Legislature(2005 - 2006)BUTROVICH 205

03/02/2005 03:30 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 53 AK PENINSULA OIL & GAS LEASE SALE; TAXES TELECONFERENCED
Heard & Held
*+ SB 110 POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         March 2, 2005                                                                                          
                           3:38 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Thomas Wagoner, Chair                                                                                                   
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Fred Dyson                                                                                                              
Senator Bert Stedman                                                                                                            
Senator Kim Elton                                                                                                               
Senator Ben Stevens                                                                                                             
Senator Gretchen Guess                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 53                                                                                                              
"An  Act relating  to a  credit for  certain exploration  expenses                                                              
against oil  and gas  properties production taxes  on oil  and gas                                                              
produced from  a lease or property  in the state; relating  to the                                                              
deadline  for certain  exploration  expenditures  used as  credits                                                              
against production  tax on  oil and gas  produced from a  lease or                                                              
property  in  the   Alaska  Peninsula  competitive   oil  and  gas                                                              
areawide lease  sale area  after July 1,  2004; and  providing for                                                              
an effective date."                                                                                                             
                                                                                                                                
          HEARD AND HELD                                                                                                        
                                                                                                                                
SENATE BILL NO. 110                                                                                                             
"An  Act relating  to regulation  of the  discharge of  pollutants                                                              
under  the National  Pollutant Discharge  Elimination System;  and                                                              
providing for an effective date."                                                                                               
                                                                                                                                
          HEARD AND HELD                                                                                                        
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                              
BILL: SB  53                                                                                                                  
SHORT TITLE: AK PENINSULA OIL & GAS LEASE SALE; TAXES                                                                           
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/12/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/12/05       (S)       RES, FIN                                                                                               
03/02/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
BILL: SB 110                                                                                                                  
SHORT TITLE: POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/16/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/05       (S)       RES, FIN                                                                                               
03/02/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Dan Dickinson, Director                                                                                                         
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT: Supported SB 53.                                                                                          
                                                                                                                                
Mark Myers, Director                                                                                                            
Division of Oil and Gas                                                                                                         
Department of Natural Resources                                                                                                 
400 Willoughby Ave.                                                                                                             
Juneau, AK  99801-1724                                                                                                          
POSITION STATEMENT: Commented on SB 53.                                                                                       
                                                                                                                                
Gary Rogers, Revenue Auditor                                                                                                    
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT: Commented on SB 53.                                                                                       
                                                                                                                                
Kurt Fredriksson, Acting Commissioner                                                                                           
Department of Environmental Conservation                                                                                        
410 Willoughby                                                                                                                  
Juneau, AK 99801-1795                                                                                                           
POSITION STATEMENT: Supported SB 110.                                                                                         
                                                                                                                                
Dan Easton, Director                                                                                                            
Division of Water                                                                                                               
Department of Environmental Conservation                                                                                        
410 Willoughby                                                                                                                  
Juneau, AK 99801-1795                                                                                                           
POSITION STATEMENT: Supported SB 110.                                                                                         
                                                                                                                                
Steve Borell                                                                                                                    
Alaska Miners Association                                                                                                       
3305 Arctic Blvd., Ste 105                                                                                                      
Anchorage AK 99503                                                                                                              
POSITION STATEMENT: Supported SB 110.                                                                                         
                                                                                                                                
Beryl Hubbard, Vice President                                                                                                   
Trident Seafoods Corporation                                                                                                    
Seattle WA                                                                                                                      
POSITION STATEMENT: Supported SB 110.                                                                                         
                                                                                                                                
Bob Robichaud, Associate Director                                                                                               
Office of Law                                                                                                                   
Environmental Protection Agency                                                                                                 
Seattle WA                                                                                                                      
POSITION STATEMENT: Supported SB 110.                                                                                         
                                                                                                                                
Dick Coose                                                                                                                      
Concerned Alaskans for Research and Envy (CARE)                                                                                 
Ketchikan AK                                                                                                                    
POSITION STATEMENT: Supported SB 100.                                                                                         
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  THOMAS   WAGONER  called  the  Senate   Resources  Standing                                                            
Committee meeting  to order  at 3:38:35  PM Present were  Senators                                                            
Seekins,  Dyson, Stedman,  Elton, Ben Stevens  and Chair  Wagoner.                                                              
Senator Guess arrived at 3:42.                                                                                                  
                                                                                                                                
        SB  53-AK PENINSULA OIL & GAS LEASE SALE; TAXES                                                                     
                                                                                                                                
CHAIR THOMAS WAGONER announced SB 53 to be up for consideration.                                                                
                                                                                                                                
DAN DICKERSON,  Director, Tax Division,  said the intent of  SB 53                                                              
is to extend  the Alaska Peninsula  as part of the active  oil and                                                              
gas province  in Alaska. It takes  an exploration credit  that was                                                              
passed  two  years ago  and  says  if the  Department  of  Natural                                                              
Resources (DNR) is  contemplating a sale on the  Alaska Peninsula,                                                              
a four-year  window will  be opened.  "If any exploration  occurs,                                                              
the state  will bear some  of that risk."  The Governor  and folks                                                              
in Bristol Bay support this bill.                                                                                               
                                                                                                                                
MARK  MYERS,  Director,  Division   of  Oil  and  Gas,  noted  the                                                              
division's preliminary  best interest findings that  were just put                                                              
out  for public  comment  on  the  recent Alaska  Peninsula  lease                                                              
sale.  He hoped  to  issue  final  findings and  a  commissioner's                                                              
approval soon; the  sale would actually occur in  October 2005 and                                                              
has significant potential  for natural gas and oil.  The sale will                                                              
cover onshore state  lands and waters out to  the three-mile limit                                                              
with onshore drilling only.                                                                                                     
                                                                                                                                
The  basin has  20 or  so  wells that  were  drilled before  1985.                                                              
After that,  there was  only leasing and  drilling on  federal and                                                              
submerged lands  on the  Outer Continental  Shelf (OCS),  but this                                                              
was discontinued  over environmental  concerns. The  community has                                                              
had  a change  of heart  and it  now wants  an oil  and gas  lease                                                              
sale.                                                                                                                           
                                                                                                                                
MR. MYERS said the  companies hadn't really looked  at the area in                                                              
any great detail  since about 1985 when  it left and a  big gap in                                                              
oil  and gas  exploration data  exists. This  incentive credit  is                                                              
strategically  placed  to  accelerate the  acquisition  of  modern                                                              
seismic data and  the potential early exploration  drilling in the                                                              
basin. The credit  is available for the first  five years. Because                                                              
there are no  active leases in the  area, a credit like  this gets                                                              
factored into the  bid if people come to the sale at  all. It is a                                                              
frontier  basin  without  data  or  oil  and  gas  infrastructure.                                                              
"There is significant geologic and economic risk."                                                                              
                                                                                                                                
The credit is up  to 40% and if it is accepted,  the state will be                                                              
allowed  to release  the  data in  10  years.  Generally, data  is                                                              
released after 25  months unless confidentiality  is extended, but                                                              
seismic   data  is   never  released.   This   bill  provides   an                                                              
opportunity  to get  data  out there  faster.  He  thinks it  will                                                              
bring more companies  to participate in the sale  and increase the                                                              
size of their bids. It will be seen very positively by industry.                                                                
                                                                                                                                
SENATOR GUESS arrived at 3:42.                                                                                                  
                                                                                                                                
SENATOR  ELTON  asked  if  he  could  quantify  if  the  increased                                                              
activity that has  taken place in other oil and  gas regimes since                                                              
the passage of the original bill in 2003.                                                                                       
                                                                                                                                
3:45:56 PM                                                                                                                    
                                                                                                                                
MR.  MYERS replied  that  he hadn't  seen  any increased  spending                                                              
activity. He  has eight  applications under  the program  and most                                                              
of them are on  the North Slope; two are on the  NPRA. There is no                                                              
way to  quantify whether  it has led  to incremental  bids because                                                              
the program is too  young. Much of the perspective  acreage on the                                                              
North  Slope  is  already  under lease.  However,  the  value  and                                                              
number  of the  bids  have  increased as  well  as  the number  of                                                              
companies  bidding in the  last two  years.   He pointed  out that                                                              
oil prices have been higher, too.                                                                                               
                                                                                                                                
The  increased number  of  applications  indicates  the credit  is                                                              
being used.  But he  didn't know  in basins  like the  North Slope                                                              
whether the  credit was bringing  the companies in or  whether the                                                              
companies   using  it  were   already  planning   on  making   the                                                              
investment. There  is an up-tic  of interest in using  this credit                                                              
in some  of the exploration  license areas  like Copper  River and                                                              
Nenana.  Revenues  will  not  increase  until  production  beings,                                                              
however.                                                                                                                        
                                                                                                                                
3:47:28 PM                                                                                                                    
                                                                                                                                
GARY ROGERS,  Revenue Auditor,  Tax Division,  said he  audits the                                                              
exploration tax  credits. Drilling  an exploration well  more than                                                              
three  miles  from  a  preexisting  well  receives  20%  allowable                                                              
expenses.  An exploration  well drilled  more than  25 miles  from                                                              
the unit receives  20% of exploration drilling costs.  If the well                                                              
is both  more than three  miles from a  preexisting well  and more                                                              
than 25 miles from  the unit, it gets 40% credit  for the drilling                                                              
costs.  The credit  also  provides  for a  40%  credit in  seismic                                                              
exploration costs.                                                                                                              
                                                                                                                                
3:49:37 PM                                                                                                                    
                                                                                                                                
Once the  credit application has  been audited and the  credit has                                                              
been  issued,  the  explorer  can  either use  it  to  offset  his                                                              
production  tax  liability  or  sell or  transfer  the  credit  to                                                              
another party  that has  a production  tax liability.  In general,                                                              
allowable  expenses are  directly  related to  the work;  excluded                                                              
are administration,  environmental, overhead  indirect costs.   SB                                                              
53 extends  the provisions  of last year's  credit program  to the                                                              
Alaska Peninsula lease sale area and extends its deadline.                                                                      
                                                                                                                                
SENATOR ELTON  asked if  the bill  extends the  tax credit  in the                                                              
Bristol  Bay  area  to  2010  and they  are  given  based  on  the                                                              
distance the new wells are from existing wells.                                                                                 
                                                                                                                                
MR. ROGERS  responded that there  actually are some old  wells out                                                              
there.                                                                                                                          
                                                                                                                                
SENATOR ELTON sought to clarify:                                                                                                
                                                                                                                                
     If you  go out  and drill  two wells  in a season,  say,                                                                   
     right  next to  each other,  the first  well won't  turn                                                                   
     around  and disqualify  the second.  We'll look at  that                                                                   
     as a  project. Then  the other point,  which I  think is                                                                   
     made, I  think when Mark said  there have been  20 wells                                                                   
     drilled  up to  1985,  there's a  cut  off.... The  ones                                                                   
     that   were   done   back...   at  the   turn   of   the                                                                   
     century...some  very old  ones, won't  be considered.  I                                                                   
     think the  cut off is roughly  30 years. Ones  that were                                                                   
     drilled  as  recently as  1985,  you  would have  to  be                                                                   
     three  miles  from  that  well to  get  your  total  40%                                                                   
     credit.                                                                                                                    
                                                                                                                                
3:51:41 PM                                                                                                                    
                                                                                                                                
CHAIR  WAGONER  said the  state  might  already  have all  of  the                                                              
information from that well.                                                                                                     
                                                                                                                                
MR.  MYERS responded  that the  information from  those old  wells                                                              
are  public  knowledge.  But  wells   like  the  Amoco  Pitcherov,                                                              
drilled around 1985,  would disqualify other wells  drilled within                                                              
a three-mile radius.                                                                                                            
                                                                                                                                
     There's  two components.  The 20% credit  applies for  -                                                                   
     any  well gets  at least  20%  if it's  more than  three                                                                   
     miles away  from an existing  well post 1979.  There's a                                                                   
     second  criteria that  it has  to  be 25  miles from  an                                                                   
     existing oil and  gas unit as of 2003. There  are no oil                                                                   
     and gas  units; so, if a  well qualifies in  the Bristol                                                                   
     Bay  area,  at  least  for the  first  season,  it  will                                                                   
     qualify for a  full 40% credit.... There may  be four or                                                                   
     five  wells that  are post  '79;  the rest  of the  area                                                                   
     would qualify at the full 40%.                                                                                             
                                                                                                                                
3:53:37 PM                                                                                                                    
                                                                                                                                
SENATOR SEEKINS  asked if every  new well would qualify  unless it                                                              
was within  three miles of a  preexisting well from back  then; so                                                              
if  there is  a really  hot  strike, every  other  well around  it                                                              
qualifies for the 40% credit no matter what.                                                                                    
                                                                                                                                
MR. DICKERSON replied that is correct.                                                                                          
                                                                                                                                
3:55:25 PM                                                                                                                    
                                                                                                                                
SENATOR  ELTON said  he  understood that  happened  for the  first                                                              
year,  but would  the credit  only be  for new  wells outside  the                                                              
three miles in the second year.                                                                                                 
                                                                                                                                
MR. DICKERSON replied that is correct.                                                                                          
                                                                                                                                
CHAIR  WAGONER noted  a large  number of  supporting letters  from                                                              
municipal   and   tribal  governments,   which   represented   the                                                              
communities  in the  area, but  commercial  fishing groups  hadn't                                                              
commented  yet. He  announced that  the bill  would be held  until                                                              
the next meeting.                                                                                                               
3:56:09 PM                                                                                                                    
                                                                                                                                
        SB 110-POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL                                                                    
                                                                                                                                
CHAIR   THOMAS   WAGONER  announced   SB   110   to  be   up   for                                                              
consideration.                                                                                                                  
                                                                                                                                
KURT    FREDRIKSSON,    Acting   Commissioner,    Department    of                                                              
Environmental Conservation  (DEC), supported SB 110  regarding the                                                              
National   Pollutant   Discharge    Elimination   System   (NPDES)                                                              
Assumption.  He wanted  to focus  on  how it  will strengthen  the                                                              
ability of  Alaskans to  protect the  state's water resources  and                                                              
build a strong economy.                                                                                                         
                                                                                                                                
3:58:29 PM                                                                                                                    
                                                                                                                                
     Since  creation of  DEC in  1971, our  duties have  been                                                                   
     clearly  spelled out  by the  Legislature  to adopt  and                                                                   
     enforce  regulations,   which  set  standards   for  the                                                                   
     control   of  water,   land   and  air   pollution   (AS                                                                   
     44.46.020).   DEC  fulfills   these  state   obligations                                                                   
     consistent  with  national  pollution  control  programs                                                                   
     authorized  under the  Clean Air and  Clean Water  Acts.                                                                   
     These   state  and   federal   laws   are  designed   to                                                                   
     accomplish    uniform   environmental   quality    goals                                                                   
     nationwide  using pollution  controls  tailored to  each                                                                   
     state's unique circumstances.                                                                                              
                                                                                                                                
     DEC currently  exercises all the authorities  granted by                                                                   
     the  Alaska Legislature  as  well as  the United  States                                                                   
     Congress  to protect Alaska's  air quality and  drinking                                                                   
     water. The same  is not true for protecting  the quality                                                                   
     of  Alaska's surface  water.  The federal  Environmental                                                                   
     Protection  Agency  (EPA)  is  the  water  authority  in                                                                   
     Alaska.  Alaska, like  four  other states,  has  allowed                                                                   
     wastewater  permitting  authority  to  remain  with  the                                                                   
     federal government.                                                                                                        
                                                                                                                                
     EPA  makes the  wastewater permitting  rules in  Alaska.                                                                   
     EPA  decides  what's  important   and  what's  not.  EPA                                                                   
     decides the  permit review timeframes. EPA  decides what                                                                   
     goes  into  the  permits and  who  gets  inspected.  EPA                                                                   
     decides  how Alaska's  water quality  standards will  be                                                                   
     applied  to  specific  discharges.   EPA  sets  Alaska's                                                                   
     water quality priorities.                                                                                                  
                                                                                                                                
     As you know,  Governor Murkowski is committed  to permit                                                                   
     streamlining  that eliminates  duplicative,  unnecessary                                                                   
     procedures,  which invite  litigation and  add time  and                                                                   
     cost   without  additional   environmental   protection.                                                                   
     Governor Murkowski  is committed to permit  streamlining                                                                   
     that aligns  our regulator requirement with  real Alaska                                                                   
     conditions  and focuses  on the real  risks to  Alaska's                                                                   
     water quality.                                                                                                             
                                                                                                                                
     DEC has  made significant  progress in streamlining  its                                                                   
     permit  programs,  but  when   it  comes  to  wastewater                                                                   
     permitting, we cannot fix what we don't control.                                                                           
                                                                                                                                
     Alaska  has never  pursued the  opportunity provided  by                                                                   
     the federal  Clean Water  Act to  shape the NPDES  water                                                                   
     pollution  control   permit  program  to   fit  Alaska's                                                                   
     unique  circumstances.   SB  110  would  allow   DEC  to                                                                   
     develop   a  comprehensive   water  quality   protection                                                                   
     program where  all program components,  from legislative                                                                   
     budgeting  and oversight to  fieldwork and  enforcement,                                                                   
     are  conducted  here in  the  state where  Alaskans  can                                                                   
     shape  solutions to  fit Alaska's  challenges.  Alaskans                                                                   
     are capable of protecting our water resources.                                                                             
                                                                                                                                
     A  state  permit  program  will  be  based  on  Alaska's                                                                   
     priorities, not  national priorities that  are one-size-                                                                   
     fits-all. DEC's  permit priorities, level of  effort and                                                                   
     performance measures  would be subject to  annual review                                                                   
     and   approval  by   Alaskans   through  their   elected                                                                   
     officials in the state Legislature.                                                                                        
                                                                                                                                
     A state  run program will  place permit decision  makers                                                                   
     closer  to  the  Alaskan  public  and  regulated  permit                                                                   
     holders.   No  longer  will   permits  be  written   and                                                                   
     enforced  by  federal  staff  unfamiliar  with  Alaska's                                                                   
     unique environment.                                                                                                        
                                                                                                                                
     The  state-run permit  program won't  be free. When  EPA                                                                   
     issues  permits in Alaska,  the costs  are borne  by the                                                                   
     U.S.  taxpayer.  A  state   permit  program  will  shift                                                                   
     authority and  responsibility to the state, but  it will                                                                   
     also shift some  of the costs to permit  holders and the                                                                   
     state.                                                                                                                     
                                                                                                                                
     Federal  programs   do  not  adapt  easily   to  Alaska.                                                                   
     National  goals  do  not  always  address  our  greatest                                                                   
     needs.  Alaska's   elected  representatives   have  made                                                                   
     clear  our commitment  to environmental  protection  and                                                                   
     our  responsibility  to develop  our  resources for  the                                                                   
     wellbeing  of all  Alaskans. If  we are  to realize  the                                                                   
     primacy  for   resource  development,  we   must  accept                                                                   
     responsibility  for managing  our water resources.  That                                                                   
     means  assuming  primacy  for the  NPDES  program.  With                                                                   
     primacy  there  will  be no  rollback  of  environmental                                                                   
     protection;  anyone who supports  primacy on that  basis                                                                   
     will be disappointed.                                                                                                      
                                                                                                                                
     NPDES primacy means:                                                                                                       
                                                                                                                                
        · A faster, more effective program for protecting                                                                       
          our water resources                                                                                                   
        · Alaskan industries and communities working with                                                                       
          Alaskan permitters on permits that reflect our                                                                        
          priorities and unique conditions                                                                                      
        · Less emphasis on a cumbersome process and more                                                                        
          emphasis on results.                                                                                                  
        · Less emphasis on one-size-fits-all permits and                                                                        
          more emphasis on specific risks to Alaska's                                                                           
          environment.                                                                                                          
        · Permitting accountability to Alaska's elected                                                                         
          officials and public.                                                                                                 
                                                                                                                                
     It  is time  for  Alaskans  to take  responsibility  for                                                                   
     protecting Alaska's  environment. To do  otherwise means                                                                   
     continuing   the  status   quo.   The   status  quo   is                                                                   
     unacceptable.                                                                                                              
                                                                                                                                
4:02:30 PM                                                                                                                    
                                                                                                                                
DAN  EASTON, Director,  Division  of Water,  SB  110 started  with                                                              
Senate Bill  326 (enacted  in 2002) and  directed DEC  to evaluate                                                              
the  potential benefits  and consequences  of  the state  assuming                                                              
primacy of the  NPDES program. The department released  its report                                                              
in January 2004.                                                                                                                
                                                                                                                                
     The report recommended  that the state seek  primacy and                                                                   
     determined that  it would need  a total of  43 positions                                                                   
     and a  budget of $4.8 million  to run the  program based                                                                   
     on workload models and comparisons with other states.                                                                      
                                                                                                                                
     Last  year,  the  Legislature   passed  House  Bill  546                                                                   
     directing the  state to apply for partial  NPDES primacy                                                                   
     just for  the timber  sector. The  fiscal note with  the                                                                   
     bill  provided a  full-time position  and a  combination                                                                   
     of  state  and  one-time federal  grant  funds  for  the                                                                   
     effort.                                                                                                                    
                                                                                                                                
     In an  unexpected twist, EPA  notified DEC last  October                                                                   
     that partial  primacy for just  the timber sector  would                                                                   
     be  "problematic."  Reconciling   ourselves  to  second-                                                                   
     best,  we executed a  "work share  agreement" with  EPA.                                                                   
     That  agreement makes  DEC the lead  in the  substantial                                                                   
     effort  of developing  the next general  permit for  log                                                                   
     transfer facilities,  but it  will remain an  EPA issued                                                                   
     and enforced  permit absent  state primacy for  the full                                                                   
     NPDES program.                                                                                                             
                                                                                                                                
4:04:49 PM                                                                                                                    
                                                                                                                                
     In November  2004, DEC formed  an advisory workgroup  to                                                                   
     examine  the  concerns, costs  and  benefits  associated                                                                   
     with  state  primacy  specifically  from  the  permittee                                                                   
     perspective.                                                                                                               
                                                                                                                                
     The  work group  met in  six  day-long meetings  between                                                                   
     November  2004  and  January  2005.  Members  from  each                                                                   
     major NPDES  permittee group  participated - the  Alaska                                                                   
     Oil  and  Gas  Association  (AOGA),  the  Alaska  Forest                                                                   
     Association   (AFA),  the   Alaska  Miners   Association                                                                   
     (AMA),  the  Alaska  Water   and  Wastewater  Management                                                                   
     Association   and  the  Alaska   Native  Tribal   Health                                                                   
     Consortium.  Public notice of  the meeting schedule  was                                                                   
     provided  and  the meetings  were  open to  the  public.                                                                   
     workgroup  proceedings,  findings   and  recommendations                                                                   
     were  captured in  a report  completed  last month.  The                                                                   
     report is available on the department's web site.                                                                          
                                                                                                                                
4:05:50 PM                                                                                                                    
                                                                                                                                
MR. EASTON said in the end this report says that support for                                                                    
state assumption of the NPDES program varied between the                                                                        
permittee sectors.                                                                                                              
                                                                                                                                
     The department's  budget currently  includes about  $3.3                                                                   
     million and  30 staff devoted  to activities  that would                                                                   
     contribute  to  the  state   NPDES  permitting  program.                                                                   
     Those  figures include  the resources  provided for  the                                                                   
     timber  primacy effort.  These  positions currently  are                                                                   
     certifying the  NPDES permits issued by EPA  as required                                                                   
     by the  Clean Water  Act and  issuing state permits  for                                                                   
     small discharges that EPA has not made a priority.                                                                         
                                                                                                                                
     Bridging  the   gap  between  current   resources  ($3.3                                                                   
     million  and  30  positions)  and what  is  required  to                                                                   
     operate   a  state   program   ($4.8   million  and   43                                                                   
     positions) will  require an additional $1.5  million and                                                                   
     13 new positions.                                                                                                          
                                                                                                                                
     Costs  would be  divided  between state  general  funds,                                                                   
     federal  grant   funds  and  permitting   fee  receipts.                                                                   
     Permit fees  will be based on charging for  direct costs                                                                   
     according   to   the   resource    agency   fee   policy                                                                   
     established by House Bill 261 in they year 2000.                                                                           
                                                                                                                                
4:08:34 PM                                                                                                                    
                                                                                                                                
SENATOR  BERT  STEDMAN asked  if  fish  streams and  mixing  zones                                                              
would be  protected and what  would be  the difference in  fees to                                                              
the end user compared to the situation today.                                                                                   
                                                                                                                                
MR.  EASTON  replied  that  mixing zones  are  a  permitting  tool                                                              
provided for  in state regulation  and are not really  affected by                                                              
the  issue of  NPDES primacy.  The current  policy established  in                                                              
2000  for  fees states  that  the  state  charges for  direct  and                                                              
indirect costs. The  actual change would not be that  great and he                                                              
would continue to apply fees the way they are now.                                                                              
                                                                                                                                
SENATOR KIM  ELTON asked how much  EPA spends on the  Alaska NPDES                                                              
program and how many employees it has.                                                                                          
                                                                                                                                
MR. EASTON replied  that the state has 30 employees  and the total                                                              
is 51; so EPA has 21.                                                                                                           
                                                                                                                                
SENATOR  ELTON  assumed  that  EPA  is  spending  more  than  $1.5                                                              
million on 21  employees. He asked if Mr. Easton's  division could                                                              
do it cheaper and with less staff.                                                                                              
                                                                                                                                
4:12:29 PM                                                                                                                    
                                                                                                                                
MR. EASTON  replied that the  actual combined number  of employees                                                              
working on  NPDES permits  would go  down from  51 to  43. "That's                                                              
what happens when  you have one agency doing  something instead of                                                              
two."                                                                                                                           
                                                                                                                                
SENATOR ELTON  asked what  happens if  a future legislature  gives                                                              
him a smaller  budget and does  he have the authority  to increase                                                              
receipts  from the industry  or if  he doesn't  do that,  does EPA                                                              
yank the program back from him.                                                                                                 
                                                                                                                                
MR.  EASTON replied  no he  does  not have  authority through  the                                                              
budget  process  to  increase  fees, because  the  fee  policy  is                                                              
established  by  statute.  The  department  can  only  charge  for                                                              
direct costs.  "Yes, ultimately if  general funds were  reduced to                                                              
a point where  we couldn't operate the program  satisfactorily, we                                                              
would run a risk of having to yield it back to EPA."                                                                            
                                                                                                                                
4:14:18 PM                                                                                                                    
                                                                                                                                
SENATOR  ELTON asked  if EPA has  ever taken  that authority  back                                                              
from other jurisdictions.                                                                                                       
                                                                                                                                
MR. EASTON replied no.                                                                                                          
                                                                                                                                
SENATOR  ELTON  remarked that  on  page 5,  there  seems  to be  a                                                              
change in  the hearing process for  a permit that would  allow the                                                              
permit applicant  to meet with staff  prior to the  public hearing                                                              
process and asked if EPA has that format now.                                                                                   
                                                                                                                                
MR. EASTON  replied that EPA  does not  have that format,  but the                                                              
state  does.  It  is  called  the  provision  for  pre-application                                                              
conference. He is  proposing using a state process  in lieu of the                                                              
current federal process.                                                                                                        
                                                                                                                                
SENATOR  GRETCHEN GUESS  supposed if  there were  budget cuts  and                                                              
the EPA took primacy  back, it seems that the processing  time for                                                              
permitting would increase.                                                                                                      
                                                                                                                                
MR. EASTON replied that would be the case.                                                                                      
                                                                                                                                
4:16:22 PM                                                                                                                    
                                                                                                                                
SENATOR GUESS  asked if there  was a legal  opinion on  whether or                                                              
not  the EPA  would  support  this  bill, particularly  section  5                                                              
about how the program would run.                                                                                                
                                                                                                                                
MR. EASTON  replied that EPA has  worked within the  workgroup and                                                              
is thoroughly familiar  with everything in the bill,  but it would                                                              
not be completely  accurate to say  that it has no  problems. Some                                                              
elements  of  the state  program  will  need some  discussion  and                                                              
work.                                                                                                                           
                                                                                                                                
CHAIR WAGONER  summarized that the  state would take  $2.2 million                                                              
out of the general  fund and then charge applicants  an additional                                                              
$300,000  that  they are  not  currently  paying to  increase  the                                                              
speed  of processing.  "Now,  how much  faster  is the  permitting                                                              
going to be?"                                                                                                                   
                                                                                                                                
4:18:22 PM                                                                                                                    
                                                                                                                                
MR.  FREDRIKSSON   remarked  that   the  federal  permit   program                                                              
operates  everything from  small discharges  to the  Red Dog  Mine                                                              
discharges.  DEC  looked at  what  efficiencies could  be  brought                                                              
about, and at  mining in particular, and has  calculated 31 months                                                              
to get  an NPDES for  a large mining  operation today.  He thought                                                              
the state could do it in 18 months.                                                                                             
                                                                                                                                
     We  feel  we   can  have  not  only  a   more  efficient                                                                   
     permitting  process,  but a  permitting  process  that's                                                                   
     targeted really  on Alaska realities as opposed  to what                                                                   
     we tend to  see with the EPA. This is not  taking a shot                                                                   
     at  them, but  they are  coming from  a national  level.                                                                   
     They treat  things across the  board as a  one-size-fits                                                                   
     all and  we think  we can break  through that.  So, that                                                                   
     is what this offers.                                                                                                       
                                                                                                                                
CHAIR WAGONER asked  if the state reduces permitting  time from 36                                                              
months to  18, that would  be saving them  a lot of money,  so why                                                              
are  we   only  receiving  $300,000   in  fees.  "Why   aren't  we                                                              
collecting more?"                                                                                                               
                                                                                                                                
4:20:57 PM                                                                                                                    
                                                                                                                                
MR. EASTON  replied that  it would  be possible  to make  a policy                                                              
that would  collect more  fees, but he  didn't recommend  it right                                                              
now.                                                                                                                            
                                                                                                                                
SENATOR  GUESS  asked since  part  of  this is  wastewater,  would                                                              
those rates increase in Anchorage.                                                                                              
                                                                                                                                
MR.  EASTON replied  that they  would  go up.  He elaborated  that                                                              
many coastal communities  have a 301(h) waiver.  Juneau isn't one,                                                              
but Anchorage  is, as  well as Petersburg,  Ketchikan  and others.                                                              
Those permits  are not delegatable by  the EPA. There won't  be an                                                              
increase  in fees,  but  they  don't get  the  state  to be  their                                                              
permitter.                                                                                                                      
                                                                                                                                
4:22:50 PM                                                                                                                    
                                                                                                                                
SENATOR  ELTON  asked  if  the  state  takes  primacy  on  issuing                                                              
permits, does it incur obligations to enforce conditions.                                                                       
                                                                                                                                
MR. EASTON  replied  yes. Permitting  includes a  lot of things  -                                                              
developing,  modifying, renewing  permits, as  well as  inspection                                                              
enforcement and  review of discharge monitoring reports.  It's all                                                              
reflected in the fiscal note.                                                                                                   
                                                                                                                                
SENATOR ELTON asked if that would include potential legal fees.                                                                 
                                                                                                                                
MR. EASTON replied yes.                                                                                                         
                                                                                                                                
4:24:03 PM                                                                                                                    
                                                                                                                                
STEVE BORELL,  Alaska Miners  Association,  testified that  it was                                                              
not until  last fall that the  mining industry was  convinced that                                                              
state  primacy was  best for Alaska.  He commended  an article  in                                                              
the "Alaska  Miner" on its  benefits. Other factors  not mentioned                                                              
earlier  are EPA decisions  on Alaska  permits  in light of  court                                                              
cases  decided  elsewhere in  the  country  and with  concerns  to                                                              
other developments  in region 10. The EPA decisions  might require                                                              
including  conditions that  do not fit  Alaskan conditions,  which                                                              
causes  problems for  the permittee.  He  supported state  primacy                                                              
and SB 110.                                                                                                                     
                                                                                                                                
4:27:06 PM                                                                                                                    
                                                                                                                                
SENATOR GUESS  asked what other  states don't have primacy  and if                                                              
he thought that  the EPA only looks at states where  it will still                                                              
do the permitting or look at all the states.                                                                                    
                                                                                                                                
MR.  BORREL replied  that  the only  other  state he  knows of  is                                                              
Idaho. If  there is an  issue going on  somewhere in  the country,                                                              
EPA's consideration of it sometimes causes Alaskans to suffer.                                                                  
                                                                                                                                
4:29:35 PM                                                                                                                    
BERYL  HUBBARD,  Vice  President,   Trident  Seafood  Corporation,                                                              
supported   state   primacy.   All  fisheries   depend   on   high                                                              
environmental   quality,   particularly    high   water   quality.                                                              
"Commercial  sales   rely  on  the  image  of   that."  Actual  or                                                              
perceptions  of environmental  quality  are vital  to the  seafood                                                              
industry.   Primacy offers  Alaskans greater  control of  programs                                                              
and  accountability  before the  state.  Alaska will  enforce  the                                                              
Clean  Water  Act  and  state  regulations  more  efficiency.  The                                                              
economy  gained  through  the efficiency  of  public  services  is                                                              
beneficial  to business.  In  terms of  environmental  stewardship                                                              
and regulatory management,  the state would be better  able to run                                                              
its  program more  efficiently.  The  state having  primacy  would                                                              
make it easier for the two agencies to work together.                                                                           
                                                                                                                                
4:35:05 PM                                                                                                                    
                                                                                                                                
MR.  HUBBARD   emphatically  stated   that  Mr.  Easton   and  Mr.                                                              
Fredriksson  are   exceptional  individuals  in  terms   of  their                                                              
managerial abilities.                                                                                                           
                                                                                                                                
4:37:00 PM                                                                                                                    
                                                                                                                                
BOB ROBICHAUD,  Associate Director,  Office of Law,  Environmental                                                              
Protection  Agency (EPA)  supported  SB 110.  He  noted that  only                                                              
five states do  not have program authority. He  has worked closely                                                              
with the  state over the  last couple of  years and DEC  has great                                                              
staff working here.                                                                                                             
                                                                                                                                
4:39:30 PM                                                                                                                    
                                                                                                                                
SENATOR GUESS  asked if  it's EPA's opinion  that unlike  the past                                                              
bill, the provisions in SB 110 are not problematic.                                                                             
                                                                                                                                
MR. ROBICHAUD  replied that for the  most part, that is  true, but                                                              
there will be discussion over some things.                                                                                      
                                                                                                                                
SENATOR GUESS  asked if Alaska  is not  at risk of  having another                                                              
problematic bill next year.                                                                                                     
                                                                                                                                
MR. ROBICHAUD replied that is correct.                                                                                          
                                                                                                                                
4:40:55 PM                                                                                                                    
                                                                                                                                
DICK COOSE,  Concerned Alaskans for  Research and Envy  (CARE) and                                                              
retired federal forester,  supported SB 110. "In my  mind, this in                                                              
only  one of  several  programs in  which  the federal  government                                                              
continues to  treat the state of  Alaska like a territory."  It is                                                              
important to note  that local knowledge of resource  management is                                                              
more efficient  than that used  by the  EPA. The DEC  works better                                                              
with local  people and uses  sound science.   He used  the example                                                              
of EPA discharge  policy for canneries in Ketchikan  that required                                                              
the fish  waste to be  ground up  like flour and  to be kept  in a                                                              
one-acre spot.  Before it  was just  chopped up. This  requirement                                                              
was  just  picked out  of  the  air  and has  caused  nothing  but                                                              
problems.                                                                                                                       
                                                                                                                                
The  resources of  Alaska  are its  wealth.  Its financial  health                                                              
depends  on  sound  management   policies;  the  funding  of  this                                                              
program is small, but its benefits are great.                                                                                   
                                                                                                                                
4:45:24 PM                                                                                                                    
                                                                                                                                
SENATOR   GUESS   mentioned   that  three   industries   are   not                                                              
represented in the  working group - construction, oil  and gas and                                                              
wastewater. She asked  why they are not there and  if he speaks on                                                              
their behalf.                                                                                                                   
                                                                                                                                
MR.  EASTON  replied that  it  is  dangerous  to speak  for  other                                                              
people  and  he would  encourage  the  industry to  express  their                                                              
views.                                                                                                                          
                                                                                                                                
CHAIR WAGONER said there is plenty of time to hold this bill.                                                                   
                                                                                                                                
4:47:52 PM                                                                                                                    
                                                                                                                                
SENATOR  ELTON noted  his concerns  with provision  4 that  set up                                                              
the recipe  for the public hearing  process. He also asked  if the                                                              
permit  process dropping  from 31  months  to 18  is an  important                                                              
component in  the time savings.  If it is,  he wanted to  know how                                                              
much of a component is it.                                                                                                      
                                                                                                                                
MR. EASTON  replied that he assumed  Senator Elton didn't  want an                                                              
immediate  response and  that he  would work  on it  for the  next                                                              
hearing.                                                                                                                        
                                                                                                                                
4:49:55 PM                                                                                                                    
                                                                                                                                
CHAIR  WAGONER   thanked   Mr.  Easton  for   his  very   thorough                                                              
presentation and adjourned the meeting at 4:50:32 PM.                                                                         
                                                                                                                                
                                                                                                                                

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