Legislature(1993 - 1994)
01/19/1994 03:32 PM Senate RES
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SENATE RESOURCES COMMITTEE
January 19, 1994
3:32 P.M.
MEMBERS PRESENT
Senator Mike Miller, Chairman
Senator Loren Leman, Vice Chairman
Senator Drue Pearce
Senator Al Adams
Senator Dave Donley
Senator Fred Zharoff
MEMBERS ABSENT
Senator Steve Frank
OTHERS PRESENT
Representative Joe Green
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 - See Resources minutes dated 11/19/93.
WITNESS REGISTER
Jack Chenoweth
Division of Legal Services
Legislative Affairs
130 Seward St., #406
Juneau, Alaska 99801-2105
POSITION STATEMENT: Commented on SB 215
Mead Treadwell, Deputy Commissioner
Department of Environmental Conservation
410 Willoughby, Suite 105
Juneau, Alaska 99801-1795
POSITION STATEMENT: Commented on SB 215.
ACTION NARRATIVE
TAPE 94-1 , SIDE A
Number 001
SENATOR MILLER called the Resources Committee meeting to order
at 3:32 p.m. and announced SB 215 (OIL/HAZARDOUS SUBS. RELEASE
RESPONSE FUND) to be up for consideration. He said it was his
intent to put this bill into a subcommittee to work on the
bill and bring it back after 10 days or so.
JACK CHENOWETH, Legal Services, briefed the committee on the
bill which, he said, is a second shot at the 5 cents per
barrel severance tax surcharge on crude oil. Generally the
bill addresses the surcharge itself and the dispositions of
the proceeds from that surcharge. It makes other changes in
the area of oil and hazardous substances clean up and
oversight.
Now the surcharge money is made available to the Oil and
Hazardous Substance Release Response Fund. This bill proposes
to split that Fund into two accounts - one called the Oil and
Hazardous Substance Contingency and Abatement Account and the
other called the Catastrophic Oil Release Response Account.
The latter is generally available to cover emergency major
spills of hazardous substances. It is available immediately.
The Contingency and Abatement Account is intended to cover all
the costs that go into preparing state agencies, contractors,
and others to be prepared in the event of an oil spill.
Number 87
Sections 25 - 28 reflect the split into two accounts.
Use of the money for construction of state ferries would be
deleted and the only use for capital improvements would be for
equipment that must be placed at the oil and hazardous
substance response depots, MR. CHENOWETH said.
Number 92
Sections 32 - 33 talk about what the Governor may do in making
use of the balance of the two accounts, particularly when an
emergency is declared.
The following Sections make conforming changes.
Number 129
Sections 9 - 16 of the bill divides the current surcharge
into 3 cent and 2 cent levies - the 3 cent levy going to the
Catastrophic Oil Discharge and the 2 cent levy being made
available on an on-going basis for the other fund.
MR. CHENOWETH said that one of the reasons this bill is under
discussion is that the on-off trigger for the surcharge has
never been used. The legislature has drawn on the fund so
much that the $50 million cap has never been reached. This
on-off trigger is made available in SB 215 to the 3 cent levy,
but is lifted from the 2 cent levy so support for the services
is on-going.
Section 38 reassigns the Oil and Hazardous Substance Response
Corps from the Division of Military and Veterans Affairs
(DMVA) to Department of Environmental Conservation (DEC).
Section 39 transfers responsibility for maintaining response
depots from DMVA to the DEC. Section 46 moves the State
Emergency Response Commission to the DMVA from DEC.
In Sections 19 - 21 there are changes to state-wide prevention
planning processes and to regional planning processes in
Sections 22 - 23.
Number 207
SENATOR ADAMS asked if he had asked if the cost of the two
accounts would be covered by the divided surcharge. MR.
CHENOWETH said he hadn't asked. SENATOR MILLER said that
according to DEC, no.
SENATOR ADAMS asked if he could make a motion to bring the
surcharge for both to be a total of 6 cents, 3 cents for each
fund.
Number 267
SENATOR PEARCE asked if there was a conditional change in the
definition of oil. MR. CHENOWETH answered no.
SENATOR ADAMS asked if this bill was a way to pass the cost
of oil distribution to the consumers. MR. CHENOWETH said he
didn't see it doing that.
SENATOR ZHAROFF asked about definitions. MR. CHENOWETH said
he reworked the definition of catastrophic in Section 15 at
100,000 barrels or less for the Governor to issue a
proclamation.
SENATOR ZHAROFF asked how adequate the 2 cents would be in a
few years with the decline of oil. MR. CHENOWETH said the
subcommittee should look at that.
SENATOR PEARCE said "threatened release" needed to be
clarified to include a declaration of emergency or a spill of
under 100,000 barrels for purposes of using the fund. owned
by villages, for instance. MR. CHENOWETH agreed and said in
some instances it would be ludicrous to have to wait for the
Governor to declare an emergency or for 100,000 barrels to
spill.
Number 378
SENATOR ADAMS asked him to explain what is different on
Section 1 and the method that we presently have. MR.
CHENOWETH said from his perspective the money has not been
left in the account long enough to build up. It has been
appropriated to DEC and has become another source of revenue
for agency operations. If a tanker goes aground and there is
another huge disaster, we will all be very embarrassed
thinking there's supposed to be a pot of money with
substantial amounts in it for response and there isn't.
The amount is not growing the way they thought it would when
the statute was put on the books. He thought the intent of
the fund should be clarified to do what it was supposed to do.
SENATOR ADAMS asked if he thought the fund was a federal tax
deduction for the companies anyway. MR. CHENOWETH answered
that he had no idea.
Number 419
MEAD TREADWELL, Deputy Commissioner, DEC, said they have a
letter which represents the Administration's position. They
would like to work on a consensus approach to modify the
process to suspend and impose the surcharge so the amount
collected is the only amount needed to have a fully funded
prevention and response program. They propose to look for
other sources of funding to supplement the nickel.
The Administration thinks it is appropriate to eliminate some
legal authority for some Fund expenditures and to
legislatively strengthen Fund management.
MR. TREADWELL said their goal is to maintain a strong state-
led spill prevention and response program, build and maintain
a $50 million spill reserve, and attempt to develop other
revenue sources for the Fund.
Number 450
MR. TREADWELL said they have three major concerns with the
proposed legislation: 1. The Fund (including the spill
reserve) must remain a vital part of Alaska's ability to
prevent and respond to spills of all kinds of hazardous
substances, not just crude oil. 2. "Splitting the nickel"
drastically reduces the level of environmental protection now
enjoyed by Alaskans. The Fund should be kept whole, and other
sources added to address equity concerns. The Commissioner
said we must be cautious in estimating a top limit to the size
of state spill prevention and response programs given some
weaknesses that exist in our overall spill prevention
coverage. 3. As the "nickel" is proposed to be split, not
enough funds are left to maintain current spill prevention and
response programs.
Number 529
SENATOR LEMAN applauded them for making the effort to find
alternative sources of funding. But it didn't make a lot of
sense to have a tax on crude operations to be responding to
some of the spills that are not crude. MR. TREADWELL said the
fund has been changed 17 times. Essentially the fund was
created to take fines and mitigation and leave it there to
respond to other crude and noncrude incidents. In calculating
the crude revenue source, they did not add in cost recoveries.
They are looking at language to accomplish that. Now we have
a very strong capability to respond to emergencies of
different kinds.
SENATOR ADAMS asked what priority raising oil taxes would have
among all the other of the Governor's proposed raises. MR.
TREADWELL said he would prefer not to comment directly on
that. He said that 1 penny of the motor fuel tax increase is
proposed to pay for the underground storage tank program.
Number 574
SENATOR ADAMS asked if the mitigation funds had been collected
from the Exxon Valdez Settlement. MR. TREADWELL answered that
it hadn't all been collected.
TAPE 94-1, SIDE B
Number 583
He said that funds coming in to it would probably be used for
the underground storage tank program.
SENATOR ADAMS asked since we'll be in a deficit position
within the budget is the Administration looking at replacing
the $44 million into the General Fund that was placed in the
470 Fund. MR. TREADWELL referred him to page 2, paragraph 3,
that says the fund balance now is approximately $37.5 million
which is derived from a number of different sources including
surcharges, general fund deposits, cost recoveries, fines, and
penalties. He said that some funds from the mitigation
account have been spent on what might be considered general
fund activities. So in some sense the general fund has been
repaid.
SENATOR ADAMS asked the subcommittee to do the accounting on
that.
Number 562
SENATOR ZHAROFF asked what other sources they would be looking
at. MR. TREADWELL answered besides cost recoveries there are
fines and penalties on noncrude spills. Also, at this time
they do not charge fees on industry contingency plans which
costs several million dollars. Financial responsibility
filings do not cost them a lot to maintain, but it's an
important part of their program. There could be fees on both
of those, he said.
They are prepared to discuss the issue of interest on the
spill reserve.
SENATOR ZHAROFF wanted to see a breakdown of charges to the
470 Fund.
Number 530
SENATOR ADAMS asked if the Fund does get split would they have
an opinion on it. MR. TREADWELL said they would want to see
more than 2 cents, because it wouldn't cover the cost of the
program. So they would definitely want input.
SENATOR MILLER said they were running out of time and the bill
would be back before them and adjourned the meeting at 4:42
p.m.
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