Legislature(1999 - 2000)
05/11/1999 08:08 AM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 110-HAZARDOUS SUBST. RELEASE: GOVT ENTITY CO-CHAIRMAN HALCRO announced that the next order of business before the committee would be CS FOR SENATE BILL NO. 110(RLS) am, "An Act relating to liability for the release of hazardous substances involving certain property acquired by a governmental entity; relating to making a determination as to when a hazardous substance release has occurred; relating to liability of a party other than the party responsible for the initial release of a hazardous substance; and providing for an effective date." SENATOR WILKEN, Sponsor of SB 110, Alaska State Legislature, provided the committee with the following example in order to put into perspective the reasoning behind SB 110. The Fairbanks Northstar Borough currently, has 14 properties with taxes in arrears which total a little over $500,000 in past taxes. Those taxes are not being paid because the property owners realize that the borough cannot take over those properties due to the perceived or actual contamination on the property. The borough is concerned that if those properties are taken by the borough, the borough would be immediately liable for the contamination. The borough would not be liable under federal law and the borough would be able to foreclose on past taxes and determine what should be done with the property. This is not the case under state law. Senator Wilken stated that SB 110 aligns state law with federal law. SENATOR WILKEN read the following sponsor statement: This bill will assist municipalities in performing their statutory duty to enforce liens for delinquent real property taxes. Tax foreclosure is a mandatory process leading to the taking of a tax deed that places the title to a tax delinquent property in the municipality's name. Some properties with delinquent taxes are contaminated. Municipalities are concerned that they may be held liable for pre-existing contamination of foreclosed land with significant environmental remediation costs. The federal Comprehensive Environmental Response, Compensation, And Liability Act (CERCLA) exempts by definition state and local governments who acquire property through "bankruptcy, foreclosure, tax delinquency, abandonment, or similar means." However, the state law which addresses liability for damage caused by the release of hazardous substances, AS 46.03.822, does not precisely mirror the federal law. SB 110 will amend AS 46.03.822 to ensure that the federal and state laws are similar in this respect. The municipality may therefore have title to the contaminated property without involuntary exposure to cleanup. Changes in the Senate also recognized the need to extend this courtesy to innocent third parties, which are not directly responsible for contaminating the property they have acquired. Subsection (m) clarifies state law to say that "a party, other than the party responsible for the initial release, who had no reason to know that a hazardous substance was disposed of on, in, or at the facility and who has acted responsibly upon discovering contamination...may not be held liable for the spread or migration of the hazardous substance except by an action of intentional misconduct or gross negligence." Number 2711 SENATOR WILKEN noted that the committee packet should contain letters of support from Anchorage, Kenai, Ketchikan, and the Fairbanks Northstar Borough. He said that it is helpful to review CSSB 110(RLS) am in two distinct sections. The first section being from page 1, line 7 to page 2, line 8 which addresses the personal liability. The second section is page 2, line 9 through to the end of the bill which addresses the municipal liability. The legislation began with a zero fiscal note, but through the process a large fiscal note was added. There were some language changes which has resulted in an indeterminate fiscal note. Senator Wilken expressed his desire to report the bill from committee with the indeterminate fiscal note in order to refine the fiscal note. CO-CHAIRMAN HALCRO noted that there are two proposed amendments, one prepared by Co-Chairman Halcro and one prepared by the Department of Environmental Conservation (DEC), which may address subsection (m). He asked if Senator Wilken had an opinion on those amendments. SENATOR WILKEN said that he had not seen Co-Chairman Halcro's proposed amendment. With regard to DEC's amendment, Senator Wilken pointed out that DEC's amendment would require a title change. Co-Chairman Halcro's amendment would delete subsection (m) entirely returning the bill to its original form which would be difficult. Therefore, Senator Wilken opposed both amendments. CO-CHAIRMAN HARRIS asked if this legislation made anyone immune from intentional contamination to property when that person abandons that property. SENATOR WILKEN replied no. Number 2518 PAUL COSTELLO, Land Management Director, Fairbanks Northstar Borough, testified via teleconference from Fairbanks. He informed the committee that there is a mandatory process under state statute. This legislation attempts to make state statute mirror federal statute in order to take these contaminated properties and proceed through the tax foreclosure process to sale if necessary to recoup the taxes. He echoed Senator Wilken's estimate that the Fairbanks Northstar Borough would be looking at approximately $500,000 in past due taxes, penalties, and interest. TIM ROGERS, Legislative Program Coordinator, Municipality of Anchorage, testified via teleconference from Anchorage. He informed the committee of the Municipality of Anchorage's support of this legislation. REPRESENTATIVE MURKOWSKI assumed that the support indicated by Mr. Rogers was in reference to the CSSB 110(RLS) am. MR. ROGERS stated, "We support the original bill that was introduced." There is no desire to limit the municipality's liability when it acquires property. The main concern is with the mandatory tax foreclosures. REPRESENTATIVE MURKOWSKI noted that the amendments before the committee would eliminate subsection (m) or substantially change subsection (m). She asked if Mr. Rogers had any comment on subsection (m). MR. ROGERS said that he had no objection to the elimination of subsection (m). CO-CHAIRMAN HARRIS noted that Anchorage is the largest municipality in Alaska. He inquired as to how many situations of abandonment of property with contamination the municipality faces. MR. ROGERS estimated that at any given time there could be 10 to 12 such properties. He offered to provide the committee with specifics. In further response to Co-Chairman Harris, Anchorage bears the cost. For example, there has been a case which has been going on for the last four or five years which has cost in excess of $50 million. He agreed with Co-Chairman Harris that the local tax payers basically bear the burden. Number 2282 REPRESENTATIVE MURKOWSKI asked if the Municipality of Anchorage had a problem with leaving subsection (m) in the legislation. MR. ROGERS said, "No, I don't believe we do." CO-CHAIRMAN HALCRO asked if there is a foreclosure on contaminated property, would the cost of remediation be passed on to the owner or does the city assume complete responsibility and liability. MR. ROGERS stated that the municipality would attempt to collect that cost from the previous owner of the property, but that is not always possible which would result in the municipality acquiring the total remediation bill. Number 2183 LARRY DIETRICK, Program Manager, Division of Spill Prevention & Response, Department of Environmental Conservation (DEC), informed the committee that the department has worked with the sponsor on this legislation. He said that the department is not opposed to the innocent landowner provision, although he noted there is currently such a provision in law. Mr. Dietrick emphasized, "Language changes to this statute are, in our view, are very important, are very critical because they have the effect of shifting the underlying liability for costs of the cleanup and damages from the spiller to the state." He explained that the fiscal note is indeterminate because some of the ambiguous language in subsection (m) which may change the fundamental scheme for the spiller pays principle. MR. DIETRICK stated that the language of concern is on page 3, line 5, subsection (m) which reads, "first introduced into the environment." The other language of concern is on page 3, line 6, subsection (m) which reads, "party responsible for the initial release" . Both are undefined terms which determine who is liable and who caused the spill. Frequently, there are underground spills which leach into a water supply years after the initial spill. In such a situation, the argument that such a situation is not an initial release is utilized. Such an argument creates legal difficulties. He informed the committee of the "Mylos Reefer" (ph), a vessel which has been aground for about 10 years now. The initial release containment, control, and cleanup was completed. Yet, this past summer some of the washings from the fuel tanks were released. He asked if that would be an "initial release", a "new spill", or an "old spill." He asked if the owners of the "Mylos Reefer" (ph) should be relieved of responding to this subsequent release. MR. DIETRICK stated that the goal is to achieve clarity in the language in order to avoid the ambiguity for the spiller in subsection (m). REPRESENTATIVE MURKOWSKI agreed that the language, "first introduced" is problematic. The proposed amendment does not contain that language. Is there a definition for "initial release" in existing statute? MR. DIETRICK replied no. He reiterated that the language, "initial release" and "first introduced" are both concerning. CO-CHAIRMAN HALCRO clarified, in response to Representative Murkowski, that the amendment with lines drawn through the text of subsection (m) and new language is from DEC. That amendment attempts to address the indeterminate fiscal note. MR. DIETRICK confirmed that the department has worked with the Department of Law on this amendment. Number 1844 CRAIG TILLERY, Assistant Attorney General, Environmental Section, Civil Section, Department of Law, testified via teleconference from Anchorage. In response to Representative Murkowski, Mr. Tillery explained that the language "initial release" is not liked due to the lack of a definition. However in the context of the second sentence, the language does not create the problem it does in the first sentence which is essentially a definition of the term "release." The language "first introduced into the environment" appears to be a temporal definition for release which is utilized for the purpose of determining liability. If one returns to subsection (a), there is an argument that liability, which is only for damages resulting from a release, could be defined as only being liable for the first introduction into the environment. Therefore, once introduced into the environment any subsequent migration of a contaminant through forces of nature would not be compensable. Mr. Tillery believed that to be a very serious problem with the first sentence. MR. TILLERY expressed concern with the word "responsible" which is subject to at least two definitions. One definition refers to a legal responsibility which would really mean liability, although that is not specified. He indicated that it could be interpreted as a fault-based word. If that interpretation is the case, the liability would be limited to only an individual who was responsible per the language of the second sentence. That is of concern because a person may transport a contaminant, but is not the owner of the contaminant. This would be the difference between an oil company and a shipper. He posed the scenario of a major oil spill in which the shipper has limited assets and the oil company is not responsible. Therefore, that entity may be released from any liability with this language. Mr. Tillery noted that the word "party" is not defined and that the word "person" is utilized everywhere else in statute. He said that "person" would be preferable. Number 1677 REPRESENTATIVE KOOKESH asked if there is a statutory definition of "a governmental entity." The sponsor statement only speaks to municipalities. MR. DIETRICK stated that the statutory definition of "governmental entity" is not included in AS 46.03.826. MR. TILLERY noted that "governmental entity" is not defined in this section. However, it is defined in AS 46.03.822 (c)(2). CO-CHAIRMAN HALCRO referred to page 2, line 10, which reads, "A unit of state or local government" that seems to be fairly broad. REPRESENTATIVE KOOKESH commented that the language "governmental entity" should be defined. Number 1520 BETH HAGEVIG, Legislative Administrative Assistant for Senator Wilken, Alaska State Legislature, said that she did not have the definition for "governmental entity" either. As Senator Wilken stated early, he intended to sponsor this legislation on behalf of the Fairbanks Northstar Borough. The bill originally was intended to cover municipalities as well as other agencies such as the Department of Transportation. CO-CHAIRMAN HARRIS asked if SB 110 received a House Judiciary Committee referral. MS. HAGEVIG informed the committee that there were two Senate Judiciary Committee meetings. She also acknowledged that the bill has received a House Judiciary Committee referral. CO-CHAIRMAN HARRIS noted that the bill sponsor requested that there be no House Judiciary Committee referral. REPRESENTATIVE MURKOWSKI pointed out that the title of SB 110 utilizes the word "party" as does subsection (m), but the remainder of the bill utilizes the word "person." CO-CHAIRMAN HALCRO asked if Ms. Hagevig had reviewed the amendment from DEC. MS. HAGEVIG replied yes. In further response to Co-Chairman Halcro, she said that she was not familiar enough with the law to comment. The focus had been on the municipality side. She indicated that Ms. Lynch, Attorney for the Municipality of Anchorage, may be able to comment. MR. DIETRICK expressed concern that these terms are ambiguous and therefore, open to interpretation. This possibly insulates a legitimate spiller who is liable to pay. The possible argument for the spiller would shift the costs for the event to the state. Therefore, he agreed with Co-Chairman Halcro that those concerns were the reason for the indeterminate fiscal note. In any given year, at least one such situation costs in the millions of dollars. Mr. Dietrick explained that the state finances these costs from the response account. If such a situation occurs and the burden is shifted to the state, the response account would be lowered below $50 million which triggers the two cent tax. Such a cycle would continue for each such case. REPRESENTATIVE MURKOWSKI inquired as to what the original bill included. MS. HAGEVIG specified that the language on page 2, line 9 through page 3, line 2 would be the closest to the original bill. CO-CHAIRMAN HALCRO inquired as to the reasoning behind inserting subsection (m) in the Senate. MS. HAGEVIG explained that there were concerns in the Senate Judiciary Committee and the Senate floor. The concern was that the legislation provided an exemption from liability to governmental entities, without extending the same privilege to innocent landowners under similar obligations. REPRESENTATIVE KOOKESH reiterated his concern with the lack of a definition for "governmental entity". He stressed, for the record, that the language on page 2, line 10, "A unity of state or local government" does not exclude tribal governments or associations. Number 1050 JONATHON LACK, Legislative Assistant for Representative Halcro, Alaska State Legislature, informed the committee that he discussed the definition of a "governmental entity" on another matter with Tam Cook, Director, Legal and Research Services. He explained that Ms. Cook indicated that the language "governmental entity" is usually utilized in titles for the legislation to be broad. The language utilized in statute is "municipality" which is defined in AS 01.10.060(4) as "'municipality' means a political subdivision incorporated under the laws of the state that is a home rule or general law city, a home rule or general law borough, or a unified municipality." REPRESENTATIVE KOOKESH reiterated his concerns regarding the lack of a definition of "governmental entity." He also reiterated his comment that a "governmental entity" does not exclude tribal governments and associations. REPRESENTATIVE MURKOWSKI referred to AS 46.03.822 which speaks to remedial action regarding liability for the release of hazardous substances. That statute refers to "the state, a municipality, or a village" which seems to be used throughout this section of statute which subsection (m) of SB 110 would fall under. Representative Murkowski surmised then that "governmental entities" are construed to be "the state, a municipality, or a village." Number 0860 VIRGIL NORTON, testifying via teleconference from Kenai, informed the committee that he was testifying as a citizen. He noted that he is a project manager for a contaminated site on the Kenai Peninsula. The remediation for this contaminated site was done by the Environmental Protection Agency last year. The site is expected to be closed this season. MR. NORTON pointed out that he has had much experience with this statute. He expressed concern with the innocent land owners. He noted that he helped craft some of the language which was adopted in the Senate Judiciary Committee. The idea with the Senate Judiciary Committee's amendment was to always place liability on the person who pollutes or contaminates land. Initially, Mr. Norton was concerned with regard to who would ultimately bear the costs of a contaminated property that was acquired by a borough or municipality if the emphasis is not always placed on the person who does the pollution. He was also concerned with the original language which had a way of coloring the existing statute to deny a person the innocent land owner defense. He believed that his client was a test case for this statute. Mr. Norton did not object to changing the language "party" to "person." The idea behind subsection (m) is that the polluter should bear all the liability and an innocent land owner, who acts responsibly, does not bear the liability. He stressed the need to preserve the innocent land owner defense in AS 46.03.822. He said that he accepted the language referring to the due diligence of the land owner in checking out the property. REPRESENTATIVE MURKOWSKI asked how Mr. Norton would interpret the term "responsibly" in reference to the innocent land owner defense. MR. NORTON explained that "acting responsibly", per the existing statute, is that land owner attempting to remediate, contain and prevent leaching of contamination that the land owner has discovered. An innocent land owner could incur an enormous expense. For example, Mr. Norton's father-in-law incurred over $1 million in expenses. This is a liability issue; who will ultimately pay. REPRESENTATIVE MURKOWSKI indicated the possible need to clarify what "acting responsibly" would mean through a list to be placed in statute. MR. NORTON noted that one using the innocent land owner defense would have to obey all the current federal environmental regulations encompassed in Title 46 and the DEC's regulations. MS. HAGEVIG pointed out that "acting responsibly" is discussed in AS 46.03.822(b)(2) which reads: "in relation to (1)(B) or (C) of this subsection, that the person, within a reasonable period of time after the act occurred, (A) discovered the release or threatened release of the hazardous substance; and (B) began operations to contain and clean up the hazardous substance." CO-CHAIRMAN HALCRO requested that Ms. Krietzer comment on some of the concerns raised. Number 0232 ANNETTE KRIETZER, Legislative Assistant for Senator Leman, Alaska State Legislature, said that she did not doubt that Mr. Tillery had concerns regarding, "first introduced into the environment." Ms. Krietzer said, "I will quote from the state's attorney general's opinion regarding CERCLA, 'Courts have complained about the in artful, confusing, and ambiguous language and the absence of useful legislative history in interpreting CERCLA. It is not a model of legislative draftsmanship and the statute is riddled with inconsistencies and redundancies.'" She assumed that Mr. Tillery assisted in the development of the fiscal note and the language explaining that note. The explanation of the fiscal note says that the language is unclear, ambiguous and causes uncertainty which Ms. Krietzer indicated was the case because state language parallels CERCLA. With regard to Mr. Tillery's example of a ship on the rocks, subsection (m) refers to a facility which per the statutory definition would not include a marine vessel. She said that some of DEC's arguments are "somewhat specious." Nothing in the statute nor this bill relieves a party from "acting responsibly." It merely extends the liability protection given to municipalities to an innocent land owner which CERCLA allows. In statute the problem is that the state... TAPE 99-33, SIDE A MS. KRIETZER explained that subsection (m) is trying to make it very explicit as to what the innocent land owner defense is. REPRESENTATIVE MURKOWSKI referred to subsection (m) which includes language indicating that an unknowing party not responsible for an initial release "may not be held liable for the spread or migration of the hazardous substance except by an act or intentional misconduct or gross negligence." She inquired as to how "acting responsibly" would tie in with "intentional misconduct or gross negligence." Number 0136 MR. TILLERY expressed concern with the last phrase in subsection (m). That phrase would imply that if a person were at fault that person may not be held liable, which he understood earlier testimony to indicate was not the intent. Furthermore, the last phrase would seem to be exculpatory for all forms of liability not just that liability in AS 46.03.822 which is different than the municipality's bill. The municipality specifically limits the nonliability phrase to under this section. Therefore, Mr. Tillery felt that the last few lines of subsection (m) are too broad. MR. TILLERY clarified that his earlier comment regarding liability spoke to the first sentence which seems to be an independent thought from the second sentence. The second sentence is limited to a facility which does not include a vessel. The first sentence does not have a limitation and would include a vessel. MS. KRIETZER asked if the language on page 3, line 4 which reads, "a release shall be considered to have occurred when a hazardous substance is first introduced into the environment" relieved Mr. Tillery's concerns. MR. TILLERY indicated that it eliminates a few of his concerns. He said, "It still leaves open the situation when you have a large storage tank or any kind of a tank or any kind of a release, and that release falls and hits the environment. At that point, there is now a definition. That is a release. That is the event for which someone is liable. When that contaminant now begins to migrate, as a result of gravity, of ground water flow, as a result of pressures or whatever it begins to migrate. Now there is an argument that once it gets beyond that initial contact with the environment, then no liability exists. So, it helps to get rid of vessels, but it does not solve the problem. The problem is that in that first sentence, you are essentially defining a fundamental term of the statute which is the term release. When you do that, it--there is a tendency for these things to have ramifications that go far beyond the intent of the drafter. And I believe that is what has happened in this case." CO-CHAIRMAN HALCRO noted that SB 110 has a House Judiciary Committee referral. He suggested that the committee report the bill from committee. He asked if there was anyone wishing to testify on SB 110. There being no one, the public testimony on SB 110 was closed. Number 0532 REPRESENTATIVE MURKOWSKI commented that she was not satisfied with the legislation as it currently exists. Many issues have been raised and many questions remain unanswered. She said, "I'm not entirely certain if this is something that needs to move through quickly, whether we have more time to consider it here. It certainly needs work in the Judiciary Committee. ... If we had time for another hearing on the matter it probably wouldn't hurt us either." CO-CHAIRMAN HALCRO noted that the bill sponsor expressed the desire to move the bill forward. Co-Chairman Halcro expressed concern with the indeterminate fiscal note. In the long run, Co-Chairman Halcro was concerned with what the state would have to absorb because of that. He noted that there is the argument that the proposed amendments would require a title change which would be suitable for the House Judiciary Committee to review. REPRESENTATIVE DYSON suggested, "Maybe we pass this out, it's not going to get through the process, I don't think, this year and if we ask...Representative Murkowski, that if in the Judiciary process, ..., things come up that are back to being a community concern that you let this committee know and we can request to get it back." Number 0759 REPRESENTATIVE DYSON moved to report CSSB 110 (RLS) am out of committee with individual recommendations and the accompanying fiscal note. CO-CHAIRMAN HALCRO objected for discussion purposes. He asked if Representative Murkowski had any problems with that. REPRESENTATIVE MURKOWSKI said that she would be happy to report back to the committee and let the committee know if she felt it appropriate for the bill to return to the House Community & Regional Affairs Committee. CO-CHAIRMAN HALCRO removed his objection. There being no objection, CSSB 100(RLS) am was reported from committee. CO-CHAIRMAN HALCRO apologized to those present to testify on HB 24. Due to time constraints it would have to be rescheduled.