Legislature(1993 - 1994)
11/19/1993 09:23 AM Senate RES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE RESOURCES COMMITTEE
Fairbanks, Alaska
November 19, 1993
9:23 A.M.
MEMBERS PRESENT
Senator Mike Miller, Chairman
Senator Loren Lehman, Vice Chairman
Senator Dave Donley
Senator Fred Zharoff
MEMBERS ABSENT
Senator Drue Pearce
Senator Steve Frank
Senator Al Adams
COMMITTEE CALENDAR
SENATE BILL NO. 215
"An Act relating to and redesignating the oil and hazardous
substance release response fund and to its use in the event of a
disaster emergency; repealing the authority in law by which marine
highway vessels may be designed and constructed to aid in oil and
hazardous substance spill cleanup in state marine water using money
in the oil and hazardous substance release response fund; amending
requirements relating to the revision of state and regional master
prevention and contingency plans; altering requirements applicable
to liens for recovery of state expenditures related to oil or
hazardous substances; amending the authority to contract to provide
personnel to respond to a release or threatened release of oil or
a hazardous substance and to contract to conduct spill related
research; reassigning responsibility for the oil and hazardous
substance response corps and for the emergency response depots to
the Department of Environmental Conservation, and for the operation
of the state emergency response commission and its attendant
responsibilities for the local emergency planning commissions to
the Department of Military and Veterans' Affairs; and modifying
definitions of terms relating to the preceding provisions;
terminating the nickel-per-barrel oil conservation surcharge;
levying and collecting two new oil surcharges; and providing for
the suspension and reimposition of one of the new surcharges; and
providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 215 - No previous action to record.
WITNESS REGISTER
Jack Chenowith
Division of Legal Services
Legislative Affairs
130 Seward St., #406
Juneau, Alaska 99801-1795
POSITION STATEMENT: Provided sectional review of SB 215.
Maria Gladziszewski
Legislative Research Agency
130 Seward Street, Suite 218
Juneau, Alaska 99801-2196
POSITION STATEMENT: Provided review of memo regarding SB 215.
Shelby Stastny, Director
State Office of Management & Budget
P.O. Box 110020
Juneau, Alaska 99801-0020
POSITION STATEMENT: Provided review of DOA memo regarding SB 215. .
Craig Tillery
Department of Law
1031 West Fourth Avenue, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Testified regarding reimbursement of Exxon
Valdez Settlement monies to the "470 Fund."
Mead Treadwell, Deputy Commissioner
Department of Environmental Conservation
410 Willoughby, Suite 105
Juneau, Alaska 99801-1795
POSITION STATEMENT: Commented on SB 215.
Ardie Gray, Public Affairs Manager
Alaska Oil & Gas Association
121 West Fireweed Lane, ¦Suite 207
Anchorage, Alaska 99503
POSITION STATEMENT: Supported SB 215.
Walt Furnace
Alaska Support Industry Alliance
4220 B Street, #200
Anchorage, Alaska 99501
POSITION STATEMENT: Supported SB 215.
Richard Mullen, Manager
South East Alaska Petroleum Resource Organization
3350 Denali
Ketchikan, Alaska 99901
POSITION STATEMENT: Commented on SB 215.
Charles McKee
7800 East DeBarr Road, #63
Anchorage, Alaska 995-4
POSITION STATEMENT: Opposed SB 215.
Chip Thoma
2 Marine Way
Juneau, Alaska 99801
POSITION STATEMENT: Opposed SB 215.
ACTION NARRATIVE
TAPE 93-24, SIDE A
CHAIRMAN MILLER called the Resources Committee meeting to order at
9:23 a.m. and announced SB 215 (OIL/HAZARDOUS SUBS. RELEASE
RESPONSE FUND) to be up for consideration.
SHELBY STASTNY, Director, State Office of Management & Budget, gave
an overview of the First, Second, and Third Quarter Reports for the
Oil Surcharge Account (dated 4/2/93, 8/20/93) issued by the
Department of Administration which are required by AS 43.55.230
(b). He acknowledged there is concern that the balance of the fund
is a negative number.
He referred to a memo from his office included in a packet
submitted by the Department of Environmental Conservation (DEC) to
the House Resources Committee hearing last week, dated November 5,
1993, regarding similar legislation (House Bill 238). He explained
that the statute requires that the quarterly reports simply show
the cumulative surcharge, or total collected through the nickel-
per-barrel tax, minus the total cumulative expenditures, which
produces a negative balance of $15,105,728 according to his 11/2/93
memo. The amount actually available in the Response fund as of
that date, however, was $37,229,669.
The difference between the Fund balance prepared by DOA and the
Fund balance prepared by OMB occurs because funding for the
cumulative expenditures is provided by the nickel-per-barrel tax as
well as program receipts and other general fund contributions from
the oil industry. Therefore, based on the statutory calculation,
the ending balance will never reach $50 million unless there is
$125 million in the Fund.
The Administration would like to see some sort of correction so the
quarterly reports reflect the true Fund balance. He stated that if
the Legislature's goal is to provide a $50 million fund, then there
should be a better way of calculating when the tax "turns off."
the administration's position is that the state should accumulate
a $50 million fund that will always be available to respond to
disasters and other significant spills, releases, etc.
SENATOR MILLER asked Mr. Stastny to clarify if and when the tax
would cease based on the $15 million and $37 million figures
presented in the OMB memorandum.
MR. STASTNY said he believes the tax would stop when the figure in
the right hand column ($37 million reached approximately $125
million due to the $75 million in expenditures which come from
revenues other than the nickel-per-barrel tax. He noted that when
the present administration took office the balance of the fund was
between $8 and $9 million and has increased to the present $37
million.
SENATOR LEMAN asked why the figures reflecting the Cumulative
Surcharge Collected were different under the columns titled AS
43.55.230 (b) Calculation and Response Fund.
MR. STASTNY said the Response Fund figure is an amount appropriated
by the Legislature annually. However, the state continually
collects the surcharge (reflected in the AS 43.55.230(b)
Calculation column) even though it has not yet been appropriated by
the Legislature.
CRAIG TILLERY, Department of Law, explained the process for
reimbursements of Exxon Valdez Settlement monies to the Fund. He
testified that Exxon is required to pay $900 million in settlement
money. Of that amount, the state and federal governments are
entitled to take their reimbursements from certain Exxon Valdez oil
spill related expenses. The remainder goes to the Exxon Valdez
Trust Fund where it is spent under the direction of the joint
federal and state trustees. The governments determine what their
restoration needs will be for a given year, then look at how much
will be left and from that, take the appropriate amount due.
That money does not go through the trust Fund, but straight to the
governments via the General Fund. The money being reimbursed from
the Response Fund goes into the Mitigation Account from which the
Legislature may, as it always has done, appropriate it back into
the Response Fund.
He pointed out that under the proposed bill, the money would go to
the Oil & Hazardous Substance Release Contingency and Abatement
Account (OHSRCAA) from which the Commissioner may spend money. He
views this as bypassing the process of legislative appropriation of
the money into the OHSRCAA which could be viewed as setting up a
dedicated fund. He suggested the committee explore the possibility
of running the money through the Mitigation Account, then allowing
the Legislature to appropriate it into the OHSRCAA.
MARIA GLADZISZEWSKI, Legislative Research Agency, reviewed her memo
dated 11/18/92 in response to questions posed by Senator Miller.
The first asked for the current balance in the Spill Response Fund
and the emergency spill reserve. She said the committee heard from
Mr. Stastny regarding the balance of the fund and referred to the
flow chart (Table One) attached to her memo. She also referred to
Table Two in the memo which explains the process discuss by Mr.
Tillery regarding reimbursements.
The second question asked was if a legislative appropriation to the
emergency spill reserve is considered an expenditure for the
purpose of AS 43.55.230(b) (suspension and reimposition of the
$0.05/pbl surcharge). She referred to a memo by Mr. Breck
Tostevin, Department of Law, which concludes that money
appropriated to the spill reserve is not considered an expenditure
for the purpose of calculating whether to suspend the surcharge.
The third question asked for (1) the current status of the Exxon
Valdez Settlement reimbursements to the State of Alaska and the
Response Fund, (2) the amount that has been reimbursed so far and
(3) how much is likely to be reimbursed in the future. A detailed
response is contained in Ms. Gladszizewski's memo.
JACK CHENOWETH, Legislative legal Services, gave a sectional
summary of SB 215.
The principal changes occur with respect to the structure and
objects of expenditure of the Oil & Hazardous Substance Release
Response Fund. It is divided into two accounts; the release
Contingency and Abatement Account, and the Catastrophic Oil Release
Response Account.
Sections 25-27 identify the division of the current fund into two
accounts.
Section 28 adds in the proviso that equipment that can be used in
substance response depots may be purchased out of the Fund and that
the current authorization of expenditure for marine ferries is to
be repealed.
Section 29 discusses the composition of the Oil & Hazardous
Substance Release Contingency and Abatement Account (OHSRCAA);
Section 30 discusses the composition of the Catastrophic Oil
Release Response Account (CORRA) and essentially requires what is
currently required of the fund as a whole.
Section 31 makes changes in what the two accounts may be sued for.
The Catastrophic Release Account may be used for major oil
releases; the Contingency and Abatement Account is used for events
that fall short of catastrophic or threatened catastrophic oil
releases.
Sections 32 and 33 are companion measures which both discuss what
the Governor may do with the balance of funds in the Catastrophic
Release Account. Following the passage of Senate Bill 90 in 1993,
Section 32 is no longer necessary in SB 215 and Section 33 would
become the operative section.
Section 34 speaks to the use of monies from either account and
requires a specific appropriation for most purposes except for
immediate response action currently authorized in law.
Sections 8 and 35 reflect the division of the Fund into two
accounts.
Sections 42 and 43 reflect revisions of definition of the terms
"release" and "threatened release."
Sections 35 and 37 make conforming changes.
Sections 1,4, 6, 7 and 41 make reference to the renamed accounts.
Section 5 refers to the two accounts and touches upon grants to
municipalities for disaster emergencies.
Sections 44 and 49 reflect changes in the definition of
"catastrophic oil discharge" in an effort to explain that
definition's applicability.
MR. CHENOWETH summarized that all the above sections make changes
that reflect the fact that the current 470 Fund would be divided
into two accounts, and the purpose of the accounts would differ in
that the Catastrophic Release Account would be used for major oil
releases, and the Contingency and Abatement Account would handle
other purposes spelled out in the bill revisions.
Sections 9 through 16 reflects a revision in the Oil & Gas
Conservation Surcharge, or nickel-per-barrel surcharge. A 3 cent
levy would be deposited into the Catastrophic Release Account and
be subject to suspension or termination when the balance of the
fund reaches $50 million. A 2 cent levy would be deposited into
the contingency and Abatement Account and continues without
limitation.
Section 38 reassigns the Oil & Hazardous Substance Response Corps
to DEC.
Section 39 transfers responsibility for maintaining the response
depots to DEC.
Section 46 moves the State Emergency Response Commission from DEC
to Department of Military and Veterans Affairs (DMVA).
Section 51 holds harmless the terms of persons serving on the
Response Committees despite the agency transfer.
Sections 2 and 3 address the Governor's authority to declare
disaster emergencies.
Sections 32 and 33 make changes that relate to the Governor's use
of money in the Oil and hazardous Substance Release Prevention &
Response Fund in the face of a disaster emergency.
Sections 17 and 18 make conforming changes.
Sections 19 and 20 make changes in the statewide prevention and
contingency master planning process.
Sections 22 and 23 make changes in the regional prevention and
contingency master planning process and eliminate the Oil &
Hazardous Substance Response Office's ability to conduct spill
technology research.
Section 24 amends the definition of "catastrophic oil discharge" to
include the declaration of a disaster emergency by the governor.
Section 40 assigns the Oil & Hazardous Substance Response Office
the authority to contract to provide personnel for certain release
related work.
Sections 43 and 45 revise the definition of "threatened release."
MR. CHENOWETH suggested that some technical drafting changes should
be considered to "clean up" the bill based on action taken during
the first session of the 18th Legislature before reporting the
measure from committee.
MEAD TREADWELL, Deputy Commissioner, Department of Environmental
Conservation, referred to a draft package submitted to the
Committee entitled "DRAFT 11/12/93: Principles for Consensus on
the Response Fund Funding." He emphasized the Department's desire
to work with all interested parties in maintaining a strong spill
response program. He also emphasized that DEC does want to build
and maintain a $50 million spill reserve and believes that will be
achieved this year. Finally, he pointed out that DEC agrees that
greater equity should be achieved in funding sources for the non-
crude and hazardous substance prevention and response aspects of
the program.
The Department's strategy is to look at other ways to expand
response fund sources including cost recovery. The fund is owed
approximately $30 million from Exxon Valdez expenditures and DEC
estimates the recovery schedule on page 6 of the draft. DEC is
also increasing, in cooperation with the Department of Law, cost
recovery efforts.
Damages and fines currently collected by the Mitigation Account
could possibly be figured in when determining suspension of the
tax.
Fees to be paid by non-crude facilities for contingency plan
review, as well as fees for financial responsibility submissions,
could be imposed. Loading fees as a source of UST funding has been
discussed. Substitution of General Funds, including interest ont
the spill reserve and use of other tax revenues, were suggested as
other possible funding sources to cover the program.
Suggestions regarding the surcharge include: 1( amending the tax
law to reflect that the tax is collected when the balance of the
fund, less obligations appropriated by the Legislature or spent
from the spill reserve, is less that $50 million and 2) adopting an
incentive clause stating that the tax will not be collected in such
a year unless other named sources are also appropriated to the
fund.
DEC has reviewed methods to further limit fund expenditures
including: removal of full funding for the SERC by making an all-
hazards SERC, repeal of the provision that allows ferries to be
built with the Response Fund, review of expenditures by a body such
as the SERC in case of spill prevention and response plans and the
HSSTRC, in case of research.
MS. ARDIE GRAY, Public Affairs Manager, Alaska Oil and Gas
Association (AOGA) said they were concerned that money from the 470
Fund was being appropriated for activities other than oil spill
emergencies. She said it was being used extensively for other
activities including funding one third of the ADEC's operating
budget.
MS. GRAY also noted that there was no consensus on how to account
for the money in the 470 Fund and this needs to be clarified.
Also, there is a significant question about the money appropriated
by the legislature to the emergency spill reserve and whether it
counts toward the $50 million cap on the Fund.
Because of the confusion over what the balance in the 470 is,
whether appropriations to the spill reserve are considered
"expenditure", and the differing views over what are appropriate
uses of the money in the 470, she said AOGA believes it is
necessary to look at a new approach to the Fund. For this reason
they strongly support SB 215.
This proposal would ensure there is an independent source, the 3
cents per barrel, for the $50 million in case there is an
emergency. It would also insure, with the 2 cents per barrel levy,
that there is a secure source of funding for state prevention and
preparedness programs as long as oil is being produced in Alaska.
While this would not provide the amounts ADEC currently needs for
the operating costs, they have indicated that the need will
decrease after the "start up".
This proposal, she said, would provide tax certainty for the
industry and for the State.
MS. GRAY said that AOGA does not think it is appropriate to use the
state's supposed oil spill emergency fund to pay for the
underground storage tank cleanup assistance program. They do
support using the mitigation account money to fund it, but with
future Exxon Valdez settlement reimbursement payments which should
be adequate.
TAPE 93-25, SIDE A
CHIP THOMA, Juneau, testified that the 470 Fund is, for the most
part, the crude and non-crude producers' profits. He stated these
producers are behind the proposed gutting of the 470 Fund. Very
large profits are also being made by the refiners and transporters.
He believes anti-trust fraud and price fixing practices exist in
the fuel industry and hopes it will be curtailed. He pointed out
that a recent BLM audit of the TAPS, Alyeska, and the owner
companies shows the management responsibility for serious
operational shortcomings is practically nonexistent. He does not
believe any of the owner companies have taken steps necessary to
prevent another large spill, nor have they made the improvements
necessary to protect communities and river systems in Alaska that
depend on refined products. he stated this is why the 470 Fund
exists, and should remain, in its present size and form.
RICHARD MULLEN, Manager, Southeast Alaska Petroleum Resource
organization (SEAPRO), said he believed the Fund has not
accomplished what the Legislature originally intended. They
believe the Fund is valuable, yet it is regionally limited, it
targets only a small segment of the potential global pollution
threat, and is not necessarily available to the public. the
Legislature should look at what is available and determine methods
to make better use of those sources to protect the general public.
SENATOR MILLER said the committee would consider SB 215 within the
first two weeks of session, work with the concerned parties, and
move it from committee before the end of the first month.
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