Legislature(1997 - 1998)

03/31/1998 09:10 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
SENATE BILL NO. 299                                                            
"An Act relating to the treatment of well test flares,                         
nonroad engines, and aggregated fuel burning equipment                         
associated with nonroad engines under the state's air                          
quality control program; defining 'stationary source'                          
for purposes of the state's air quality program."                              
                                                                               
SENATOR LOREN LEMAN was invited to join the committee to                       
speak to this bill, which he was the sponsor.  His testimony                   
follows:                                                                       
                                                                               
"Mr. Chairman, committee members, SB 299 amends Alaska's air                   
quality control statutes to clarify that non-road engines                      
are mobile sources and are not to be regulated as though                       
they are stationary facilities.  In Section One, the bill                      
also provides guidance on the treatment of well test flares,                   
which is an event that occurs for a short time after the                       
completion of each well.  Section Two adds the EPA and state                   
adopted regulatory definition of non-road engines to Alaskan                   
statute.  So operators and owners will have the same                           
understanding at the state level that they do at the federal                   
level of what a non-road engine is.  In addition, the bill                     
adds the federal definition of stationary source."                             
                                                                               
"Some have asked why this bill is necessary and I would like                   
to think that it wouldn't be necessary.  I think back in                       
history, five years ago, Mr. Chairman, I served with the                       
Senate President and with former Senator Zharoff on a                          
subcommittee where we worked through the Federal Clean Air                     
Act and how implementation at the state level - what would                     
be necessary to implement that act.  We agreed with the                        
department at that time that the issue of mobile sources was                   
one that would need to be worked out.  It has been five                        
years since we had those subcommittee meetings and slightly                    
over four years since the effective date of the statute that                   
was passed by the Legislature.  I believe that has been                        
sufficient time to work things out.  Unfortunately, although                   
some issues have been worked out this issue is one that has                    
not been.  It appears now that the DEC intends to go beyond                    
the minimum set under the Federal Clean Air Act."                              
                                                                               
"I'll just note that at most there are 20 rigs working on                      
the North Slope and Cook Inlet according to information that                   
I have been given.  Drilling rigs are in place an average of                   
seven to ten days.  I think one of the things - I know Mr.                     
Chairman, that you were in the Resources Committee when we                     
went through this - one of the things that this committee                      
would be interested in looking at is the fiscal note, which                    
I find interesting that they are projecting that it's going                    
to cost $83,000 not to issue ten permits.  I think the                         
committee can conclude probably similarly to what I have                       
that this is probably another attempt to add costs when the                    
department doesn't agree with a bill."                                         
                                                                               
"They're already putting out regulations - in fact they have                   
proposed regulation out now.  They are suggesting this is                      
going to cost them even more to not implement this bill."                      
                                                                               
"I think I'll close at least with a simple analogy of what                     
it is we're talking about.  Let's say that I have my house,                    
which is a stationary facility.  It operates year round                        
twenty-four hours a day.  I have a furnace in the house that                   
is operating at least most of the time, certainly most of                      
the time in the winter.  Let's say that because of that this                   
house needs a permit because I heat my house with fuel.                        
Then I go hire my neighbor's kid to mow the lawn with a                        
lawnmower.  According to the way the department is                             
determining it, I have to include that lawnmower in the                        
house permit as if it is mowing twenty-four hours a day,                       
seven days a week, 365 days a year.  In reality we all know                    
that event is a very short event that takes place and is                       
completed.  Certainly that event of the lawnmowing doesn't                     
impact the operation of my house. But it could, according to                   
the permit and their interpretation of the impact of how                       
warm I keep my house.  That may be a simple analogy and its                    
one that small compared to facilities on the slope, but its                    
one that I think we can understand."                                           
                                                                               
"In questioning before the Resources Committee I asked the                     
department if they have any hard evidence of ambient air                       
quality problems on the North Slope.  They said they may                       
have some modeling but nothing in terms of evidence.  We're                    
not talking about a non-attainment area - an area that's not                   
meeting the requirements of the Clean Air Act.  I believe                      
that this bill - I would have liked to have dealt with this                    
in a different way but since we have not yet been able to -                    
this bill is necessary I believe to implement at least what                    
our intentions were in 1993 when we passed the original                        
bill."                                                                         
                                                                               
The committee had no questions or comments for Senator                         
Leman.                                                                         
                                                                               
Co-Chair Sharp asked a representative from the Department of                   
Environmental Conservation to respond and give the                             
department's recommendation on the bill.  AL EWING the                         
Deputy Commissioner came to the table, introduced himself                      
and testified as follows:                                                      
                                                                               
"Governor Knowles has been very clear in word and deed, that                   
Alaska is open for business.  The area-wide oil and gas                        
leases on the Kenai Peninsula, in Cook Inlet and on the                        
North Slope, his actions to cause renewed leasing at the                       
National Petroleum Reserve are illustrations of his                            
commitment.  It has been equally clear that development in                     
Alaska must be done right from an environmental perspective.                   
We have many illustrations of how that commitment is being                     
kept as well.  These two guiding principles, being open for                    
business and doing it right, go hand in hand.  Neither can                     
endure for long without the other."                                            
                                                                               
"SB 299 is the exact opposite of doing it right.  If                           
enacted, it would prohibit regulation of oil drilling rigs,                    
which are significant sources of air pollution.                                
Additionally, because of the imprecise wording of the bill,                    
it can be interpreted to prohibit regulation of a wide range                   
of significant sources of air pollution throughout the                         
state.  Even if it's interpretation could be limited to oil                    
drilling rigs, it would be unacceptable to the                                 
administration and I am confident it would also be                             
unacceptable to the people living, working and playing on                      
the Kenai Peninsula, in Cook Inlet, in the village of                          
Nuiqsut and more generally on the North Slope."                                
                                                                               
"Air pollution standards are designed to protect human                         
health and the environment.  They are not limited in their                     
scope to protection of people who live in urban areas.  All                    
Alaskans have a right to clean air to breathe."                                
                                                                               
"I would like to share with you a quote from a letter sent                     
last year to Mr. Frank Brown, Vice President of Arco Alaska.                   
The letter was from Benjamin Nageak, Mayor of the North                        
Slope Borough."                                                                
                                                                               
"A quote from this letter follows. 'There is significant                       
concerns regarding air pollution impacts to the health of                      
the Nuiqsut people.  There is an increasing incidence of                       
respiratory problems in Nuiqsut residents and the dark or                      
yellow cloud often seen over Prudoe is now sometimes seen                      
extending to Nuiqsut.  In view of this, we are very worried                    
that added air pollution from the alpine development                           
(processing plants, various emissions, etc.) will cause even                   
more problems.'"                                                               
                                                                               
"The North Slope, the Kenai Peninsula and Cook Inlet are                       
designated unclassifiable areas for the pollutants of                          
particular concern (sulfur dioxide, oxides of nitrogen that                    
are emitted by oil drilling rigs.)  We believe that these                      
areas do currently comply with air quality standards but we                    
have no data to confirm that belief.  However, state of the                    
art air quality models tell us that if oil drilling rigs are                   
allowed to operate unregulated, they will in many cases,                       
cause violations of clean air standards."                                      
                                                                               
"The industry tells us we shouldn't regulate these rigs                        
until we can confirm that there are air quality standard                       
violations.  The law tells us we have a responsibility to                      
prevent violations of air quality standards.  I think that                     
is what the people who live, work and play in these areas                      
expect as well.  In my judgement, it would be very unwise to                   
wait until the health and welfare of Alaskans is adversely                     
impacted before taking action."                                                
                                                                               
"We understand that oil drilling rigs are mobile and that                      
they need the flexibility to move quickly from site to site.                   
We also understand that they need flexibility in how they                      
operate.  Commissioner Brown and I spent a day on the North                    
Slope recently to get a first hand view of these rigs and                      
how they operate."                                                             
                                                                               
"We've been working with the industry for the past three                       
years to design regulations that would provide flexibility                     
and necessary air quality controls.  Each proposal has been                    
rejected by the drillers as being unsatisfactory.  Now we                      
understand why.  Their solution is no regulation."                             
                                                                               
"We are prepared to continue working with the industry to                      
find a workable solution.  But any solution must be                            
acceptable not only to the industry, but also to the people                    
who work, play and most importantly, live in and subsist off                   
the natural resources of impacted areas.  Any solution must                    
also result in compliance with air quality standards."                         
                                                                               
"We are given a variety of reasons why these rigs shouldn't                    
be regulated.  We are told they don't emit enough pollution                    
to be a problem.  The fact is a single rig can emit as much                    
pollution as more than 100 city buses operating in a single                    
very crowded intersection.  That is not an insignificant                       
amount of pollution as anyone who has gotten stuck behind a                    
city bus can attest.  Once again, state of the art air                         
quality models not surprisingly predict violations on air                      
quality standards if these rigs are allowed to operate                         
without controls."                                                             
                                                                               
"We are told federal rules don't require these sources to be                   
regulated.  Well, because the Arco Warthog project was                         
offshore, it was permitted by the federal government.  Let                     
me assure you there has been no non-road engine in the State                   
Of Alaska that has ever been regulated by the state to the                     
degree the drilling rig on the Warthog project was                             
regulated.  They required use of .06 percent diesel fuel -                     
that's sulfur content and established an exclusionary zone                     
around the project to prevent public exposure to air                           
pollutants expected to exceed air quality standards.  And                      
remember, this was an offshore project."                                       
                                                                               
"We are told that other drillers in other states aren't                        
regulated.  We've not gone and done a broad survey to see                      
what other states are doing, because frankly we are not                        
looking for the lowest common denominator.  Our objective is                   
to maintain clean air in ways that are consistent with the                     
laws of the land and with common sense."                                       
                                                                               
"In conversation with air program managers of other states,                    
we find that drilling rigs and other non-road engines are                      
using low sulfur fuel of .05 percent because that is what is                   
available in every other state except Alaska.  If we were                      
using .05 percent sulfur fuel in Alaska, drilling rigs would                   
be insignificant sources of SO2 and would not require                          
regulation for that pollutant.  I believe that drilling rigs                   
in other states are complying with best available technology                   
- that's BAT standards.  These BAT standards are designed to                   
control NOx emissions.  If drilling rigs were complying with                   
BAT standards in Alaska, they would be insignificant sources                   
of NOx also.  I'm sure if we looked we could find drilling                     
rigs in some states not using low sulfur fuel and not                          
complying with BAT standards and not otherwise being                           
regulated.  But I would not find that a compelling reason to                   
make that our standard in Alaska."                                             
                                                                               
"We are also told that rigs are constantly moving and                          
consequently couldn't be much of a problem for very long                       
even if standards were being violated.  We understand that                     
drilling rigs generally move around a lot.  But we also note                   
that some rigs remain on a site for extended periods of                        
time, sometimes for a year or more.  Mobility though doesn't                   
seem like very good justification for allowing violations of                   
air quality standards.  We have all seen the beater car                        
going down the road spewing clouds of blue smoke as it goes.                   
I don't know about you, but while I'm glad to see it go, the                   
fact that its moving doesn't make me feel a whole lot                          
better."                                                                       
                                                                               
"We are told we use too many conservative functions and our                    
models don't accurately predict what happens in the real                       
world.  Our models are the best available in the world.  The                   
assumptions we use are standard assumptions spelled out in                     
law and used throughout the country.  We hope to be able to                    
do ambient air quality monitoring in the future to assess                      
air quality conditions and trends on the North Slope and                       
elsewhere in the state.  That would cost money that we don't                   
currently have.  In the meantime, we will use the best tools                   
we have - the model."                                                          
                                                                               
"In summary, for all the reasons outlined, we are strongly                     
opposed to SB 299.  It is a major threat to the air quality                    
of Alaska, it would put our citizens and our environment at                    
risk, it is the opposite of doing it right and we believe it                   
is correctly being labeled the dirty air bill.  This                           
concludes my testimony, I'll be happy to respond to                            
questions."                                                                    
                                                                               
Senator Phillips looked in his packet of information for                       
resolutions from the North Slope Borough, the Mat-Su Borough                   
or the Kenai Peninsula Borough in support of the                               
Administration's position.  Had they passed any such                           
resolutions, he asked.  Mr. Ewing reminded the senator he                      
just quoted a letter from the North Slope Borough.  He                         
doubted whether the boroughs were even aware the pending                       
legislation was being considered.  Senator Phillips                            
countered that the deputy commissioner reported to be                          
protecting their interests and he was interested in actual                     
evidence that the boroughs agreed with the department's                        
opinion.  Mr. Ewing suggested the best way to get input                        
would be to gather borough representatives at the committee                    
table to hear first-hand.  He said his office had not been                     
out garnering support.                                                         
                                                                               
Co-Chair Sharp had a question relating to the modeling.  He                    
asked if DEC had any indications that at the locations where                   
oil drilling was occurring, air quality was anywhere close                     
to non-attainment levels required by the state.  Mr. Ewing                     
believed that the areas where drilling would be taking place                   
was complying with the standards.  He warned, the models                       
predicted that these areas would not be in attainment if the                   
rigs were allowed to operate without some control of the                       
sulfur content in the fuel.  Co-Chair Sharp pointed out that                   
the rigs already were operating and were in compliance.  Mr.                   
Ewing argued that was because the department was able to                       
permit and regulate the operations.  Under the new law,                        
permitting and putting limitations on operations would no                      
longer be allowed.  Co-Chair Sharp again asked if the air                      
quality standards were anywhere near non-attainment or did                     
the department monitor to ensure they didn't reach those                       
levels.  Mr. Ewing replied there was no ambient monitoring                     
being done in any of the areas at the time.  Therefore, he                     
could not answer the question, just offer his best                             
professional judgement, which was that the standards were                      
being met and could be met so long as the limitations were                     
in place.                                                                      
                                                                               
Co-Chair Sharp wanted to know how the department knew the                      
permitting was working if there was no monitoring.  Mr.                        
Ewing referred to the limitation of the sulfur content                         
allowed in fuel.  They were able to use models to predict                      
the amount of emissions based on the amount of sulfur in the                   
fuel.                                                                          
                                                                               
Co-Chair Sharp asked if low-sulfur fuel was available in the                   
State Of Alaska or was it shipped in.  Mr. Ewing said there                    
was varying levels of sulfur content fuel within the state                     
and some of it was shipped in.  In the case of the Warthog                     
project, the fuel was brought from the Northwest Territory.                    
                                                                               
Senator Donley admitted environmental science was not an                       
area of his expertise.  He asked Mr. Ewing what was his                        
background.  Mr. Ewing spoke of his 25 years working in the                    
environmental field in air and water quality and other                         
related areas.  Senator Donley wanted to know if he held a                     
technical degree.  Mr. Ewing responded that he did not                         
possess such a degree, his qualifications were through his                     
experience plus other departmental employees who did have                      
specific degrees.                                                              
                                                                               
Senator Donley asked what were the standards the department                    
was trying to enforce.  Mr. Ewing referred to the Federal                      
Clean Air Act standards.  Senator Donley wanted to know if                     
Mr. Ewing knew and could explain those standards to him.                       
Mr. Ewing offered other staff who could.                                       
                                                                               
Senator Donley asked if the standards were universally                         
accepted as being necessary.  Mr. Ewing qualified that there                   
were probably no scientific standards that were accepted                       
unanimously throughout the world.  Generally, the standards                    
being discussed here did have wide acceptance.  They had                       
gone through the rule-making process, were subjected to peer                   
review and had the basis of the best information available,                    
he stated.  Senator Donley asked how large a group disagreed                   
with these standards.  Were there scientific articles                          
claiming these particular standards may not be the best, not                   
necessary or possibly overly restrictive, he wondered.  Mr.                    
Ewing responded that depended on what he was looking for. If                   
he wanted to make a case for tighter standards, he could                       
find support; if he wanted less restrictive standards he                       
could find support for that also.  What he was trying to                       
say, was through the process, they had arrived at these                        
standards, which were national standards set to protect                        
human health.                                                                  
                                                                               
Senator Donley wanted to know how once the national                            
standards were established by the federal government, how                      
were the standards tested for compliance.  He referred to                      
carbon monoxide monitoring done in a busy intersection in                      
Anchorage, which were to establish standards for the entire                    
city.  Wasn't there an issue with how the standards were                       
administered, he questioned.  Mr. Ewing admitted that had                      
been the argument used by industry and others to grant the                     
state the authority to oversee monitoring. This would allow                    
flexibility.  He reminded the committee of the federal                         
oversight on the Warthog project and the tight controls                        
placed on that project.  He felt the federal government was                    
more restrictive then necessary.  What the state offered in                    
recent years was more flexible approaches to regulating                        
sulfur dioxide as related to the rigs.  He emphasized they                     
could provide flexibility but having no standard and                           
ignoring pollution was not a solution.                                         
                                                                               
Senator Donley spoke of the Truckers Association and other                     
business association complaints regarding air quality in the                   
Anchorage area and asked why DEC hadn't responded to them.                     
Mr. Ewing pointed out these were different situations.  The                    
current topic was non-road engines.  He did say the                            
department had proved flexible in the Anchorage and                            
Fairbanks areas with regard to the automobile issues.  While                   
they may not have been far enough for some people, they did                    
provide balance and worked within the federal guidelines.                      
                                                                               
Senator Donley felt that the issues were related in that the                   
claim of flexibility was in question.  Mr. Ewing disagreed,                    
saying DEC was very flexible, perhaps not to the degree the                    
senator wanted for the trucking industry and again the oil                     
drilling industry in this case, but overall balance was                        
achieved.  There was further debate on the air quality                         
standards and the trucking industry.  Mr. Ewing concluded                      
that DEC could not swing entirely to meet the demands of one                   
particular interest, leaving other interests unrepresented.                    
Senator Donley agreed but felt Mr. Ewing was exaggerating.                     
Mr. Ewing stated that the department in every case listened                    
to all arguments and tried to make a reasonable judgement.                     
He felt that in Senator Donley's case a fair judgement had                     
been made, but if the senator disagreed, they could discuss                    
the matter further at another time.                                            
                                                                               
Senator Parnell recalled intentions voiced several years ago                   
by the state to conform to federal standards, but not go                       
beyond.  He then referred to Mr. Ewing's comment on                            
regulating drilling rigs as a mobile source as required                        
under federal law.  He asked Mr. Ewing where that                              
information came from.  Mr. Ewing clarified non-road engines                   
were not mobile sources under the Clean Air Act.  Mobile                       
sources were things like automobiles and things that moved                     
around continually, he explained.  Drilling rigs were non-                     
road engines that did move around, but fell under a                            
different definition under the Clean Air Act.  He continued,                   
telling the committee DEC was instructed they did not have                     
to regulate drilling rigs as stationary sources, but they                      
did have to maintain ambient air quality standards.  This                      
meant that when in an area with clean air, the requirements                    
of prevention of deterioration came into play. Any source                      
with the potential to emit pollution that could put the air                    
quality over the standard, must be regulated, he finished.                     
He conceded that people were often confused when they read                     
they didn't need a Title 5 permit - or stationary source                       
permit.  Often they would assume that meant they did not                       
have to comply with the clean air standards.  That was not                     
the case, he stressed.                                                         
                                                                               
Senator Parnell inquired as to the classification of the                       
North Slope area.  Mr. Ewing responded the North Slope was a                   
non-classifiable area according to the information they had                    
available.  They believed it to be in attainment, but could                    
not confirm.                                                                   
                                                                               
Senator Parnell asked, if DEC were to classify the North                       
Slope area emissions as coming from stationary sources                         
versus non-road engines, what approximate percentages would                    
be made up of non-road sources.  Mr. Ewing reminded the                        
senator he did not have any hard data.  He outlined the                        
process when an operator wished to permit a particular site.                   
The department would compile a list of all the significant                     
sources on that site and create a model, which would tell                      
them what to expect as far as ambient air quality.  This was                   
a process they did on every site that was proposed for a                       
permit.                                                                        
                                                                               
Senator Parnell again attempted to get an approximation of                     
the percentage of non-road engine emissions.  Would it be 50                   
percent or 90 percent, he wondered.  Mr. Ewing responded                       
that it depended on the site and the time.  He estimated                       
that some of the time the non-road engine percentage would                     
be close to 100.                                                               
                                                                               
Senator Parnell asked if the measurements were taken from                      
the drilling rig or from the entire area.  Mr. Ewing replied                   
that they measured the particular site.  He explained that                     
if there were a drilling site where oil development was                        
being done, close to 100 percent of emission would be coming                   
from the drilling rig itself.                                                  
                                                                               
Senator Parnell then referred to the North Slope Borough                       
mayor's comments on the cloud over Nuiqsut and asked Mr.                       
Ewing to explain.  Mr. Ewing stipulated that the situation                     
was not one DEC had documented, but it sounded like the                        
classic cloud formation that would come from SO2 and similar                   
types of emissions.  He expanded saying, that type of                          
formation would not be expected on the North Slope because                     
it usually required intense sunlight for the chemical                          
reaction to occur.  However, even in the absence of the                        
intense sunlight they were getting reports of observations                     
of the cloud formations.  He stated the department could not                   
confirm the cloud was a result of activity on the North                        
Slope or that it was blown in from Asia, he speculated it                      
was probably from a combination of the two.                                    
                                                                               
Senator Parnell questioned if DEC had any hard data this                       
phenomenon caused or could cause federal ambient standards                     
violations.  Mr. Ewing replied that the only way to evaluate                   
future air quality conditions in a situation where a permit                    
was being considered was to use a modeling technique.  He                      
stressed that an operation could not be measured before it                     
began and the permitting stage took place before operations                    
could begin.  He said there was nothing unusual about this.                    
                                                                               
Co-Chair Sharp opened the meeting to public testimony.                         
First to testify was BRIAN PETTY, Senior Vice President of                     
Governmental Affairs for the International Association of                      
Drilling Contractors via teleconference from Washington D.C.                   
After a short introduction of himself and his organization,                    
he spoke to the legislation.                                                   
                                                                               
"...I am here today to support Senator Leman's well crafted                    
bill, SB 299.  IADC, as Deputy Commissioner Ewing properly                     
pointed out, has been frustrated in coming to terms with                       
ADEC on a rational approach to our problem.  That problem                      
being the business of regulating or not regulating drilling                    
rigs working in Alaska."                                                       
                                                                               
"IADC has been engaged here in Washington with the EPA from                    
early days.  After the 1990 Clean Air Act amendments were                      
passed, we were invited in by the EPA to become part of                        
their E&P oil and gas cluster - meeting as early as 1993 to                    
discuss ways of defining properly, non-road engines,                           
stationary sources and the whole gamut of issues that come                     
up in oil and gas activities, especially from the                              
exploration side.  I might add that those meetings were                        
attended widely by the EPA including their solid waste and                     
water branches.  Those discussions evolved further into                        
active dialog with EPA contractors focusing on the air                         
regulations in Annarbor, Michigan and in Research Triangle,                    
North Carolina."                                                               
                                                                               
"The culmination of that long process is represented in the                    
direct final rule that EPA put out just at the end of                          
December last entitled Control of Air Pollution Emission                       
Standards for the New Non-road Compression Engines at or                       
below 37 Kilowatts.  We have, at IADC, been attempting to                      
encourage ADEC to understand the dimension of the federal                      
regulations and fact that those federal regulations do not                     
require the inclusion of non-road engines or mobile sources                    
under Title 5.  And that the states in fact are totally                        
authorized to exclude them as is the case with a number of                     
oil patch states all over in this country including                            
Colorado, which in matters environmental is no slouch as                       
many of you know.  Colorado expressly exempts drilling rig                     
engines from its permitting requirements.  That state takes                    
a back seat to none in terms of considering its pristine                       
environment because of its high value it accords its tourism                   
industry.  I would add that there are substantial number of                    
rigs working there - quite a few more than are working in                      
Alaska as a matter of fact."                                                   
                                                                               
"This pattern follows in states Montana, North Dakota,                         
Kansas, New Mexico, Oklahoma and Wyoming.  In Texas there is                   
a separate regime but it comes to the same result.  Drilling                   
rigs are not considered stationary sources for permitting                      
purposes.  So what is being ventured by ADEC, is absolutely                    
unique and in ways radical because it deviates from                            
established patterns in mature dialog and a mature regime                      
that began with a process here in Washington after the Clean                   
Air Act amendments were passed."                                               
                                                                               
"IADC, in its international dimension, has information drawn                   
from environmental regulators all over the world.  We've                       
been an association for sixty years.  We are very, very                        
sensitive to the need for preserving safety and                                
environmental mitigation in our operations.  As a                              
consequence we are very concerned and alarmed by the                           
direction the ADEC is taking in Alaska because it threatens                    
to be an eccentric result that could have the affect of                        
shutting in a lot of production and certainly exploration in                   
Alaska, which of course is a vital industry in that state.                     
That is why I was asked to come in today to just point out                     
the importance of this to the international association and                    
to illustrate the depth and length of time we have been                        
spending with our engineers and our company engineers                          
engaged in active dialog with EPA engineers for example."                      
                                                                               
"Our efforts at ADEC go back to about August of 1996 when                      
our representatives met with representatives of ADEC in                        
Juneau.  At that time those ADEC representatives conceded                      
the point that drilling rigs were in fact mobile sources in                    
their use of non-road engines.  We were dismayed when in                       
early 1997; ADEC seemed to reverse itself.  There was a                        
request by ADEC for us to produce questions, which they                        
agreed to answer promptly.  That request was April.  We did                    
not get an answer until late October and that was only after                   
another letter asking ADEC to come forward with some                           
justification for their modeling and some explanation why                      
the State Of Alaska should venture off into an entirely new                    
area of what was an established national norm."                                
                                                                               
"As a consequence IADC finds itself today completely                           
frustrated moving any further with ADEC because ADEC seems                     
predisposed to venturing a rule that would consider drilling                   
rigs essentially stationary sources.  As a consequence the                     
Legislation as drafted is very carefully aligned with that                     
of existing federal law and its interpretation judicially                      
and we think its a prudent step that will not make one whit                    
of difference in terms of damaging Alaska's environment but                    
will have a lot to do with the preservation of a vital oil                     
and gas industry in the state."                                                
                                                                               
There were no questions from committee members and Co-Chair                    
Sharp called upon the next person to testify.  RUSS DOUGLAS                    
came to the table and introduced himself as a representative                   
of the International Association of Drilling Contractors-                      
Alaska Chapter.  Accompanying Mr. Douglas was KYLE PARKER,                     
also from the AK Chapter of IADC.  Mr. Parker acted as the                     
primary speaker and his testimony was as follows.                              
                                                                               
"I'd like to start off today just by responding to three of                    
the points which Deputy Commission Ewing stressed at some                      
length here to the committee."                                                 
                                                                               
"First off, I'd like to respond to his suggestion that for                     
three years they have been actively pursuing a solution to                     
this problem with us.  That frankly is just not the case.                      
We have a letter, and I believe it's in your committee                         
packets, from July 24, 1997 signed by Michael Conway who's                     
Acting Director of the Air Section down at DEC, wherein he                     
says that the department is committed to working a longer                      
term solution to this issue with all interested parties by                     
establishing and leading a work group.  Nothing - no work                      
group was ever formed following that July 24th letter.  As                     
of March 12th of this year, nothing had been done by DEC to                    
move forward in forming a work group to work with industry.                    
So Deputy Commissioner Ewing's suggestion that there's been                    
an active effort on their behalf to work with industry in                      
solving this and that we've rejected their proposed                            
solutions is just not the case."                                               
                                                                               
"Recently they did come out with a draft proposed                              
regulations, which were presented to us.  These proposed                       
regulations are a form of the California Rig Registration                      
Program.  Industry did respond to him that we did not                          
believe that was the right solution for Alaska.  We are not                    
opposed - we have not been opposed to sitting down and                         
working with the department on developing a solution.  We                      
have, I believe been very open to working with them over the                   
last three years and as recently as March 25th, we had sent                    
this letter to Commissioner Brown, and I have a copy here                      
for each of the committee members, wherein we take the                         
position with this recently proposed workgroup that we would                   
be pleased to have a opportunity to work in a workgroup                        
format with the regulators in developing some form of a                        
solution.  But from our perspective, the DEC isn't willing                     
to step back and take a look to see whether first of all                       
there's a problem here.  As a matter of fact, at that                          
meeting, one of the representatives from industry suggested                    
that DEC stand down from its aggressive regulation of                          
drilling rigs and give industry the time to work with DEC to                   
develop the facts so we know what the reality is on the                        
North Slope.  We will then develop an appropriate regulatory                   
framework for mobile sources of emissions.  But Deputy                         
Commissioner Ewing at that point said no, we don't have the                    
flexibility to do anything but regulate emissions from                         
drilling rigs.  That's all detailed in your letter."                           
                                                                               
"So please note that industry has been very willing to work                    
this issue.  We've been working it for over three years now                    
with them and frankly we've been frustrated at every turn in                   
our negotiations with them."                                                   
                                                                               
"So our solution, as the deputy commissioner said - he said                    
that our solution is no regulation - that is not in fact the                   
case.  We have been willing to sit down and work with them                     
on an appropriate regulatory framework.  That's not                            
happened."                                                                     
                                                                               
"The second point is that the deputy commission suggests                       
that rigs are not regulated.  In fact engines on drilling                      
rigs - engines on all mobile sources are regulated.  They                      
are manufactured to standards that are established by the                      
federal government.  This is the point of our legislation.                     
The federal government recognizes that you regulate                            
stationary sources of emissions and mobile sources of                          
emission differently.  The appropriate places to regulate                      
mobile sources of emissions is at the manufacturing stage                      
where the engines are manufactured and you put appropriate                     
technologies on at that point.  Stationary sources, you can                    
add things like scrubbers, higher stacks, pollution                            
collectors - those types of technologies.  Adding those to a                   
mobile source, you lose mobility."                                             
                                                                               
"Finally, and Russ Douglas will address this at length a bit                   
more, Deputy Commissioner Ewing started out by saying that                     
rigs are a significant source of emissions on the North                        
Slope.  Well we in the industry have taken the time to                         
develop some of the numbers and I'll let Mr. Douglas speak                     
to that."                                                                      
                                                                               
Mr. Douglas began speaking.                                                    
                                                                               
"My evaluation has been just to make essentially look at                       
some of the permits on the North Slope and these are the                       
stationary permits.  The level of emissions from those                         
bigger facilities - the production facilities, the central                     
compression plant are normally much greater than the                           
emissions from any drilling rig.  There are a limited number                   
of...                                                                          
                                                                               
Tape #106 Side B                                                               
                                                                               
"...from my evaluation. I've looked at the comparison and                      
most of them are in the range of ten percent or less in                        
terms of the contribution of drilling rigs if a drilling rig                   
were to be on the facility."                                                   
                                                                               
"In addition those 20 rigs, not all of the 20 rigs are                         
running totally on diesel.  There are some that are run on                     
gas - or there's one that is run on gas.  Several have                         
capability to be run electricity, if available can be                          
powered by that electricity.  That further reduces the                         
amount of actual emissions from drilling rigs from measures                    
that have been taken by the drilling industry."                                
                                                                               
"Another point I would like to address is the question about                   
ambient monitoring on the slope.  There was a program begun                    
in 1986 by the Prudo Bay unit operators to monitor air                         
quality.  They've established three stations at APAD, at the                   
Gathering Center One and at the Central Compression Plant                      
and they monitored emissions for quite a while.  I believe                     
this was in conjunction with the DEC.  Then the program - or                   
at least from the DEC standpoint, was discontinued but the                     
Prudoe Bay unit operators decided they would proceed with                      
it.  So they are monitoring to date.  The IADC is in the                       
process of obtaining that data.  But since it is by the                        
Prudoe Bay unit operators now it has to be requested and                       
approved by all the unit operators before they can release                     
that data.  I've been assured by my contact at BP who runs                     
the program that the data show there is no increasing air                      
quality detriment at this point in time."                                      
                                                                               
"I would also like to add that Alpine, Arco with their                         
Alpine project, has agreed to a monitoring station at their                    
facility in regard to the Nuiqsut concerns.  So they have                      
agreed to monitor the air out there as well."                                  
                                                                               
Senator Adams asked that with the passage of this                              
legislation, could IADC guarantee there would be no                            
pollution in the North Slope that could affect the safety of                   
the workers in the North Slope.  Would they be willing to                      
share their data with the communities in the affected area,                    
he inquired.  Mr. Parker responded they would be happy to                      
share the analysis that was still ongoing as well as the                       
numbers that were in the current permits and how the                           
drilling rigs compared in terms of the percentage of                           
emissions.  He assured the committee he would get a copy of                    
that information to them.  He admitted there could be no                       
guarantee against emissions on the North Slope.  That was                      
part of the ongoing operations, both in the stationary                         
facilities working to collect and separate the oil and the                     
drilling rigs discussed at this meeting.                                       
                                                                               
Senator Adams suggested this was just a facade created by                      
the oil companies.  Mr. Parker responded saying that                           
industry deserved credit in recent years for modifying power                   
sources on the rigs.  Rigs on the North Slope were turning                     
to electrical generation and less diesel fuel was being                        
burned.  He spoke of other modifications to convert rigs to                    
natural gas operation.  He stressed that this bill was not a                   
license to pollute.                                                            
                                                                               
Senator Parnell referred to pollution in his district in                       
Anchorage.  He stated the issue at hand was not the                            
emissions, but the permit.                                                     
                                                                               
Mr. Parker testified in response to Mr. Ewing's earlier                        
comments relating to federal compliance and DEC's failure to                   
research other state's handling of the drilling rig                            
emissions.  Mr. Parker attested that DEC had actually looked                   
at what California was doing to regulate the non-road                          
engines.  Mr. Parker alluded that California was not the                       
ideal comparison for Alaska's situation.                                       
                                                                               
This concluded public testimony on the bill.                                   
                                                                               
Senator Phillips offered a motion to move from committee SB
299 with accompanying fiscal note.  Senator Adams objected.                    
                                                                               
Co-Chair Sharp voiced concerns with the fiscal note, saying                    
he didn't understand why the department claimed to need more                   
funds to not issue permits.  He felt this bill should save                     
them money.                                                                    
                                                                               
Senator Pearce joined the discussion on the fiscal note.                       
She read accompanying comments on the note relating to no                      
change in staff workload and pointed out the request for an                    
additional staff position.  She suggested that because the                     
bill was in the Senate Finance Committee, they had the                         
authority to change the fiscal note.  She expressed a desire                   
to write a new fiscal note eliminating the new staff                           
position.                                                                      
                                                                               
Co-Chair Sharp supported this idea.  He felt the department                    
was already making regulation changes the way they wanted,                     
so he didn't know how it would require more staff to not do                    
those changes.  He declared the personal service line item                     
should be zero.                                                                
                                                                               
Senator Pearce added the Department of Law review would be                     
applicable.  She stated for the record the changes to be                       
made to the DEC fiscal note, eliminating the personal                          
services monies and the travel expenses for the would-be                       
created position.  Senator Phillips amended his motion to                      
accommodate, noting the total amount for the fiscal note                       
would be $11,600.                                                              
                                                                               
Senator Adams asked for clarification on what would be                         
included in the revised fiscal note.  Senator Phillips                         
responded that what was left was funding for Department of                     
Law review, advertising, public hearings and publication of                    
new regulations.                                                               
                                                                               
Senator Phillips asked Senator Adams if the North Slope                        
Borough had passed a resolution opposing this legislation.                     
Senator Adams noted the letter from the mayor.  He                             
maintained his objection.                                                      
                                                                               
Senator Donley pointed out information in the file in                          
support of the legislation.  He wanted to know if there was                    
a position paper from the department, stating their opinion                    
in writing.  Co-Chair Sharp was only aware of oral                             
statements made in the Resources Committee and here.                           
Senator Donley said he found the backup papers in the file                     
supporting the bill to be very persuasive.                                     
                                                                               
Co-Chair Sharp asked for roll call to be taken on the                          
motion.  The vote was 6-1; Senator Adams cast the lone nay                     
vote.                                                                          
                                                                               

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