Legislature(1999 - 2000)
02/21/2000 03:12 PM Senate RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE RESOURCES COMMITTEE
February 21, 2000
3:12 p.m.
MEMBERS PRESENT
Senator Rick Halford, Chairman
Senator Robin Taylor, Vice Chairman
Senator Pete Kelly
Senator Lyda Green
Senator Georgianna Lincoln
MEMBERS ABSENT
Senator Sean Parnell
Senator Jerry Mackie
COMMITTEE CALENDAR
SENATE BILL NO. 175
"An Act relating to state mining law, to methods of locating
mining claims, to the granting of larger mining claims using a
legal subdivision based on rectangular survey descriptions, and
to mandatory rental payments for prospecting rights."
-MOVED SB 175 OUT OF COMMITTEE
SENATE BILL NO. 226
"An Act relating to stranded gas pipeline carriers and to the
intrastate regulation by the Regulatory Commission of Alaska of
pipelines and pipeline facilities of stranded gas pipeline
carriers."
-HEARD AND HELD
CS FOR HOUSE CONCURRENT RESOLUTION NO. 9(RES) am
Relating to Take a Young Person Hunting Week.
-MOVED CSHCR 9(RES)am OUT OF COMMITTEE
SENATE BILL NO. 273
"An Act requiring oil discharge prevention and contingency plans
and proof of financial responsibility for non-tank vessels and
railroad tank cars; authorizing inspection of non-tank vessels
and trains; and providing for an effective date."
-HEARD AND HELD
PREVIOUS SENATE COMMITTEE ACTION
SB 175 - No previous action to record.
SB 226 - No previous action to record.
HCR 9 - No previous action to record.
SB 273 - No previous action to record.
WITNESS REGISTER
Mr. Steve Borell, Executive Director
Alaska Miners Association
3305 Arctic #202
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 175.
Mr. Bob Loeffler, Director
Division of Mining and Water Management
Department of Natural Resources
3601 C Street, Ste 800
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 175.
Mr. Michael Hurley
ARCO Alaska Inc.
Alaska North Slope LNG Sponsor Group
700 G Street
Anchorage, AK 99501
POSITION STATEMENT: Supported SB 226.
Mr. Mike Barnhill, Assistant Attorney General
Department of Law
P.O. Box 110300
Juneau, AK 99811
POSITION STATEMENT: Commented on SB 226.
Mr. Scott Petsel
Aide to Representative Gail Phillips
State Capitol Bldg.
Juneau, AK 99811
POSITION STATEMENT: Testified for the sponsor of HCR 9.
Senator Drue Pearce
Alaska State Capitol
Juneau, AK 99811-1182
POSITION STATEMENT: Sponsor of SB 273.
Mr. Pat Carter
Aide to Senator Drue Pearce
Alaska State Capitol
Juneau, AK 99811
POSITION STATEMENT: Commented on SB 273.
Ms. Wendy Lindskoog, Director
External Affairs
Alaska Railroad Corporation
P.O. Box 107500
Anchorage, AK 99510
POSITION STATEMENT: Supported SB 273.
Mr. Ernie Piper, Assistant Vice President
Health, Safety, and Environmental Compliance
Alaska Railroad Corporation
P.O. Box 107500
Anchorage, AK 99510
POSITION STATEMENT: Supported SB 273.
Mr. Bob Doll, General Manager
Alaska Marine Highway System
Department of Transportation
12175 Glacier Hwy.
Juneau, AK 99801
POSITION STATEMENT: Supported SB 273.
ACTION NARRATIVE
TAPE 00-03, SIDE A
Number 001
CHAIRMAN HALFORD called the Senate Resources Committee meeting to
order at 3:12 p.m. Present were Senators Lincoln, Pete Kelly,
Green, Taylor and Halford. The first order of business to come
before the committee was SB 175.
SB 175-STATE MINING LAW
MR. STEVE BORELL, Executive Director of the Alaska Miners
Association, said that SB 175 is the result of several years of
work between the mining industry and the Department of Natural
Resources (DNR). The changes in it only affect the process
required to locate and stake mining claims. They do not increase
or decrease the rights that are established by the claims. The
primary catalyst for the review was the on-going state budget
challenge combined with technological advances regarding land
records, Internet access to land records, and global positioning
systems (GPS).
The advances make it easier to post the data in a timely and
efficient manner, which was the primary issue for DNR. Mining
claims will be put into a format that can be electronically
entered on the state land status plats, which should improve
accuracy, accessibility, and timeliness of the data. From the
standpoint of the mining industry, the changes will simplify the
claim staking process and reduce errors. They will also make it
possible to use global positioning systems to establish claim
corners in the field.
SB 175 will also allow the use of a larger size of mining claim,
which will decrease the amount of "pick work" for both the miner
and DNR. The existing claim location system will continue to be
available for situations in which the new positioning method is
not practical. The bill also establishes rent for prospecting
sites which do not have a rental rate on them now. It also adds
some restrictions on using the new system: Meridian, Township,
Range, Section, and Claim, (MTRSC). If that system is used, it
must be done in a way that will facilitate the process for DNR.
Mr. Borell said the mining industry believes SB 175 makes
appropriate changes.
Number 115
CHAIRMAN HALFORD asked if the bill allows for claim locations
that are not posted on the ground.
MR. BORELL answered no, the post in the ground is the essential
starting point according to the state mining law. SB 175 does
not change that.
SENATOR TAYLOR asked, if it doesn't change the requirement to
post on the ground, what savings are involved and how SB 175 will
improve the system.
MR. BORELL explained that an aliquot grid, based on meridian,
township, range and section, covers the entire state. If a miner
goes out and establishes claim corners and tells DNR the location
defined by MTRSC, DNR's cost is significantly less because a
draftsman will no longer have to enter it onto the land status
plats. The claim can be highlighted on the appropriate plat with
a computer cursor. DNR staff would confirm the data and hit the
enter button; the claim would then be on the land status plat and
almost instantaneously available anywhere in the state or world.
SENATOR TAYLOR commented that DNR is willing to use aliquot parts
and GPS with mining claims but it has been totally resistant to
do anything like that when it comes to land sales in the state.
SENATOR LINCOLN requested a fiscal note.
MR. BOB LOEFFLER, Division of Mining, DNR, stated support for SB
175. The Division has a problem providing the services the
mining industry relies upon. This bill is a partial solution to
that problem. In the early '90s, the Division did about 3,000
mining claim stakings per year. In FY99, there were 15,000 and
in the late '90s there have been 10,000 to 11,000. The Division
expects that number to continue. The Division is pleased with
that level but when it receives more than 10,000 applications per
year, the Division can't turn them around fast enough. It has a
four to six month back log in terms of creating a record for each
mining claim. This bill solves the problem in two ways: it
allows for larger mining claims, which will require fewer to be
processed and it allows the miners to stake the claims in a way
that helps the division automate the system.
MR. LOEFFLER said the fiscal note is a bit odd and he doesn't
want to mislead the committee. SB 175 applies rents to
prospecting sites. The Division believes it will generate new
revenue of about $150,000; half would go to the treasury and half
to the Permanent Fund. At the same time, the Division isn't able
to provide the services to make use of this information. To
reduce the backlog, the Division will need approximately $75,000
to process the claims. The Division attempted to demonstrate in
the fiscal note that the bill will create a new revenue source
but it will need to capture some of those funds to provide the
services to generate the funds. He said DNR would support the
bill in any form.
Number 598
SENATOR TAYLOR asked Mr. Loeffler if he ever talked to anyone in
the Division of Lands regarding the sale of land, because the
allowance to stake a claim is a conveyance of an interest in
state real property. He thought there should be some
coordination between the Division of Land and the Division of
Mining. He applauded Mr. Loeffler for the changes he worked out
with the miners and for using technology to locate these points.
He questioned why the Division of Lands couldn't use the same
method of aliquot parts and location by GPS for land sales.
MR. LOEFFLER answered that the Division of Mining, Land, and
Water is now one division. He explained that when a claim is
staked on aliquot parts, the record will reflect aliquot parts;
however, the on-the-ground post prevails. Therefore, if the post
is off the aliquot parts by 100 feet, the location on the ground
may not be the aliquot parts. The mining industry was willing to
say that the record may reflect the aliquot parts, but the actual
on-the-ground location is, in fact, whatever the post says it is.
Therefore, if you want to know exactly where that mining claim is
on the ground, you have to survey it. The aliquot part
reflection is just a paper location. The same is true of land
sales. While the use of GPS is very helpful, the physical
location on-the-ground prevails.
SENATOR TAYLOR said he understands that, but the land sales
section has not been willing to even talk about GPS or aliquot
parts. They are insisting on on-site surveys before anything is
actually noticed. He thought the same system could be applied to
land sales. He encouraged Mr. Loeffler to work with them to
utilize the aliquot parts and GPS to provide notification to the
public of lands available for sale and then require the land to
be surveyed before any transaction takes place.
CHAIRMAN HALFORD said, based on the way DNR handled the
unallocated cuts in its last budget, he isn't sure he would
encourage the Finance Committee to give it any more money, but he
said this does look like a proposal that could work.
CHAIRMAN HALFORD noted one section of the bill deletes the
requirement that boundaries of the claim remain clearly marked.
He asked how sections 7 and 8 work, as well as the prohibition on
the prior locator, and how that applies to both prospecting sites
and claim locations. He said he was wondering how it would apply
to a person who did not submit all of the paperwork and can no
longer locate on that prospecting site, while anyone else can.
MR. LOEFFLER responded if a person does not complete the work
required to keep a prospecting site in good order, he may not
stake the prospecting site for a year but the person can stake a
claim. That is consistent with existing law and was designed to
prevent people from staking prospecting sites or claims on
speculation.
Number 1959
MR. BORELL explained that under current law, a person can stake a
prospecting site and not pay rent and, at the end of one year,
automatically extend it for a second year. At the end of the
second year, if the individual was unable to get the work done
because of extenuating circumstances, the law allows the person
to request another extension from DNR. The fact of the matter is
that every time DNR receives such a request, it involves quite a
bit work of work to decide if an extension appropriate.
During the discussions between DNR and the industry, they decided
to set the life of a prospecting site at two years and to
prohibit any extensions. At the end of the two-year period, the
owner of the prospecting site can stake a mining claim or a lease
hold location on top of that prospecting site and convert the
site into a mining claim. That conversion must occur prior to
the expiration of the prospecting site's two-year life. Anyone
holding a prospecting site who fails to convert to a mining claim
would be prohibited from staking another prospecting site. They
could stake a mining claim, but not a prospecting site. They
could stake a mining claim, however. The idea behind it is that
there is a two-year period in which you have to follow the rules
for a prospecting site and, after that, if you don't convert, you
are out of luck for a year. If no one else has staked it after a
year, the person can come back and stake it.
CHAIRMAN HALFORD asked if they could do anything to provide a
valid discovery on a piece of property on which one doesn't have
a prospecting site.
MR. BORELL answered yes. You can do work on any ground that is
not restricted. The prospecting site provides legal protection
against someone else who would come along and stake the claim,
which does happen.
Number 2198
SENATOR TAYLOR moved to pass SB 175 from committee with
individual recommendations. There were no objections and it was
so ordered.
SB 226-STRANDED GAS PIPELINE CARRIERS
CHAIRMAN HALFORD announced SB 226 to be up for consideration.
MR. MIKE HURLEY, ARCO Alaska ANS Gas Commercialization Group,
said he has been assigned to manage the commercial regulatory
efforts of the Alaska North Slope Sponsor Group, which supports
SB 226. For the last year and a half, the sponsor group,
comprised of ARCO Alaska, BP Amoco, Foothills Pipelines, Ltd.,
Phillips Petroleum, and Marubeni Corporation, has been actively
pursuing the development of a new design for a market viable LNG
export project. It will include a commercial regulatory regime
to provide long term customers with regulatory certainty and, at
the same time, it will meet state and federal regulators' needs
for adequate access and commercial oversight. SB 226 strikes the
balance that provides the Regulatory Commission of Alaska (RCA)
with clear and unambiguous oversight of intrastate gas
transportation.
MR. HURLEY explained the provisions of SB 226 as follows.
Section 1 clarifies that the current Right-of-way Leasing Act
common carriage requirements apply only to the intrastate gas
shipments. Sections 2 and 3 clarify that a stranded gas pipeline
system's intrastate shipments would be regulated under the
Pipeline Act (AS 42.06) rather than under the Utilities Act (AS
42.05).
Section 4 adds a new subsection to the Pipeline Act that creates
a process in RCA's existing certification procedures to determine
the amount of pipeline capacity that should initially be set
aside for intrastate transportation. That process sets out
distinct criteria for capacity for local distribution companies
that must submit their gas purchase contracts to the RCA under
the current regulations. It contains a different set of
procedures for industrial gas users who must provide written
commitments to transport intrastate gas volumes that are
supported by take-or-pay purchase commitments with stranded gas
producers.
Under Section 5, an expansion of the stranded gas pipeline may be
ordered by the RCA, only if such requests for additional
intrastate capacity are supported by firm contractual
commitments.
Section 6 allows the RCA to consider and approve a reservation or
similar charge in the intrastate tariff for firm intrastate
transportation.
Finally, section 7 contains the definitions of terms referred to
in other sections of the bill in an effort to increase clarity
and understanding.
In closing, MR. HURLEY said the companion bill, HB 290, was
recently amended in its first committee of referral in the other
body. He offered to answer questions about the bill or the
amendments.
CHAIRMAN HALFORD asked him to review the amendments.
MR. HURLEY stated the first amendment that the Oil and Gas
Committee took up changed the reference to "stranded gas" to
"North Slope natural gas (NS gas)" throughout the bill. There
was concern about the use of the term "stranded gas" as it
applied to HB 393 (the stranded gas development act, which was
discussed a couple of years ago.
Number 2504
The second amendment that was adopted made a change to Section 4.
It was based on discussions with the RCA about the standards for
building capacity in the initial build of the pipeline system.
The concern was that the standards for small communities along
the line were too high to meet. The amendment changed the
standards so that there are no take-or-pay commitments for
communities, but there would still be a fairly high standard for
large industrial consumers.
CHAIRMAN HALFORD asked if it was a rewrite of the entire section
and it limits take-or-pay to large customers.
MR. HURLEY said that is correct. He explained that the
definition was set at 20 million standard cubic feet per day.
Anything larger than that still has a high bar to it. Only two
facilities in Alaska use more than 20 million cubic feet a day of
gas; the Beluga Power Plant and ML&P's main plant. They were
interested in making sure that any large industrial usage would
have some kind of commitment in place before space for it is
built in the system.
Amendment 2(b) added a new section to the bill at the request of
the chairman. It changes the determinations that need to be made
under the AS 38.05 royalty statutes. It changes the requirements
for the commissioner of the Department of Natural Resources (DNR)
when determining whether to take royalty in kind or in value. It
then provides for legislative approval before the commissioner
can take action with regard to taking royalty in value.
CHAIRMAN HALFORD commented that was a significant rewrite, too.
MR. HURLEY responded it was and it required a change in the
title.
MR. HURLEY stated that Amendment three was written with the RCA.
It addresses section five of the bill. The RCA was concerned
that some language in the bill created a hybrid that was not
under AS 42.06 or AS 42.05. The amendment stripped out some of
the language in 310.(d)1(A) and revised (B), so that it is
clearly under the Pipeline Act.
A fourth amendment was proposed, but did not pass. It referenced
the changes in AS 38.35.
The fifth amendment, which did pass, was the addition of a new
section to the bill that changes the rate structure, such that
tariffs for the North Slope natural gas pipeline would be
calculated as if it was a public utility.
SENATOR LINCOLN referenced Mr. Ross Coen's letter dated February
21, 1000, which asks for the removal of language on line 9, page
8, which excludes marine terminal facilities, including pollution
control equipment. She asked Mr. Hurley to comment on that
request.
MR. HURLEY explained that the intent behind changing the
definition of a pipeline to exclude those facilities was that the
sponsor group recognized that gas will be transported for
intrastate use all along the pipeline system. The actual plant
that makes LNG is expected to be dedicated to the export market.
The existing intrastate usage, under the proposed regulatory
regime, is a regular common carriage system. If the entire
system was kept common carriage, the plant, which is dedicated to
export, would be accessible to people who want to use LNG
instate. That would impinge on the export volumes and they
wouldn't be able to satisfy contracts for export of LNG overseas.
It doesn't prevent anyone from building another LNG plant next
door and barging LNG around the state. The group wanted to keep
the plant and the marine terminal out of a common carriage
situation so they defined the system subject to common carriage
so that it included only the pipeline and the upstream pieces.
The State Pipeline Coordinator's Office (SPCO) has become
concerned that this definition will eliminate the SPCO's
oversight of that plant. The group's intent was never to change
SPCO's regulatory authority one way or the other. They are
working with the Department of Law and the SPCO to find some
other language to take care of that.
Number 2909
MR. MIKE BARNHILL, Department of Law, said he is also testifying
for Roger Marks, Department of Revenue, who is the
Administration's lead on the bill. He circulated Mr. Marks'
written comments.
MR. BARNHILL said the Administration applauds the efforts of the
sponsor group and others to bring the commercialization of North
Slope natural gas closer to reality. The Administration supports
that intent. Nevertheless, the Administration has certain
concerns that he hoped could be resolved.
He read the comments of Roger Marks:
This represents a preliminary analysis by the
Administration, including the Departments of Law, Revenue,
and Natural Resources, and the Regulatory Commission of
Alaska, and the State Pipeline Coordinator's Office.
Instate use of natural gas would be a very valuable benefit
of an Alaska North Slope liquefied natural gas project.
However, if the gas is commercialized, most of the volume
will be for export. The financing of this multi-billion
dollar project will require establishment of long term
contracts with buyers. The set amount of pipeline capacity
will need to be reserved for contractual obligations.
At the same time, the economics of the proposed export
projects appear to be financially marginal. They could not
afford to take the North slope gas to market if they have to
bear the cost of pre-investing to provide substantial excess
capacity if there were a risk the instate excess capacity
would not be used. To do so would affect the economics such
that there would be no project and no one would get gas.
MR. BARNHILL said the desire of the Administration is to maximize
the instate access to natural gas without jeopardizing the export
economics of the project. He thought the goal of this bill
should be to strike that balance. He continued reading Mr.
Marks' comments.
Whereas it is straightforward to arrange for pipeline
capacity and gas supplies for intrastate use before
construction starts, attaining pipeline capacity after
operation begins may be difficult and expensive.
Consequently, the question of how to allocate space and gas
needs to be addressed before the line is built.
TAPE 00-03, SIDE B
MR. BARNHILL continued.
What this bill does is provide a possible way to reduce the
potential gas supply risks perceived by the foreign market,
facilitating the marketing of the gas, while providing a
mechanism for communities to procure gas. The
Administration supports this broad intent.
This said, the bill raises complex issues that could have
significant long-term impacts. Some of these issues
include:
1. Local jurisdictions committing in advance to secure
pipeline capacity without knowing what the cost will be,
especially if the gas purchase contracts are also not in
place. (There may, however, be mechanisms available to
reduce risks to buyers without unduly harming the pipeline
sponsors.)
He said that an attempt was made in the House Oil and Gas
Committee to address the Administration's concerns in amendment
two. Although it was a step in the right direction, there is
more to be done to protect the interests of instate users. He
continued reading Mr. Mark's comments.
2. Allocation of capacity between intrastate and export use
in the event of shortages or excesses of capacity.
3. Exclusion of the pipeline from the Alaska Public
Utilities Regulatory Act and subjection to the Pipeline Act.
The Administration is analyzing the extent to which the
differences between these two statutory regimes may be
material.
4. Finally - exclusion of marine terminal facilities from
the Right-of-Way-Leasing Act. This may affect the ability
of the State Pipeline Coordinator's Office to oversee land
management of marine terminal facilities.
MR. BARNHILL noted the Administration, the pipeline sponsor
group, and Yukon Pacific have been working together over the past
few days to come up with satisfactory language. Making the
marine facilities and LNG common carriers is a principal concern
of the pipeline sponsor group. He continued reading.
In conclusion, the Administration is not yet sufficiently
comfortable with the measures in SB 226 to endorse them at
this time. The multi-agency team will continue to analyze
the bill and provide recommendations to the legislature.
CHAIRMAN HALFORD noted that there wasn't anyone else signed up to
testify on SB 226 and announced that the committee would continue
to work on it.
HCR 9-TAKE A KID HUNTING WEEK
CHAIRMAN HALFORD announced HCR 9 to be up for consideration.
MR. SCOTT PETSEL, aide to Representative Phillips, said HCR 9 as
amended seeks to name the second week in September each year as
Take A Young Person Hunting Week. Such an event would greatly
assist in preserving our hunting heritage and encourage Alaskan
hunters to become knowledgeable in the areas of sport fishing and
hunting.
Naming a special week would greatly complement the hunter
education and shooting sports program funded last year by the
legislature.
MR. PETSEL noted there were letters of support in their packet.
Ten percent or less of the U.S. population now hunts, and that
number is declining. This resolution may not only help to teach
hunting heritage and the importance of wildlife conservation, but
also increase the number of hunters in the state.
SENATOR TAYLOR said he totally supports this concept, but he
questioned where he could take a young person hunting if
subsistence passes, which the sponsor supports.
MR. PETSEL said he couldn't respond, but would pass Senator
Taylor's comments on to Representative Phillips.
SENATOR LINCOLN said she understands the concept, but she has
difficulty with it. She read the proclamation by the Governor,
which talked about gun safety, hunting skills and that people
make smart and safe decisions when choosing to hunt. Her
difficulty with the resolution is that it says that we have an
obligation to teach our children hunting skills, that we need to
have opportunities to hunt, and that we urge our schools to
ensure the continuation of hunting. She doesn't have a problem
with the percentage of people who are hunting or with the people
who don't want to go out and kill. When people depend on hunting
for food, she doesn't have a problem with that. She thought
people are teaching their children about that. This resolution
is not written the same as the proclamation, which talks about
gun safety and when one chooses to hunt. It talks about how
hunters are declining and, "By golly, get those young kids out
there armed with guns and bows and arrows and go out and show
them how to kill animals." That gives her heartburn - especially
when they talk about taking that into the schools. She believes
many programs should be taught in the schools, but this is not
one of them. It is the reverse of removing guns from schools and
the school yard. The resolution applies to a yearly event,
unlike the Governor's proclamation, which concentrates on one
year.
MR. PETSEL said he didn't think it was Representative Phillips'
intention to teach children to go out and kill; it was designed
to address wildlife conservation issues, gun safety, and
heritage.
SENATOR LINCOLN asked where it talks about wildlife conservation.
SENATOR TAYLOR and MR. PETSEL pointed to page 1, lines 8 and 14,
and page 2, line 1.
SENATOR GREEN said she supports this resolution and finds the
language in it to be very tactful. She said resolutions are
meant to bring attention to the issue. She noted the resolution
speaks to the harvest, which many Alaskans partake in regularly.
She believes it is important that students and children grow up
with good information about it.
SENATOR GREEN moved to pass HCR 9 from committee with individual
recommendations. There were no objections and it was so ordered.
SB 273-OIL SPILL RESPONSE; NONTANK VESSELS & RR
CHAIRMAN HALFORD announced SB 273 to be up for consideration.
SENATOR PEARCE, sponsor, said we are too often brought together
as a legislature to react to events beyond its control and often
times beyond the control of the individuals who have been a part
of the events. That is what brings SB 273 before them today.
SENATOR PEARCE said that Alaska has the best oil spill prevention
and response program for crude oil, heavy crude carrying vessels,
and the pipeline because it provides 20 percent of the oil
produced in the United States. However, most of the oil spills
occurring in the waters of Alaska today come from carriers that
are not required to prepare for spill response by state law.
Since 1995, 93 spills from regulated vessels and facilities
occurred; a total of 5,286 gallons of oil were spilled. During
that same period, 945 separate spills from non-regulated carriers
occurred; over a quarter of a million gallons of oil was spilled.
SB 273 would expand the prevention and response program to
include larger non-tank vessels and the Alaska Railroad
Corporation (ARRC), which transports oil products in bulk.
SENATOR PEARCE stated the bill does a few simple things. It
requires non-tank vessels and ARRC to provide an oil discharge
prevention and contingency plan to the Department of
Environmental Conservation (DEC), as is presently required of the
oil industry and the tanker vessels that carry crude oil. It
requires proof of financial responsibility for those vessels that
are operating in our waters and it requires that the vessels be
subject to inspections by the State along with whatever Coast
Guard inspections are required under federal law. This is
because we have had 945 spills since 1995 that totaled over a
quarter million gallons of product. While that may sound like a
much smaller number than the 11 million gallons of crude spilled
by the Exxon Valdez, the non-crude petroleum products are often
more toxic than the heavy crude, which goes to the bottom and
doesn't intermix with the water column.
Also, these vessels frequently carry a larger volume than those
carrying fuel-less cargo, like the barges. One of the newest
cruise ships coming into Alaskan waters for the first time this
year carries 18,000 barrels of fuel - over three quarters of a
million gallons of fuel. The cruise ships, many of the cargo
ships, and state ferries, may have double hulls or bottoms that
protect the cargo, but the fuel tanks are in the area between the
second hull and the first hull, so the actual fuel of these
ships, as much as 18,000 barrels, sits right next to the hull -
only one hull away from the rocks.
Clearly, the entire 18,000 barrels would not be spilled because
the ships have separated tanks and baffling but they do carry a
very large amount of fuel. They are not currently required to
have a response system or equipment in place to prevent or
respond to spills. They are not required to have the ability to
finance the clean up effort and damages resulting from a spill.
We don't have in place the process by which we would require the
individual owners of the ships to respond. She expressed concern
that if we have an event, it would the same kind of situation
that occurred in Dutch Harbor in 1997 when the Kiroshima spilled
39,000 gallons of heavy bunker oil. Everyone spent a lot of time
pointing in different directions and no one went to clean up the
spill in the early days. Granted, the weather was bad and the
site was hard to get to, but that marine environment is important
and it was an important time period.
SENATOR PEARCE thought that any ships that ply our waters should
be required to have response plans. The ARRC is included in this
bill; it has had three derailments since 1992 and three spills in
the last four months. The largest spill was 167,000 gallons.
Two recent spills equaled approximately 125,000 gallons of jet
fuel that spilled out of tanker cars coming to Anchorage from
Fairbanks. The spill of 12,450 gallons was the actual diesel
fuel that was in the locomotive. That may have been caused by
human error and perhaps human negligence in that a valve was
jerry-rigged open. In 1999, 28,000 railroad cars carried an
average of 22,500 gallons of fuel per car, meaning that the
railroad carried 630 million gallons of fuel up and down that
corridor with no contingency plan. They have proof of financial
responsibility, which is probably the state. They have not had
clean up response in place and ready to go.
Non-tank vessels and the railroad would be covered by submitting
oil discharge prevention contingency plans to DEC consistent with
current requirements of tankers and oil facilities. The
contingency plan (C-plan) requires the prevention and response
equipment, personnel, and resources needed to respond to an oil
spill. It requires proof of financial responsibility based on
the maximum oil carrying capacity of the individual vessels and
it would require spill drills and inspections of the equipment.
SENATOR PEARCE explained that SB 273 allows DEC to adopt
alternative ways to achieve equivalent levels of spill prevention
and response in place of some C-plan requirements. Alternative
compliance would be determined through the negotiated rule making
process, so that a working group of representatives from
industry, agencies, and other parties to assist in development of
the regulations could be established. The vessel owner and/or
the railroad would be required to demonstrate proof of financial
ability to respond and clean up a major spill: $300 per barrel
for persistent oil; $100 per barrel for non-persistent oil.
Persistent oil is defined as heavy refined oil and fuel such as
bunker, crude, and lube oil. Non-persistent are the lighter
refined oils and fuels such as gasoline, diesel, kerosene, and
jet fuel, which are more toxic to both the fisheries resources
and the flora and fauna.
The law would take effect September 1, 2000, and the proof of
financial responsibility and the inspection requirement would
kick in. The actual C-plan requirement would not kick in until
June 1, 2001, to provide time to do the regulations and to give
the entities the opportunity to get their responses in place.
SENATOR PEARCE said she is pleased with the number of entities
that agree they should have prevention and contingency plans in
place, as well as a way to respond to a spill. The industries in
question have indicated that this bill is not a surprise. She
has reason to believe the small cruise ships want to voluntarily
comply, although they don't come under the 300 gross ton
requirement. The least receptive people who have contacted her
office are the representatives of the large fishing vessels that
maneuver in Alaska's most dangerous water during the worst times
of the year. The experience with fishing vessels, like the
Kiroshima, indicate to her that Alaska should have some sort of
requirements in place that aren't there now.
Number 1949
SENATOR GREEN asked if there has been some reluctance to further
empower DEC and give it more oversight authority.
SENATOR PEARCE admitted there are people in the State who don't
like the DEC, but she doubted any of them would disagree that
these groups should have contingency plans and the financial
ability to respond. DEC has its Spill Prevention and Response
(SPAR) group and while there have been a number of negotiations
over the finalization of contingency plans for the large tankers,
part of the problem was created by vagueness in the bill that
passed in 1990. The bill required best available technology,
which is an ever changing standard. She believes the system is
working quite well at the moment and that DEC has developed a
great deal of expertise during the last 10 years. She is
comfortable with giving oversight responsibility to the SPAR
folks. Someone has to have that authority and DEC has a lot of
regulations and knowledge in that area.
SENATOR GREEN asked, based on the initial newspaper article about
the ability of various owners to respond, whether companies will
have to have big pieces of equipment available onsite and whether
companies will have to own duplicate pieces of equipment.
SENATOR PEARCE said, taking the railroad for example, she would
expect that some response equipment would be stored on every
train to be used for an initial response. The trains travel
north and south, so the same train is probably making daily
trips. That would require two sets of equipment: one for the
northbound train and one for the southbound. Spill response
contractors are already in place throughout the state because of
current law. Seapro is in Southeast Alaska. It is the
consortium put in place by the Southeast vessels that come under
the present law because of all the fuel barged to every community
in Southeast Alaska. There is no reason the new entities
couldn't become part of those consortiums. The same thing is
true in Southwest Alaska; Cook Inlet has three consortiums.
SENATOR PEARCE clarified that not every vessel will have to have
its own set of equipment. However, she suspects that there is
not enough equipment in Seward today to respond to an accident
should a cruise ship go aground. She suspects there would have
to be a build-up of one of the coops in that area.
SENATOR TAYLOR said the unfortunate part is that those people who
have equipment are under contract to respond to the people who
have paid for that equipment. He stated, regarding the Kiroshima
incident, that equipment wasn't very far away on a barge. He
explained that Campbell Towing, located out of Wrangell, had a
tug and barge in the area for other purposes. It was willing to
move equipment to respond to the troubled vessel and start off-
loading oil so it wouldn't go in the water. Unfortunately, the
onsite DEC personnel did not have sufficient authority to allow
the movement of the equipment out of the area it was designated
to protect. Had anything occurred in the area where that
equipment was supposed to be available, everyone would have been
strictly liable under OPA '90. The incident occurred on a
Saturday night. Eventually, Commissioner Brown was located to
give the authorization to move the equipment so that it could be
moved to pump the oil. Everyone involved was very cooperative
and professional. He assumed that DEC has fixed that problem so
that a person who can give the contractors the right to respond
can be reached at all times.
SENATOR TAYLOR said he has spent a lot of time working on
contingency plans and he was shocked to find that every Navy and
Coast Guard vessel that moves up and down the coast has to have,
onboard, the spill response plan for each of the counties and
communities along the Pacific Coast. That requires a large
library of materials, most of which is outdated. In addition,
they don't know who to contact. All of the spill response plans
are different and they are not even indexed the same way. He
said he understands Senator Pearce's concerns and supports the
effort to provide a meaningful response when a spill occurs, but
he believes there should be some practical way of making sense of
it all when the oil hits the water.
He said he was present when Seapro was formed and it was created
only because there was no way that individual companies could
afford to respond. They collectively brought their money and
equipment together. It took years to get DEC to approve the
level of equipment, where it would be based, and how it would all
work. He said he does not want to see an overlay that creates
another 18 member committee in each community to solve a problem.
SENATOR TAYLOR said he is still waiting for DEC to show him how
it spent the two cents per barrel. He would like to know what
equipment it purchased and how much booming material is available
in Southeast. He also asked about the three cents per barrel
that went to DEC all of this time.
SENATOR PEARCE said the two cents per barrel was not to buy
anything; it goes into the $50 million contingency fund account.
The three cents per barrel was supposed to do several things. She
knows that DEC has purchased equipment around the state. One of
the reasons we don't have the same requirements in Alaska as
other states have is that Alaska did its first. Second, there
was a move made by California, Washington, and Oregon to create
an interstate compact with Alaska to decide what spill responses
would be up and down the entire West Coast. The Alaska
Legislature chose not join the compact, which she thought was a
good choice, because Alaska's requirements are not as onerous as
California's. On the other hand, she believes the ships that are
coming to Alaska should be prepared for an accident.
SENATOR PEARCE said the experience in Dutch Harbor was the first
of that kind in that area and everyone learns from each and every
incident. There were those same sorts of questions in Prince
William Sound, but after DEC has gone through all of the table-
top exercises over the years most of Senator Taylor's concerns
have been resolved.
SENATOR PEARCE said she believes that one non-profit spill
response organization writes all of the plans in the state of
Washington. Every vessel that sails into Washington's waters
gets a bill for $160 every time it enters. Because so many ships
come into those waters, the fee is only $160 per transit. She
thought that in Southeast, for instance, as more entities have to
join, the cost of that equipment will be spread out and, over the
long term, it will be better for everybody economically. She
noted she understands the frustrations in the past but she has
found that people in Southeast Alaska are glad there is a spill
response capability that wasn't here in 1989.
SENATOR TAYLOR said he would help her any way he could.
Number 1000
CHAIRMAN HALFORD asked who exempted public vessels.
SENATOR PEARCE said public vessels that are commercial are not
exempted so the ferries are not exempted, but she didn't know of
any other state vessels that fit. She noted that federal vessels
are exempt.
CHAIRMAN HALFORD asked about the biggest of the ADF&G boats.
SENATOR PEARCE replied that they are not 300 gross tons.
CHAIRMAN HALFORD asked what 300 gross tons equal in terms of
size. He noted the tonnage is fairly large, but the gallon
capacity is fairly low; it looks like a vessel has to be 300
gross tons or more and carry 6,000 gallons.
SENATOR PEARCE explained that those numbers were chosen because
that is what is in all the other states on the West Coast. She
did not want to bring in an entirely new group of vessels. There
is some question about whether gross tonnage should be the
measure; perhaps it should be displacement. The 300 gross
tonnage picks up the largest of the processing ships, but it does
not bring in any vessels that have limited entry permits. That
was a threshold that DEC was trying to get above.
CHAIRMAN HALFORD asked if a 150 foot Bering Sea crab boat weighs
less than 300 tons.
MR. PAT CARTER, aide to Senator Pearce, said that generally
speaking, a 150 foot vessel would fall under this but the gross
tonnage is based on cargo capacity and, depending on how the ship
is constructed, the tonnage can be calculated differently.
TAPE 00-04, SIDE A
Number 001
MR. CARTER explained that the intent was to exclude barges that
don't transport fuel - barges that transport containers, for
example. He noted a vessel could weigh 300 gross tons as a
barge, that is carrying fuel for dredging equipment or a crane
onboard.
CHAIRMAN HALFORD noted that most tenders in the fisheries may be
barges but they carry a lot more than 6,000 gallons of fuel.
MR. CARTER added that some of the tenders, especially those that
work the salmon fleet, will fall under that because they are fuel
barges that sell fuel to the fishermen. Part of their commerce
is generated by transporting fuel for cargo, so they are already
under the law now (as a tanker barge).
SENATOR TAYLOR asked what amount of equipment the railroad
carries now.
MS. WENDY LINDSKOOG, Alaska Railroad Corporation, said the ARRC
is currently revising its emergency response plan to meet
contingency plan requirements that currently do not apply to it.
ARRC believes, that as a state-owned entity, it should meet or
beat the standards the state requires of similar carriers. ARRC
believes that legislation to place this type of planning in
statute and regulation is prudent and will ensure consistency in
response planning and prevention over time. ARRC is especially
encouraged by provisions in this and other legislation that will
allow the railroad to craft regulatory standards with state
regulators to fit the railroad's unique operational situation
rather than simply impose a one-size fits all response planning
standard. ARRC will work actively with the legislature, DEC,
other state agencies, and the public to produce effective
regulations and response plans. She concluded saying ARRC
supports the legislation.
SENATOR TAYLOR asked what equipment is on the train now.
MR. ERNIE PIPER, Alaska Railroad Corporation, replied that every
locomotive has a three-man train crew and some spill response
equipment. It's really designed to respond to the most likely
scenario that three people could deal with, which might be a
small hole in the fuel tank of the locomotive, a leak from a
belly cap on a tanker or some kind of valve damage. They don't
carry equipment to do a major response.
SENATOR TAYLOR asked what equipment they carry.
MR. PIPER replied that pumps and other types of equipment used
for larger responses are staged at strategic locations along the
route. For example, some equipment is cached at the Hurricane
section just above Gold Creek and Canyon. Equipment is also
cached in Fairbanks and Anchorage.
SENATOR TAYLOR asked what kind of crew is available to respond.
MR. PIPER said the practical way for most carriers to deal with a
spill is to have independent contractors, which is what the
Railroad has.
SENATOR TAYLOR asked if ARRC's independent contractors were
ready, capable, and able to respond to the last couple of spills.
He heard a lot of criticism about the ability of the railroad to
respond to the spills.
MR. PIPER answered that ARRC has good contractors. The same
contractors are used by Alyeska Pipeline and others. The real
problem in each of the spills was that the locations were
particularly remote. In addition, the Gold Creek spill happened
during the middle of a storm that had Southcentral Alaska shut
down. He tells people that response is never clean and it
doesn't work very well; prevention is the key. He assured them
that there were ways to improve the response time and capability
and ARRC will do that. SB 273 will help.
SENATOR TAYLOR asked how the bill will help when nothing
prevented ARRC from going in that direction before the bill was
filed. He asked what ARRC's real plans are for the future, how
the bill will affect its overall economics, and whether SB 273
will work from a practical standpoint.
MR. PIPER answered that contingency planning in Alaska statute
and regulation actively involves two parts of the equation that
aren't normally involved - both the public and the regulatory
agencies. When everyone has a clear picture of what the likely
scenarios are, what dedicated equipment is available, and what
the response strategies are going to be in particular areas, it
makes things go a lot more smoothly. This bill is one of the
ways to actively involve more people to see what could be done to
do a response. It keeps the communications strong among all the
parties involved.
MR. BOB DOLL, Department of Transportation and Public Facilities
(DOTPF), stated support for SB 273. He pointed out that the
Marine Highway already has a written agreement with the DEC to
operate its vessels in support of an oil spill clean-up effort
and its ships have additional capabilities on board. His
principal purpose for testifying today is to point out DOTPF's
fiscal note, which indicates a source to pay the costs of DOTPF's
participation. That is one of DOTPF's main concerns.
SENATOR TAYLOR said his concern is that DOTPF has announced a
transition to a high speed fleet in Southeast, which will travel
in excess of 32 knots. He assumes that when one of those vessels
hits a rock, it will spray oil all over the place.
MR. DOLL replied that DOTPF doesn't expect that to happen. The
ferry system has a 37-year record of operating at 16 knots in
some very difficult waters and through challenging channels.
DOTPF expects to apply the same safety standards to the high-
speed fleet.
SENATOR TAYLOR said that traveling at half that speed, 18 knots,
the Taku ran directly into an island in the middle of the bay at
Prince Rupert on a clear night. Other vessels were run on to
rocks in Sergius Narrows and the bottoms were ripped out. Those
vessels do carry a significant amount of fuel. He said, "In
fact, we always were very happy that we had the oil tank on the
bottom of the vessel because when we ripped a hole in the bottom
of the boat, all we lost was fuel, we didn't lose a vessel."
Senator Taylor stated he wants to make certain that in going
through this process, the bill will not add one more layer of
cost and inefficiency to a system that certainly isn't operating
to the level of service he would like to see it.
MR. DOLL responded that DOTPF's costs are indicated in the fiscal
note. He noted that, "Anytime we talk about additional costs for
the Marine Highway operation we need to be cautious about that
and certainly I will continue to sound that note at every
opportunity." He did not believe this bill will affect the
marine highway service level. DOTPF already has contingency
plans in place. It does expect additional costs associated with
SB 273 and would like to target those expenses as much as
possible.
CHAIRMAN HALFORD noted that Senator Taylor volunteered to work on
this issue and he would look for two more volunteers to work with
the sponsor.
CHAIRMAN HALFORD adjourned the meeting at 4:20 p.m.
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