the bill  raises complex  issues that  could have                                                              
     significant  long-term   impacts.    Some  of   these  issues                                                              
     1.  Local  jurisdictions  committing  in  advance  to  secure                                                              
     pipeline  capacity without  knowing  what the  cost will  be,                                                              
     especially  if the  gas purchase  contracts are  also not  in                                                              
     place.  (There  may,  however,  be  mechanisms  available  to                                                              
     reduce risks  to buyers without  unduly harming  the pipeline                                                              
He  said that  an  attempt  was made  in  the  House Oil  and  Gas                                                              
Committee to  address the  Administration's concerns  in amendment                                                              
two.   Although it  was a step  in the  right direction,  there is                                                              
more to  be done  to protect  the interests  of instate  users. He                                                              
continued reading Mr. Mark's comments.                                                                                          
     2.  Allocation of capacity between  intrastate and export use                                                              
     in the event of shortages or excesses of capacity.                                                                         
     3.    Exclusion  of  the  pipeline  from  the  Alaska  Public                                                              
     Utilities Regulatory Act and  subjection to the Pipeline Act.                                                              
     The  Administration  is analyzing  the  extent  to which  the                                                              
     differences  between  these  two  statutory  regimes  may  be                                                              
     4.   Finally - exclusion  of marine terminal  facilities from                                                              
     the Right-of-Way-Leasing  Act.   This may affect  the ability                                                              
     of the  State Pipeline Coordinator's  Office to  oversee land                                                              
     management of marine terminal facilities.                                                                                  
MR.  BARNHILL  noted  the  Administration,  the  pipeline  sponsor                                                              
group, and Yukon Pacific have been  working together over the past                                                              
few  days to  come  up with  satisfactory  language.   Making  the                                                              
marine facilities  and LNG common carriers is  a principal concern                                                              
of the pipeline sponsor group.  He continued reading.                                                                           
     In  conclusion, the  Administration is  not yet  sufficiently                                                              
     comfortable with  the measures in  SB 226 to endorse  them at                                                              
     this time.   The multi-agency  team will continue  to analyze                                                              
    the bill and provide recommendations to the legislature.                                                                    
CHAIRMAN HALFORD noted that there  wasn't anyone else signed up to                                                              
testify on SB 226 and announced that  the committee would continue                                                              
to work on it.                                                                                                                  
                 HCR  9-TAKE A KID HUNTING WEEK                                                                             
CHAIRMAN HALFORD announced HCR 9 to be up for consideration.                                                                    
MR. SCOTT PETSEL,  aide to Representative Phillips, said  HCR 9 as                                                              
amended seeks  to name the second  week in September each  year as                                                              
Take A  Young Person Hunting  Week.   Such an event  would greatly                                                              
assist in  preserving our hunting  heritage and encourage  Alaskan                                                              
hunters to become knowledgeable in  the areas of sport fishing and                                                              
Naming  a  special  week  would   greatly  complement  the  hunter                                                              
education  and shooting  sports program  funded last  year by  the                                                              
MR. PETSEL  noted there were letters  of support in  their packet.                                                              
Ten percent  or less of  the U.S. population  now hunts,  and that                                                              
number is declining.   This resolution may not only  help to teach                                                              
hunting heritage and the importance  of wildlife conservation, but                                                              
also increase the number of hunters in the state.                                                                               
SENATOR  TAYLOR said  he  totally supports  this  concept, but  he                                                              
questioned  where  he  could  take   a  young  person  hunting  if                                                              
subsistence passes, which the sponsor supports.                                                                                 
MR.  PETSEL  said he  couldn't  respond,  but would  pass  Senator                                                              
Taylor's comments on to Representative Phillips.                                                                                
SENATOR  LINCOLN said  she understands  the concept,  but she  has                                                              
difficulty with  it.  She read  the proclamation by  the Governor,                                                              
which  talked about  gun safety,  hunting skills  and that  people                                                              
make  smart  and  safe  decisions  when choosing  to  hunt.    Her                                                              
difficulty with  the resolution  is that it  says that we  have an                                                              
obligation to teach  our children hunting skills, that  we need to                                                              
have  opportunities  to hunt,  and  that we  urge  our schools  to                                                              
ensure the  continuation of hunting.   She doesn't have  a problem                                                              
with the percentage  of people who are hunting or  with the people                                                              
who don't want to go out and kill.   When people depend on hunting                                                              
for  food, she  doesn't have  a problem  with that.   She  thought                                                              
people are  teaching their children  about that.   This resolution                                                              
is not  written the  same as the  proclamation, which  talks about                                                              
gun safety  and  when one chooses  to  hunt.  It  talks about  how                                                              
hunters are  declining and,  "By golly, get  those young  kids out                                                              
there armed  with guns  and bows  and arrows and  go out  and show                                                              
them how to kill animals."  That  gives her heartburn - especially                                                              
when they talk  about taking that into the schools.   She believes                                                              
many programs  should be  taught in the  schools, but this  is not                                                              
one of them.  It is the reverse of  removing guns from schools and                                                              
the  school yard.    The resolution  applies  to  a yearly  event,                                                              
unlike  the Governor's  proclamation,  which  concentrates on  one                                                              
MR. PETSEL  said he didn't  think it was Representative  Phillips'                                                              
intention to  teach children to go  out and kill; it  was designed                                                              
to  address   wildlife  conservation   issues,  gun   safety,  and                                                              
SENATOR LINCOLN asked where it talks  about wildlife conservation.                                                              
SENATOR TAYLOR and  MR. PETSEL pointed to page 1,  lines 8 and 14,                                                              
and page 2, line 1.                                                                                                             
SENATOR  GREEN said  she supports  this resolution  and finds  the                                                              
language  in it  to be  very tactful.   She  said resolutions  are                                                              
meant to bring  attention to the issue.  She  noted the resolution                                                              
speaks to the  harvest, which many Alaskans partake  in regularly.                                                              
She believes it  is important that  students and  children grow up                                                              
with good information about it.                                                                                                 
SENATOR GREEN moved  to pass HCR 9 from committee  with individual                                                              
recommendations.  There were no objections  and it was so ordered.                                                              
         SB 273-OIL SPILL RESPONSE; NONTANK VESSELS & RR                                                                    
CHAIRMAN HALFORD announced SB 273 to be up for consideration.                                                                   
SENATOR PEARCE,  sponsor, said we  are too often  brought together                                                              
as a legislature  to react to events beyond its  control and often                                                              
times beyond the  control of the individuals who  have been a part                                                              
of the events.  That is what brings SB 273 before them today.                                                                   
SENATOR PEARCE said that Alaska has  the best oil spill prevention                                                              
and response program for crude oil,  heavy crude carrying vessels,                                                              
and  the  pipeline because  it  provides  20  percent of  the  oil                                                              
produced in  the United States.   However, most of the  oil spills                                                              
occurring in  the waters of Alaska  today come from  carriers that                                                              
are not required to prepare for spill response by state law.                                                                    
Since  1995,  93  spills from  regulated  vessels  and  facilities                                                              
occurred; a  total of 5,286 gallons  of oil were spilled.   During                                                              
that same period, 945 separate spills  from non-regulated carriers                                                              
occurred; over a quarter of a million  gallons of oil was spilled.                                                              
SB  273  would  expand the  prevention  and  response  program  to                                                              
include   larger  non-tank   vessels  and   the  Alaska   Railroad                                                              
Corporation (ARRC), which transports oil products in bulk.                                                                      
SENATOR  PEARCE stated  the bill  does a  few simple  things.   It                                                              
requires non-tank  vessels and  ARRC to  provide an oil  discharge                                                              
prevention   and   contingency   plan   to   the   Department   of                                                              
Environmental Conservation (DEC),  as is presently required of the                                                              
oil industry  and the  tanker vessels  that carry  crude oil.   It                                                              
requires proof of financial responsibility  for those vessels that                                                              
are operating  in our waters and  it requires that the  vessels be                                                              
subject  to inspections  by the  State along  with whatever  Coast                                                              
Guard  inspections  are  required  under  federal law.    This  is                                                              
because we  have had  945 spills  since 1995  that totaled  over a                                                              
quarter million gallons  of product.  While that  may sound like a                                                              
much smaller number  than the 11 million gallons  of crude spilled                                                              
by the  Exxon Valdez, the  non-crude petroleum products  are often                                                              
more toxic  than the  heavy crude,  which goes  to the bottom  and                                                              
doesn't intermix with the water column.                                                                                         
Also, these  vessels frequently carry  a larger volume  than those                                                              
carrying  fuel-less cargo,  like the  barges.   One of the  newest                                                              
cruise ships  coming into Alaskan  waters for the first  time this                                                              
year carries  18,000 barrels  of fuel -  over three quarters  of a                                                              
million gallons  of fuel.    The cruise  ships, many of  the cargo                                                              
ships, and  state ferries, may have  double hulls or  bottoms that                                                              
protect the cargo, but the fuel tanks  are in the area between the                                                              
second  hull and  the  first hull,  so the  actual  fuel of  these                                                              
ships, as much  as 18,000 barrels,  sits right next to  the hull -                                                              
only one hull away from the rocks.                                                                                              
Clearly, the  entire 18,000 barrels  would not be  spilled because                                                              
the ships  have separated tanks and  baffling but they do  carry a                                                              
very large  amount of fuel.   They are  not currently  required to                                                              
have  a  response system  or  equipment  in  place to  prevent  or                                                              
respond to spills.   They are not required to have  the ability to                                                              
finance the  clean up effort and  damages resulting from  a spill.                                                              
We don't have in  place the process by which we  would require the                                                              
individual owners of the ships to  respond.  She expressed concern                                                              
that if  we have  an event, it  would the  same kind of  situation                                                              
that occurred in  Dutch Harbor in 1997 when the  Kiroshima spilled                                                              
39,000 gallons of heavy bunker oil.   Everyone spent a lot of time                                                              
pointing in different  directions and no one went  to clean up the                                                              
spill in  the early days.   Granted, the  weather was bad  and the                                                              
site was hard to get to, but that  marine environment is important                                                              
and it was an important time period.                                                                                            
SENATOR PEARCE thought  that any ships that ply  our waters should                                                              
be required to have response plans.   The ARRC is included in this                                                              
bill; it has had three derailments  since 1992 and three spills in                                                              
the last  four months.   The  largest spill  was 167,000  gallons.                                                              
Two recent  spills equaled  approximately  125,000 gallons  of jet                                                              
fuel that  spilled out  of tanker  cars coming  to Anchorage  from                                                              
Fairbanks.   The spill  of 12,450  gallons was  the actual  diesel                                                              
fuel that  was in  the locomotive.  That may  have been  caused by                                                              
human  error and  perhaps human  negligence  in that  a valve  was                                                              
jerry-rigged  open.   In  1999, 28,000  railroad  cars carried  an                                                              
average  of 22,500  gallons  of fuel  per  car,  meaning that  the                                                              
railroad  carried 630  million gallons  of fuel  up and down  that                                                              
corridor with no  contingency plan.  They have  proof of financial                                                              
responsibility, which  is probably the  state.  They have  not had                                                              
clean up response in place and ready to go.                                                                                     
Non-tank vessels and  the railroad would be covered  by submitting                                                              
oil discharge prevention contingency  plans to DEC consistent with                                                              
current   requirements  of   tankers  and   oil  facilities.   The                                                              
contingency  plan (C-plan)  requires the  prevention and  response                                                              
equipment, personnel,  and resources needed  to respond to  an oil                                                              
spill.   It requires  proof of financial  responsibility  based on                                                              
the maximum  oil carrying capacity  of the individual  vessels and                                                              
it would require spill drills and inspections of the equipment.                                                                 
SENATOR  PEARCE  explained  that   SB  273  allows  DEC  to  adopt                                                              
alternative ways to achieve equivalent  levels of spill prevention                                                              
and response  in place of  some C-plan requirements.   Alternative                                                              
compliance would be determined through  the negotiated rule making                                                              
process,  so  that   a  working  group  of   representatives  from                                                              
industry, agencies, and other parties  to assist in development of                                                              
the regulations  could be  established.   The vessel owner  and/or                                                              
the railroad would  be required to demonstrate  proof of financial                                                              
ability to  respond and clean up  a major spill:  $300  per barrel                                                              
for  persistent  oil;  $100 per  barrel  for  non-persistent  oil.                                                              
Persistent oil  is defined as heavy  refined oil and fuel  such as                                                              
bunker,  crude, and  lube  oil.   Non-persistent  are the  lighter                                                              
refined oils  and fuels  such as  gasoline, diesel, kerosene,  and                                                              
jet fuel,  which are  more toxic to  both the fisheries  resources                                                              
and the flora and fauna.                                                                                                        
The law  would take  effect September  1, 2000,  and the  proof of                                                              
financial  responsibility  and the  inspection  requirement  would                                                              
kick in.   The actual C-plan  requirement would not kick  in until                                                              
June 1, 2001,  to provide time to  do the regulations and  to give                                                              
the entities the opportunity to get their responses in place.                                                                   
SENATOR PEARCE  said she  is pleased with  the number  of entities                                                              
that agree  they should have  prevention and contingency  plans in                                                              
place, as well as a way to respond  to a spill.  The industries in                                                              
question have  indicated that  this bill is  not a surprise.   She                                                              
has reason to  believe the small cruise ships  want to voluntarily                                                              
comply,  although  they  don't  come   under  the  300  gross  ton                                                              
requirement.   The least receptive  people who have  contacted her                                                              
office are the  representatives of the large fishing  vessels that                                                              
maneuver in Alaska's  most dangerous water during  the worst times                                                              
of  the year.    The experience  with  fishing  vessels, like  the                                                              
Kiroshima, indicate  to her that  Alaska should have some  sort of                                                              
requirements in place that aren't there now.                                                                                    
Number 1949                                                                                                                     
SENATOR GREEN asked  if there has been some reluctance  to further                                                              
empower DEC and give it more oversight authority.                                                                               
SENATOR PEARCE  admitted there are  people in the State  who don't                                                              
like the  DEC, but  she doubted  any of  them would disagree  that                                                              
these  groups should  have  contingency  plans and  the  financial                                                              
ability to  respond.   DEC has its  Spill Prevention  and Response                                                              
(SPAR) group  and while there have  been a number  of negotiations                                                              
over the finalization of contingency  plans for the large tankers,                                                              
part of  the problem  was created  by vagueness  in the  bill that                                                              
passed  in 1990.   The  bill required  best available  technology,                                                              
which is  an ever changing standard.   She believes the  system is                                                              
working quite  well at  the moment  and that  DEC has developed  a                                                              
great  deal  of expertise  during  the  last  10  years.   She  is                                                              
comfortable  with  giving  oversight responsibility  to  the  SPAR                                                              
folks.  Someone  has to have that  authority and DEC has  a lot of                                                              
regulations and knowledge in that area.                                                                                         
SENATOR GREEN asked, based on the  initial newspaper article about                                                              
the ability of  various owners to respond, whether  companies will                                                              
have to have big pieces of equipment  available onsite and whether                                                              
companies will have to own duplicate pieces of equipment.                                                                       
SENATOR PEARCE  said, taking the  railroad for example,  she would                                                              
expect  that some  response  equipment would  be  stored on  every                                                              
train  to be  used for  an initial  response.   The trains  travel                                                              
north  and south,  so  the same  train  is probably  making  daily                                                              
trips.   That would  require two  sets of  equipment: one  for the                                                              
northbound  train and  one  for the  southbound.   Spill  response                                                              
contractors are already  in place throughout the  state because of                                                              
current  law.    Seapro  is  in  Southeast  Alaska.    It  is  the                                                              
consortium put in  place by the Southeast vessels  that come under                                                              
the present law because of all the  fuel barged to every community                                                              
in  Southeast  Alaska.    There is  no  reason  the  new  entities                                                              
couldn't  become part  of those consortiums.    The same thing  is                                                              
true in Southwest Alaska; Cook Inlet has three consortiums.                                                                     
SENATOR PEARCE clarified  that not every vessel will  have to have                                                              
its own  set of equipment.   However,  she suspects that  there is                                                              
not enough  equipment in  Seward today to  respond to  an accident                                                              
should a  cruise ship go aground.   She suspects there  would have                                                              
to be a build-up of one of the coops in that area.                                                                              
SENATOR TAYLOR said the unfortunate  part is that those people who                                                              
have equipment  are under  contract to respond  to the  people who                                                              
have paid for that equipment.  He  stated, regarding the Kiroshima                                                              
incident,  that equipment  wasn't very far  away on  a barge.   He                                                              
explained that  Campbell Towing,  located out  of Wrangell,  had a                                                              
tug and barge in  the area for other purposes.   It was willing to                                                              
move equipment  to respond to the  troubled vessel and  start off-                                                              
loading oil  so it wouldn't go  in the water.   Unfortunately, the                                                              
onsite DEC  personnel did not  have sufficient authority  to allow                                                              
the movement  of the equipment out  of the area it  was designated                                                              
to  protect.    Had  anything occurred  in  the  area  where  that                                                              
equipment was supposed  to be available, everyone  would have been                                                              
strictly  liable  under OPA  '90.    The  incident occurred  on  a                                                              
Saturday  night.  Eventually,  Commissioner  Brown was located  to                                                              
give the authorization  to move the equipment so  that it could be                                                              
moved to  pump the oil.   Everyone  involved was very  cooperative                                                              
and professional.   He assumed that DEC has fixed  that problem so                                                              
that a person  who can give  the contractors the right  to respond                                                              
can be reached at all times.                                                                                                    
SENATOR  TAYLOR  said  he has  spent  a  lot  of time  working  on                                                              
contingency plans and  he was shocked to find that  every Navy and                                                              
Coast Guard vessel  that moves up and down the coast  has to have,                                                              
onboard,  the spill  response plan  for each of  the counties  and                                                              
communities  along  the Pacific  Coast.    That requires  a  large                                                              
library  of materials,  most of  which is  outdated. In  addition,                                                              
they don't know  who to contact.  All of the  spill response plans                                                              
are different  and they  are not  even indexed the  same way.   He                                                              
said he  understands Senator  Pearce's concerns  and supports  the                                                              
effort to provide  a meaningful response when a  spill occurs, but                                                              
he believes there should be some  practical way of making sense of                                                              
it all when the oil hits the water.                                                                                             
He said he was  present when Seapro was formed and  it was created                                                              
only  because there  was no  way that  individual companies  could                                                              
afford  to respond.   They  collectively brought  their money  and                                                              
equipment  together.   It took  years to  get DEC  to approve  the                                                              
level of equipment, where it would  be based, and how it would all                                                              
work.   He said he does  not want to  see an overlay  that creates                                                              
another 18 member committee in each  community to solve a problem.                                                              
SENATOR TAYLOR  said he is still  waiting for DEC to show  him how                                                              
it spent  the two cents  per barrel.  He  would like to  know what                                                              
equipment it purchased and how much  booming material is available                                                              
in Southeast.   He  also asked  about the  three cents per  barrel                                                              
that went to DEC all of this time.                                                                                              
SENATOR  PEARCE said  the  two cents  per barrel  was  not to  buy                                                              
anything; it goes  into the $50 million contingency  fund account.                                                              
The three cents per barrel was supposed  to do several things. She                                                              
knows that DEC  has purchased equipment around the  state.  One of                                                              
the  reasons we  don't have  the  same requirements  in Alaska  as                                                              
other states  have is that  Alaska did  its first.   Second, there                                                              
was a move  made by California,  Washington, and Oregon  to create                                                              
an interstate compact  with Alaska to decide what  spill responses                                                              
would  be  up  and  down  the  entire  West  Coast.    The  Alaska                                                              
Legislature chose  not join the compact,  which she thought  was a                                                              
good choice, because  Alaska's requirements are not  as onerous as                                                              
California's.  On the other hand,  she believes the ships that are                                                              
coming to Alaska should be prepared for an accident.                                                                            
SENATOR PEARCE said  the experience in Dutch Harbor  was the first                                                              
of that kind in that area and everyone  learns from each and every                                                              
incident.   There were  those same  sorts of  questions in  Prince                                                              
William Sound,  but after DEC has  gone through all of  the table-                                                              
top exercises  over the  years most  of Senator Taylor's  concerns                                                              
have been resolved.                                                                                                             
SENATOR  PEARCE  said  she  believes  that  one  non-profit  spill                                                              
response  organization writes  all of  the plans  in the state  of                                                              
Washington.   Every  vessel that  sails  into Washington's  waters                                                              
gets a bill for $160 every time it  enters.  Because so many ships                                                              
come into  those waters, the  fee is only  $160 per transit.   She                                                              
thought that in Southeast, for instance,  as more entities have to                                                              
join, the cost of that equipment  will be spread out and, over the                                                              
long term,  it will  be better  for everybody  economically.   She                                                              
noted she  understands the  frustrations in the  past but  she has                                                              
found that  people in Southeast Alaska  are glad there is  a spill                                                              
response capability that wasn't here in 1989.                                                                                   
SENATOR TAYLOR said he would help her any way he could.                                                                         
Number 1000                                                                                                                     
CHAIRMAN HALFORD asked who exempted public vessels.                                                                             
SENATOR PEARCE  said public  vessels that  are commercial  are not                                                              
exempted so the  ferries are not exempted, but she  didn't know of                                                              
any other state vessels that fit.   She noted that federal vessels                                                              
are exempt.                                                                                                                     
CHAIRMAN HALFORD asked about the biggest of the ADF&G boats.                                                                    
SENATOR PEARCE replied that they are not 300 gross tons.                                                                        
CHAIRMAN  HALFORD asked  what 300  gross  tons equal  in terms  of                                                              
size.   He  noted the  tonnage  is fairly  large,  but the  gallon                                                              
capacity  is fairly  low; it  looks like  a vessel  has to be  300                                                              
gross tons or more and carry 6,000 gallons.                                                                                     
SENATOR PEARCE  explained that those  numbers were  chosen because                                                              
that is what  is in all the other  states on the West  Coast.  She                                                              
did not want to bring in an entirely  new group of vessels.  There                                                              
is  some  question  about  whether gross  tonnage  should  be  the                                                              
measure;  perhaps  it  should  be displacement.    The  300  gross                                                              
tonnage picks up the largest of the  processing ships, but it does                                                              
not bring  in any vessels that  have limited entry permits.   That                                                              
was a threshold that DEC was trying to get above.                                                                               
CHAIRMAN HALFORD asked  if a 150 foot Bering Sea  crab boat weighs                                                              
less than 300 tons.                                                                                                             
MR.  PAT CARTER,  aide  to  Senator  Pearce, said  that  generally                                                              
speaking, a  150 foot vessel would  fall under this but  the gross                                                              
tonnage is based on cargo capacity  and, depending on how the ship                                                              
is constructed, the tonnage can be calculated differently.                                                                      
TAPE 00-04, SIDE A                                                                                                            
Number 001                                                                                                                    
MR. CARTER  explained that the intent  was to exclude  barges that                                                              
don't  transport  fuel -  barges  that transport  containers,  for                                                              
example.   He  noted a  vessel could  weigh  300 gross  tons as  a                                                              
barge, that  is carrying  fuel for dredging  equipment or  a crane                                                              
CHAIRMAN HALFORD noted  that most tenders in the  fisheries may be                                                              
barges but they carry a lot more than 6,000 gallons of fuel.                                                                    
MR. CARTER added  that some of the tenders, especially  those that                                                              
work the salmon fleet, will fall  under that because they are fuel                                                              
barges that  sell fuel to the  fishermen.  Part of  their commerce                                                              
is generated by  transporting fuel for cargo, so  they are already                                                              
under the law now (as a tanker barge).                                                                                        
SENATOR  TAYLOR  asked  what  amount  of  equipment  the  railroad                                                              
carries now.                                                                                                                    
MS. WENDY  LINDSKOOG, Alaska Railroad  Corporation, said  the ARRC                                                              
is  currently  revising  its  emergency   response  plan  to  meet                                                              
contingency plan requirements  that currently do not  apply to it.                                                              
ARRC believes,  that as  a state-owned entity,  it should  meet or                                                              
beat the standards  the state requires of similar  carriers.  ARRC                                                              
believes  that  legislation to  place  this  type of  planning  in                                                              
statute and regulation  is prudent and will ensure  consistency in                                                              
response planning  and prevention over  time.  ARRC  is especially                                                              
encouraged by provisions  in this and other legislation  that will                                                              
allow  the  railroad  to craft  regulatory  standards  with  state                                                              
regulators  to fit  the  railroad's unique  operational  situation                                                              
rather than  simply impose a  one-size fits all  response planning                                                              
standard.  ARRC  will work  actively  with the  legislature,  DEC,                                                              
other  state  agencies,  and  the   public  to  produce  effective                                                              
regulations  and   response  plans.  She  concluded   saying  ARRC                                                              
supports the legislation.                                                                                                       
SENATOR TAYLOR asked what equipment is on the train now.                                                                        
MR. ERNIE PIPER,  Alaska Railroad Corporation, replied  that every                                                              
locomotive  has a  three-man train  crew and  some spill  response                                                              
equipment.   It's really  designed to respond  to the  most likely                                                              
scenario  that three  people could  deal  with, which  might be  a                                                              
small  hole in the  fuel tank  of the  locomotive,  a leak from  a                                                              
belly cap on  a tanker or some  kind of valve damage.   They don't                                                              
carry equipment to do a major response.                                                                                         
SENATOR TAYLOR asked what equipment they carry.                                                                                 
MR. PIPER  replied that  pumps and other  types of equipment  used                                                              
for larger responses  are staged at strategic  locations along the                                                              
route.   For example,  some equipment is  cached at the  Hurricane                                                              
section  just above  Gold Creek  and  Canyon.   Equipment is  also                                                              
cached in Fairbanks and Anchorage.                                                                                              
SENATOR TAYLOR asked what kind of crew is available to respond.                                                                 
MR. PIPER said the practical way  for most carriers to deal with a                                                              
spill  is to  have  independent  contractors,  which is  what  the                                                              
Railroad has.                                                                                                                   
SENATOR  TAYLOR  asked  if  ARRC's  independent  contractors  were                                                              
ready, capable, and able to respond  to the last couple of spills.                                                              
He  heard a lot of criticism about  the ability of the railroad to                                                              
respond to the spills.                                                                                                          
MR.  PIPER answered  that ARRC  has  good contractors.   The  same                                                              
contractors are  used by  Alyeska Pipeline and  others.   The real                                                              
problem  in  each  of  the spills  was  that  the  locations  were                                                              
particularly remote.   In addition, the Gold Creek  spill happened                                                              
during the  middle of  a storm that  had Southcentral  Alaska shut                                                              
down.   He  tells  people  that response  is  never  clean and  it                                                              
doesn't work  very well; prevention is  the key.  He  assured them                                                              
that there were  ways to improve the response  time and capability                                                              
and ARRC will do that.  SB 273 will help.                                                                                       
SENATOR  TAYLOR  asked  how  the   bill  will  help  when  nothing                                                              
prevented ARRC  from going in that  direction before the  bill was                                                              
filed.  He  asked what ARRC's real  plans are for the  future, how                                                              
the bill  will affect  its overall economics,  and whether  SB 273                                                              
will work from a practical standpoint.                                                                                          
MR. PIPER  answered that  contingency planning  in Alaska  statute                                                              
and regulation  actively involves two  parts of the  equation that                                                              
aren't  normally involved  - both  the public  and the  regulatory                                                              
agencies.   When everyone has a  clear picture of what  the likely                                                              
scenarios  are, what dedicated  equipment  is available,  and what                                                              
the response  strategies are going  to be in particular  areas, it                                                              
makes things  go a  lot more smoothly.   This  bill is one  of the                                                              
ways to actively involve more people  to see what could be done to                                                              
do a response.   It keeps the communications strong  among all the                                                              
parties involved.                                                                                                               
MR. BOB DOLL,  Department of Transportation and  Public Facilities                                                              
(DOTPF),  stated support  for SB  273.   He pointed  out that  the                                                              
Marine Highway  already has  a written agreement  with the  DEC to                                                              
operate its  vessels in  support of an  oil spill clean-up  effort                                                              
and  its  ships  have  additional  capabilities  on  board.    His                                                              
principal purpose  for testifying  today is  to point out  DOTPF's                                                              
fiscal note, which indicates a source  to pay the costs of DOTPF's                                                              
participation.  That is one of DOTPF's main concerns.                                                                           
SENATOR  TAYLOR said  his concern  is that DOTPF  has announced  a                                                              
transition to a  high speed fleet in Southeast,  which will travel                                                              
in excess of 32 knots.  He assumes  that when one of those vessels                                                              
hits a rock, it will spray oil all over the place.                                                                              
MR. DOLL  replied that DOTPF doesn't  expect that to happen.   The                                                              
ferry system  has a  37-year record  of operating  at 16  knots in                                                              
some  very  difficult waters  and  through  challenging  channels.                                                              
DOTPF expects  to apply  the same  safety standards  to the  high-                                                              
speed fleet.                                                                                                                    
SENATOR TAYLOR said  that traveling at half that  speed, 18 knots,                                                              
the Taku ran directly  into an island in the middle  of the bay at                                                              
Prince Rupert  on a  clear night.   Other vessels  were run  on to                                                              
rocks in Sergius  Narrows and the bottoms were ripped  out.  Those                                                              
vessels  do carry  a significant  amount of  fuel.   He said,  "In                                                              
fact, we always  were very happy that  we had the oil  tank on the                                                              
bottom of the vessel  because when we ripped a hole  in the bottom                                                              
of the  boat, all  we lost  was fuel,  we didn't  lose a  vessel."                                                              
Senator  Taylor stated  he wants  to  make certain  that in  going                                                              
through this  process, the  bill will  not add  one more  layer of                                                              
cost and inefficiency  to a system that certainly  isn't operating                                                              
to the level of service he would like to see it.                                                                                
MR. DOLL responded that DOTPF's costs  are indicated in the fiscal                                                              
note.  He noted that, "Anytime we  talk about additional costs for                                                              
the Marine  Highway operation  we need to  be cautious  about that                                                              
and  certainly  I  will  continue  to sound  that  note  at  every                                                              
opportunity."   He  did  not believe  this  bill  will affect  the                                                              
marine  highway  service level.    DOTPF already  has  contingency                                                              
plans in place.   It does expect additional costs  associated with                                                              
SB  273  and would  like  to  target  those  expenses as  much  as                                                              
CHAIRMAN HALFORD noted that Senator  Taylor volunteered to work on                                                              
this issue and he would look for  two more volunteers to work with                                                              
the sponsor.                                                                                                                    
CHAIRMAN HALFORD adjourned the meeting at 4:20 p.m.                                                                             

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