HOUSE FINANCE COMMITTEE February 22, 1994 1:36 p.m. TAPE HFC 94-37, Side 2, #000 - end. CALL TO ORDER Co-Chair Larson called the House Finance Committee to order at 1:36 a.m. PRESENT Co-Chair Larson Representative Hoffman Co-Chair MacLean Representative Martin Vice-Chair Hanley Representative Navarre Representative Brown Representative Parnell Representative Foster Representative Therriault Representative Grussendorf ALSO PRESENT James Baldwin, Assistant Attorney General, Department of Law; Richard Pegues, Director, Division of Administrative Services, Department of Law; Carol Collins, Staff, House Finance Committee; Nancy Letticoe, Valdez; Steve Borrell, Alaska Miner's Association, Anchorage; Florian Sever, Sitka; Don Muller, Sitka; Joel Kawahara, Sitka; Elmer Lindstrom, Special Assistant, Department of Health and Social Services; Russell Heath, Director, Alaska Environmental Lobby. SUMMARY INFORMATION HB 454 "An Act making a supplemental appropriation to the Department of Law to pay costs of certain continuing legal proceedings; and providing for an effective date." CSHB 454 (FIN) was reported out of Committee with a "do pass" recommendation. SB 54 "An Act relating to violations of laws by juveniles; and providing for an effective date." HCS CSSB 54 (FIN) and with five zero fiscal notes, two by the Department of Administration, one by the Department of Public Safety, one by the Department of Law and one by the Department of Health and Social Services; and with two fiscal impact notes, one by the Department of 1 Corrections, and one by the Alaska Court System. SB 178 "An Act relating to civil nuisance actions; and providing for an effective date." HCS CSSB 178 (FIN) was HELD in Committee for further discussion. HOUSE BILL NO. 454 "An Act making a supplemental appropriation to the Department of Law to pay costs of certain continuing legal proceedings; and providing for an effective date." JIM BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW urged the Committee to support HB 454. He noted that the Legislature has financed oil and gas litigation on a half year basis so that activities can be reviewed at the beginning of each legislative session. He stressed that oil and gas litigation is a constantly shifting activity. He observed that the Department of Law was funded for FY 94 at the same level as FY 93. The Department had requested $25 million dollars for FY 94. He maintained that the pace of the current litigation requires additional funds. Mr. Baldwin advised that the amount requested in HB 454 needs to be increased by an additional $2.5 million dollars. Co-Chair Larson stated that the Department's amended request would be for $13,837.5 million general fund dollars and $4,612.5 million dollars in Permanent Fund Corporation receipts. Co-Chair Larson MOVED to ADOPT the new total amount of $18,450.0 million dollars, $13,837.5 million general fund dollars and $4,612.5 million dollars in Permanent Fund Corporation receipts. There being NO OBJECTION, it was so ordered. Mr. Baldwin noted that the matters funded in HB 454 are in active litigation. He expounded that the amount of money that the Department intends to expend for various aspects of the litigation is subject to the attorney/client privilege. Co-Chair Larson stressed that under AS 44.62.310 executive sessions are allowed for matters of personnel, finances, litigation, matters that may effect the operations of state government or attorney/client privileges. He reiterated that the matter before the Committee could effect 2 attorney/client privileges. EXECUTIVE SESSION Co-Chair MacLean MOVED that the Committee meet in EXECUTIVE SESSION for the purpose of discussing matters in CSHB 454 (FIN) that could effect finances of the State of Alaska and attorney/client privileges. There being NO OBJECTION, the House Finance Committee met in EXECUTIVE SESSION from 1:45 p.m. to 2:23 a.m. REGULAR SESSION Co-Chair Larson RECONVENED the Committee in REGULAR SESSION at 2:23 a.m. Co-Chair Larson reiterated that the total amount appropriated by CSHB 454 (FIN) to the Department of Law is $18,450.0 million dollars, $13,837.5 million general fund dollars and $4,612.5 million dollars in Permanent Fund Corporation receipts. Representative Navarre MOVED to report CSHB 454 (FIN) out of Committee with individual recommendations. There being NO OBJECTION, it was so ordered. CSHB 454 (FIN) was reported out of Committee with a "do pass" recommendation. sb54 SENATE BILL NO. 54 "An Act relating to violations of laws by juveniles; and providing for an effective date." Co-Chair Larson noted that HCS CSSB 54 (FIN) was adopted by the House Finance Committee during the 2/11/94 meeting. He explained that transmittal of the bill was held to allow agencies an opportunity to revise their fiscal notes for consideration by the Committee. CAROL COLLINS, STAFF, HOUSE FINANCE COMMITTEE clarified that HCS CSSB 54 (FIN) (version, 8-LS0384\G) was previously adopted by the Committee. She observed that departments had submitted the following revised fiscal notes; five zero fiscal notes, two by the Department of Administration, one by the Department of Public Safety, one by the Department of Law and one by the Department of Health and Social Services; and with four fiscal impact notes, two by the Department of Health and Social Services, one by the Department of Corrections, and one by the Alaska Court System. She added that the Committee did not consider the letter of intents by the Senate and the House Judiciary Committee during previous 3 action. Representative Parnell MOVED to RESCIND the Committee's action in reporting from Committee HCS CSSB 54 (FIN). There being NO OBJECTION, it was so ordered. Ms. Collins clarified that a drafting error was made in section 13 of the previous version of HCS CSSB 54 (FIN). The error was corrected in the version before the Committee. Representative Hanley noted that the Department of Health and Social Services submitted a revised fiscal note for $1,125.0 million dollars. ELMER LINDSTROM, SPECIAL ASSISTANT, DEPARTMENT OF HEALTH AND SOCIAL SERVICES expresed the Department's concern that the Department would be required to place juveniles in private treatment facilities as defined on page 15. He observed that in-state costs for a private treatment facility could be as high as $18 thousand dollars a month. He emphasized that the Department of Law has assured the Department of Health and Social Services that the placement of juveniles into a private facility would be optional. He stressed that the option to use private treatment facilities would remain but that the Department did not anticipate exercising the option. If the Department exercised the options of a private treatment facility the cost would be born by the Division of Medical Assistance in the medicaid budget. Mr. Lindstrom stated that the Department of Health and Social Services was withdrawing their two fiscal impact notes, for $1,125.0 million dollars and $0.2 hundred dollars with the understanding that the Department would not be compelled to make placements in private facilities. Representative Hanley provided members with AMENDMENT 1 (copy on file). Amendment 1 would delete on page 15, lines 13 - 16, "treatment facilities' means a hospital, clinic, institution, center, or other health care facility that has been designated by the department for the treatment of juveniles." Representative Brown stressed that the language gives the Department the option of placing juveniles in private facilities. She observed that there are currently four juveniles being held who are awaiting treatment beds. She noted that construction of treatment beds would be expensive. She suggested that it may be possible to meet the needs for treatment through contract with private facilities. She recommended that the language be kept in the legislation. 4 MARGOT KNUTH, CRIMINAL DIVISION, DEPARTMENT OF LAW clarified that under AS 47.10.080(b)(i) placement in a private treatment facility is discretionary. She acknowledged that litigation could result from the language. She estimated that there is a 85 percent chance that the court would rule in favor of the state with regards to the state's failure to make placements in private facilities. Representative Hanley MOVED to ADOPT AMENDMENT 1. Representative Brown OBJECTED. In response to a question by Representative Grussendorf, Ms. Knuth observed that juveniles awaiting placement in the MacLaughlin correctional facility are held at the Johnson detention facility. Ms. Knuth was not aware of any litigation initiated by a juvenile awaiting placement in a juvenile treatment facility. A roll call vote was taken on the motion to adopt AMENDMENT 1. IN FAVOR: Parnell, Hanley, Martin, Larson OPPOSED: Brown, Foster, Grussendorf, Hoffman, Navarre, MacLean Representatives Therriault was not present for the vote. The MOTION FAILED (4-6). Representative Brown noted that the content of the legislation has changed. She questioned the applicability of the letter of intents. Members decided to address the letter of intents when the legislation is before the House. (Tape Change, HFC 94-38, Side 1) Representative Foster MOVED to report HCS CSSB 54 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. SENATE BILL NO. 178 "An Act relating to civil nuisance actions; and providing for an effective date." Representative Therriault provided members with Work Draft the work draft substantially narrows the scope of the bill, in order to address concerns expressed in previous hearings. He summarized changes made by the work draft. He noted that the legislation would be limited in effect to those under 5 air, water or solid waste discharge permits. If a facility has acquired a permit subject to continuing compliance monitoring, periodic review by the issuing agency and renewal on a periodic basis than a nuisance lawsuit would not be allowed. The legislation contains an immediate effective date. Section 3 would make the legislation retroactive to any action currently under litigation that has not come to a final judgement. FLORIAN SEVER, SITKA testified against CSSB 178 (JUD) am(efd fld), via the teleconference network from Sitka. He asserted that the legislation works against the public's interest. He maintained that the legislation infringes on the public's right to due process and self protection. He felt that the legislation would encourage pollution. STEVE BORRELL, EXECUTIVE DIRECTOR, ALASKA MINER'S ASSOCIATION testified in support of CSSB 178 (JUD) am(efd fld), via the teleconference network from Anchorage. He emphasized that individuals or companies conducting business within the law should not be subject to nuisance lawsuits. He stressed that Alaska mining activities are in competition for investment dollars from countries around the world. DON MULLER, SITKA testified against CSSB 178 (JUD) am(efd fld), via the teleconference network from Sitka. He asserted that the Alaska Pulp Company does not respect the rights of the community in which it has operated. JOEL KAWAHARA, SITKA testified against CSSB 178 (JUD) am(efd fld), via teleconference network from Sitka. He referred to the definition of "nuisance". RON DICK, ASSOCIATE PROFESSOR, SHELDON JACKSON COLLEGE testified in opposition to CSSB 178 (JUD) am(efd fld), via the teleconference network from Sitka. He asserted that the legislation is a direct response to a lawsuit against the Alaska Pulp Corporation (APC). He maintained that the legislation exempts any polluter from liability if they have the permission of the government to pollute by virtue of statute, regulation, license, or permit. Mr. Dick observed that the APC had numerous private meetings with the Department of Environmental Conservation to agree upon acceptable pollution standards. He maintained that the Environmental Protection Agency is contemplating a lawsuit against the Department of Environmental Conservation (EPA) for their failure to enforce air quality regulations. He asserted that the Department of Environmental Conservation has been too lenient with APC. Mr. Dick alleged that CSSB 178 (JUD) am(efd fld) would 6 disenfranchise the public "from seeking legal redress when the state government and industry collude to circumvent the laws and regulations of the state." RAY JENNINGS, SITKA testified against CSSB 178 (JUD) am(efd fld), via the teleconference network from Sitka. He asserted that the right of an Alaskan to maintain a private nuisance action to protect his property is fundamental. NANCY LETTICOE, PRESIDENT, ALASKA WILDERNESS, RECREATION AND TOURISM ASSOCIATION testified in opposition to CSSB 178 (JUD) am(efd fld), via the teleconference network from Valdez. She asserted that the impact on the tourism industry could be considerable. She gave examples of instances of pollution by industry that could effect tourism. She alleged that the legislation was introduced to help APC fight specific court action. She stressed, that if the right of business to bring civil action for damages resulting from civil nuisance is withdrawn, the only recourse will be to sue the State of Alaska. Mr. Sever provided the Committee with an overview of the litigation against the APC. He stated that discharge monitoring reports by APC to EPA showed that levels of solids being discharged in their waste stream were over the amount allotted by their permit. He asserted that discoloration and damage to the water and ecosystem of Silver Bay resulted. He added that in 1991 and 1992 polluting sludge from APC's waste water treatment facility was showing up in Silver Bay. The sludge was found to contain significant amounts of toxins when tested by EPA. In 1991, EPA found that APC had intentionally violated the Clean Water Act. A fish advisory was issued by the Department of Environmental Conservation advising local processors not to wash fish caught in the waters of Silver Bay due to the contamination of the water. He maintained that beach front property values were effected by the activities of APC. Mr. Sever understood that the legislation would provide that as long as a business is operating under a permit and is covered by the terms of the permit they cannot be sued in state court for any damage done from discharges covered by the permit. RUSSELL HEATH, DIRECTOR, ALASKA ENVIRONMENTAL LOBBY testified in opposition to CSSB 178 (JUD) am(efd fld). He stressed that Alaska does not have a problem with an unacceptably large number of suits to abate nuisances. He asserted that the legislation was introduced to kill a specific nuisance suit against APC. He noted that CSSB 178 (JUD) am(efd fld) was introduced only days after the court 7 ordered APC's Japanese parent corporation to disclose its financial records. He maintained that APC has evaded complying with air and water quality standards for years by claiming that it was financially unable to do so. He concluded that the record disclosure could destroy APC's last defense to avoid compliance. Mr. Heath observed that APC's air emissions contain sulfur dioxide. He noted that sulfur dioxide turns into sulfuric acid and can burn eyes and throats. He emphasized that there were vociferous complaints against APC at public hearings regarding their Department of Environmental Conservation air quality permit. He added that the Department of Environmental Conservation has also received hundreds of written complaints. He asserted that public concerns have been ignored. He alleged that permits are negotiated behind closed doors. He noted that the Department of Environmental Conservation's administrative appeal hearing officer directed the Department to work more closely with the public. Mr. Heath emphasized that the permitting process does not guarantee that private property rights will be protected. He asserted that the State of Alaska has failed in its administration of the permitting process. He alleged that CSSB 178 (JUD) am(efd fld) "restricts the property rights of 600,000 Alaskans in order to shield a Japanese corporation form an American Court." In response to a question by Representative Brown, Mr. Heath noted that APC has received variances on its permit stipulations. He was uncertain how the proposed committee substitute would effect the litigation against APC. JIM CLARK, GENERAL COUNSEL, ALASKA FOREST ASSOCIATION testified in favor of CSSB 178 (JUD) am(efd fld). He stressed that nuisance laws were crafted to protect property not otherwise regulated. He emphasized that permits take several years to obtain. He maintained that regulations intersect in terms of obtaining permits. He observed that water permits are obtained from EPA. Air permits are issued by the State of Alaska and overseen by EPA. Solid waste permits are issued by the State of Alaska. He discussed the permitting process. He added that permits are renewed every five years. He emphasized that the public has the opportunity to object during the permitting process and permit renewal. He noted that permits are subject to adjudicatory hearings by any aggrieved party. Those not satisfied by the adjudicatory hearing can appeal to the ninth circuit court of appeals. Mr. Clark discussed the EPA water permit process. He noted 8 that the permit process was developed over a number of years with input from the public. He asserted that human health risk factors, protection of private property, and the effect on animal life and vegetation are taken into account. He maintained that the permit process provides safety. Mr. Clark stressed that permit conditions must be met at the property line. Water requirements must be met at the edge of the mixing zone. Air permit requirements must be met at the border of the property line. Solid waste permit requirements must be met at the boundary of the facility. He asserted that these projections are built in to protect unreasonable interference with property rights of other property owners. He stressed that there are three opportunities for lawsuits in addition to administrative appeals during the permit process. He maintained that once a permit holder has met the requirements of the issuance it is reasonable to cut off litigation possibilities. Representative Navarre asked why a retroactive clause was added to the legislation. Mr. Clark stressed that the retroactive clause is an effective date. Any case that has not reached a final judgement loses the opportunity to bring further action. Representative Brown noted that the state's legal counsel has advised that the legislation may be unconstitutional due to the retroactive provision. Mr. Clark observed that the state of California has similar provisions. He did not know if the California provisions were enacted with a retroactive date. He argued that the retroactive date is supportable. Mr. Clark noted that legislation, sponsored by Senator Kerttula, passed in 1986, cut off nuisance actions for those that moved to the nuisance. He added that North Carolina has similar provisions. In response to a question by Representative Grussendorf, Mr. Clark acknowledged that permit holders that do not fulfill the terms of their permit will be subject to litigation. Only permit holders meeting the requirements of their permits are covered by the legislation. He observed that violations would not be protected by the permit. Representative Grussendorf observed that if the permit holder was using a chemical or process not covered by the permit they could be subject to a lawsuit. Mr. Clark added that if an impact not anticipated by the permitting process was the cause of injury it could be subject to litigation. Mr. Clark concluded that the permit holder must be strictly in accordance with the permit, the permit cannot have 9 unanticipated consequences, and if there are violations of the permit terms, the holder's legal protection would be lost. He stressed that the legislation will provide an incentive to meet the terms of the permit. (Tape Change, HFC 94-38, Side 2) Representative Therriault clarified that if the public feels that they do not have an avenue to have input into the permit process there are administrative appeals available. Mr. Clark detailed administrative appeals available to the public. Representative Therriault MOVED to ADOPT Work Draft #8- LS0903\D dated 2\22\94. There being NO OBJECTION, it was so ordered. HCS CSSB 178 (FIN) was HELD in Committee for further discussion. ADJOURNMENT The meeting adjourned at 3:55 p.m. 10