Legislature(1999 - 2000)
03/21/2000 02:00 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 361
An Act relating to charges for state services;
requiring that fees levied by resource agencies for
designated regulatory services be based on the actual
and reasonable direct cost of providing the services,
except in the case of certain negotiated or fixed fees;
relating to negotiated or fixed fees of resource
agencies; relating to invoices for designated
regulatory services; establishing a petition process
regarding fees charged by resource agencies for
regulatory services; and providing for an effective
date.
Representative Bunde MOVED to ADOPT the work draft for HB
361, #1-LS1299\I, Kurtz, 3/21/00. There being NO OBJECTION,
it was adopted.
MIKE TIBBLES, STAFF, REPRESENTATIVE THERRIAULT, provided an
overview of the work draft. He noted that there were a few
items which did not make it into the draft.
The first change would be to Page 2, Line 15, the language
"Except as provided in AS 37.10.052(a)" was added. He noted
that the language would provide for an annual review to the
Legislature about statutory changes.
Representative J. Davies questioned if it should be required
annually. Mr. Tibbles stated that this is existing law and
is an annual review required for all agencies.
Mr. Tibbles continued, Page 3, provides a provision to limit
the amount of the fix fee to $250. There was an exception
to the $250 dollar limit if it could be justified as an
actual direct cost. The deletion was requested by the
Department of Environmental Conservation.
Language was added on the ends of Lines 3-7, which require a
review of all fixed fees. On Page 3, Line 9, there was a
deletion of the word "standard" for negotiated agreements.
Language was modified on Lines 11 & 12 regarding negotiated
agreements. Page 3, Subsection c is new. It is replacement
of the petition process established in the statutes.
(TAPE CHANGE, HFC 00 - 76, Side 2)
Co-Chair Therriault explained that the provision had been
submitted by the Department of Environmental Conservation.
Representative J. Davies asked about Page 4, Line 3. Mr.
Tibbles explained that the language was "held over" language
from a procedure that required the regulatory process. The
intent was that it be demonstrated why the Department would
need to justify when they denied the act.
Representative J. Davies questioned if there was distinction
between "served upon" and "provides to". Co-Chair
Therriault pointed out that was a language change.
Mr. Tibbles addressed Page 4, Line 24, the "invoicing
section", noting that the original bill required the
Department to establish a uniform accounting system. That
would have been very expensive and that language was
removed. The goal was to create an invoice that one could
look at to determine if they were being billed for the
actual service that they received. In that section, there
is a new provision which establishes that these requirements
apply to negotiated agreements as well. The language would
give Department of Environmental Conservation and the
permittee the option to negotiate different requirements for
the invoicing.
Mr. Tibbles noted that on Page 5, Lines 6 & 7, language was
added "request that the resource agency review the invoice".
That language was recommended by the Department of
Environmental Conservation. The first "stop review" would
be with Department of Environmental Conservation. If a
person was not happy with that review, then they could go to
the Office of Management and Budget (OMB). On Page 5, Line
17, the petition was removed for a single project fee. All
that remains in that section is a petition for a
modification of a new fixed fee.
Mr. Tibbles referenced Page 6, Line 3, language "under the
following" was added by a request from Department of Natural
Resources. The technical change modified the definition of
direct costs in Subsection (3). Page 3, Line 28, removes
"notice" which will now allow the Department of
Environmental Conservation to charge the permittee for the
cost of public notices.
Mr. Tibbles commented that on Page 7, Lines 15 - 17, another
modification was made at the request of the Department of
Natural Resources to the definition of "fee". There was a
concern that the Joint Pipeline Office would not be able to
charge the full amount negotiated under their leases. That
was never the intent of the bill. Additionally, Subsection
(g) was removed at the request of the Department of Law and
Department of Environmental Conservation. Page 7, Line 20
increases the multiplier for salary and benefits at the
request of the Department of Environmental Conservation.
Mr. Tibbles explained that on Page 8, Subsection (10), the
definition of "standard designated regulatory service"
removed the inclusion list for small-scale mining. The
agency wanted to be able to determine which activities were
more complex.
Representative Grussendorf observed that the Office of
Management and Budget was included in the legislation. He
commented that the Office of Management and Budget does not
have the authority to develop regulations on the appeal
process. He questioned why no fiscal note had been included
from that agency.
Co-Chair Therriault noted that the proposed legislation has
"greatly" lessened OMB's participation. Mr. Tibbles added
that there was a $176 thousand dollar fiscal note submitted
at the last hearing from OMB. He reiterated that the
proposed legislation has reduced their involvement.
Co-Chair Therriault added that the bill would be held in
Committee until the new fiscal notes were received.
Mr. Tibbles reviewed Amendment 1. [Copy on File]. He noted
that the amendment suggests striking the language "this
determination upon request" and inserting "the fixed fees".
On Page 3, Line 22, after "services" new language was added,
"at least one of which is a designated regulatory service".
Representative J. Davies observed that if there was more
than one agency involved then the Office of Management and
Budget would become involved. He believed those would be
more complex issues. Co-Chair Therriault pointed out that
within the Governor's budget there is both OMB and the
Division of Governmental Coordination (DGC). DGC would act
as the coordinator of multi agency functions. He believed
that DGC would handle these issues given their coordination
function.
Representative Grussendorf questioned who would be
responsible to collect the program receipts. Co-Chair
Therriault explained that the unified fee would be a
tabulation of the separate fee amounts. The parts could
then be tracked.
Mr. Tibbles explained that in Amendment #1, Page 4, Line 10,
Subsection c(3) would be deleted and the following sections
would be renumbered. Page 4, Line 25, would insert "AS
37.10.052(b) or (c)" and delete "AS 37.10.052(b)". This
language indicates the new petition for a single fee. Page
5, Line 14, would add language "and AS 37.10.052(d)". Mr.
Tibbles explained that language would move some of the
standards to a different section.
Mr. Tibbles referenced Amendment #1, Page 7, Lines 22 & 26,
stating that section was requested by the Department of
Environmental Conservation. He pointed out that language
would address charges for plan approval. The Department
currently is charging for this service and did not want it
excluded.
Mr. Tibbles referenced Page 8, Line 7, of Amendment #1.
That section of the bill addresses Department of
Environmental Conservation's general fee authority for more
than just the designated regulatory services. Concern
exists with the definition of direct costs used in, AS
37.10.058, which did not apply to other items outside those
services. The amendment would insert "AS 37.10.056".
JANICE ADAIR, (TESTIFIED VIA TELECONFERENCE), DIRECTOR,
DIVISION OF ENVIRONMENTAL HEALTH, DEPARTMENT OF
ENVIRONMENTAL CONSERVATION, recommended that approval be
added. She noted that they were referring to "plan
approval" as that is the issue for water and wastewater.
Representative J. Davies asked if there were other kinds of
approval. Ms. Adair responded that they are all "plan
approval" of one sort or another. She believed that it would
be safer to use the broader term.
Representative J. Davies asked if the Department was
satisfied with the last change proposed in the amendment.
Ms. Adair responded that if it does the effect indicated by
Mr. Tibbles, the Department would support it.
Representative J. Davies asked if Ms. Adair could recommend
any additional changes to Amendment #1. Ms. Adair responded
that the Department intends to provide an amendment to
address their remaining concerns.
Co-Chair Therriault MOVED to ADOPT Amendment #1. There
being NO OBJECTION, Amendment #1 was adopted.
KEN FREEMAN, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT CENTER
(RDC), ANCHORAGE, commented that RDC is a statewide, member-
funded, non-profit trade association. The organization's
mission is to grow Alaska's economy through the responsible
development of the state's natural resources. The membership
includes individuals and leading companies from all of
Alaska's basic industries, mining, oil and gas, fisheries,
timber and tourism.
Mr. Freeman noted that in January 1999, RDC was tasked with
building industry-wide consensus on legislation designed to
deal with State agency permit fees. Sealaska Corporation had
taken an earlier lead on the issue with a draft bill known
as the "Permittee Bill of Rights." The concepts articulated
in the "Permittee Bill of Rights" served as the starting
point subsequent discussions.
Mr. Freeman commented that while industry recognizes its
responsibility to pay for the services it receives, the
issue of allocating program costs between the public and the
regulated community remains unresolved. He noted that RDC
applauds the Legislature for its past involvement in the
issue, and appreciates having had the time to design a well
crafted product.
Mr. Freeman advised that HB 361 would accomplish several
important objectives:
? First, it requires the resource agencies to establish a
schedule of fixed fees for relatively simple and
repetitive regulatory activities. These fees must he
based on the actual and reasonable direct cost of
providing the service and cannot include additional
charges such as program overhead. That change is
important for two reasons. It will provide the regulated
community with more predictability in determining the
costs to permit an activity. Also, it would ensure the
person requiring a designated regulatory service will
only pay for the costs associated directly with
providing that service.
? Secondly, recognizing that not all services provided by
the resource agencies lend themselves to fixed fees, the
bill directs the resource agencies to enter into
negotiations with any person requiring a service to
determine the costs of complex or controversial
permitting activities. In the event that negotiations
are unsuccessful, the bill requires the agency to bill
on a strict time and expenses basis for the work. That
system will act as an incentive to both the agency and
the permittee to conduct good-faith negotiations.
? Third, the bill will provide the regulated community
with flexibility through a petition process. Petitions
may be used to request that the agency supplement its
schedule of fixed fees, they may be used to create a
fixed fee for an activity specific to a distinct
economic sector, and they may be used to request a
single project fee for an activity requiring multiple
permits. This type of flexibility will make doing
business in Alaska easier.
? Fourth, the bill requires that any resource agency
providing a designated regulatory service establish a
uniform accounting system capable of producing an
audible invoice. Services billed on a time and expenses
basis will require monthly invoices. Some negotiated
fees will also incorporate the use of invoices. This
requirement makes the costs of providing regulatory
services more transparent.
? Lastly, in the interest of clarification, Mr. Freeman
pointed out two additional details. First, the bill is
written to encompass all of the resource agencies,
Department of Natural Resources, Department of Fish and
Game and Department of Environmental Conservation, on a
program by program basis. Currently, the only programs
included in the bill fall under Department of
Environmental Conservation.
Mr. Freeman concluded noting that the legislation is an
appropriate step toward fulfilling Alaska's promise or being
open and ready for business.
CAROL CARROLL, DIRECTOR, DIVISION OF ADMINISTRATIIVE
SERVICES, DEPARTMENT OF NATURAL RESOURCES, commented on
Amendment #1, the change to Page 6, which would sufficiently
addresses the concerns of the Department over large mine
activities.
Co-Chair Therriault asked about the fiscal note. Ms.
Carroll clarified that the note would be lowered to zero.
STEVEN DAUGHERTY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, commented on some of the legal issues which exist in
the bill. He voiced concern with the issue of OMB's
authority. He commented that authority to adopt regulations
or an explicit exemption from the Administrative Procedure
Act (APA) is still needed for fee agreements and the appeal
process. Under Alaska law, if something effects more than
one person, it must be adopted by regulation. The fee
agreement, under the State's Administrative Procedure Act
will be required to be in regulation.
Mr. Daugherty added that in the same section, it is not
clear whether those same fee agreements would be treated as
a binding contract. If they were, there would need to be a
review provided by the Department of Law. He emphasized
that section needs to be clarified. A change would need to
be made on Page 3, and inserted on Page 4, Line 4, "a fee
negotiated under this section is not subject to the
Administrative Procedures Act".
Mr. Daugherty stated that there is a potential problem on
Page 2, where a change was made to the definition of fees.
He noted that Page 7, Line 13, defines fee. He thought the
language insinuated that other than pipeline right of way
leases, other leases would be included. He did not know the
impact of that language and did not believe it was the
intent of the provision. Mr. Daugherty thought that concern
could be addressed on Page 2, Line 10, inserting "fees
associated with the sale of property".
Mr. Daugherty noted another issue of concern was the
interagency charges. That section does not address the
Department of Law's need to be able to charge for services.
Under the new version, interagency charges are only
recoverable as listed on Page 6, Line 25. The Department of
Law charges would not meet those requirements.
(TAPE CHANGE, HFC 00 - 77, Side 1).
Mr. Daugherty recognized that the proposed bill was greatly
improved over the previous version.
Ms. Adair voiced her appreciation to Mr. Tibbles for all his
work. She noted that Mr. Daughtery had indicated a concern
of the Department of Environmental Conservation in
clarifying that the provision regarding negotiations for
fees are not subject to the APA. She believed that a
specific provision included could make that clear.
Ms. Adair indicated concern on Page 3, Line 5, in that the
fee could be based on an estimated reasonable direct cost.
At the end of the four years when the Department has to make
the review, they will need to make changes based on the
average actual costs. The Department will still be required
to do cost accounting for every person involved in the
project. The Department proposes that the flat fee continue
to be based on the estimated average reasonable direct cost.
Co-Chair Therriault interjected that if the first 4 years
were based on the estimated, the information would already
be available. Ms. Adair explained that this would be a
matter of detail. Actual costs are much more detail
oriented than the estimated average cost.
Representative J. Davies asked Ms. Adair for suggested
language to address that concern. Ms. Adair would prefer to
see Line 4, include "estimated average reasonable direct
costs". (Page number inaudible). She added that would have
a significant impact on the fiscal note.
JON TILLINGHAST, ATTORNEY, SEALASKA CORPORATION, LEGAL
COUNCIL TO RESOURCE DEVELOPMENT COUNCIL (RDC), JUNEAU,
provided response to suggestions made by the Department of
Law and Ms. Adair, Department of Environmental Conservation.
He thought that most of the concerns could be addressed
easily. With respect to OMB and writing regulations, he
stated that there would be two things for OMB to do. One
would be to hear appeals on specific invoices. OMB's other
authority would be to set a multi agency fixed fee that will
have some longevity to it. He suggested language to Page 4,
between Lines 16 & 17, "no action by resource agency of the
Office of Management and Budget under this subsection is
subject to the Administrative Procedures Act". He stated
that would provide a "blanket" exemption for anything,
anybody does under that subsection. Mr. Daughtery agreed
that would be sufficient. Mr. Tillinghast stated that the
actual coordinating role would be done by DGC, which is a
subdivision of OMB.
In response to Mr. Daugherty's second concern, Mr.
Tillinghast advised on Page 2, Line 10, it would be
appropriate to state that it would not apply to sales on
leased property.
Mr. Tillinghast advised that the remaining concerns would be
more difficult to address as they enter into policy such as
the Department of Law's concerns that their charges to the
Department of Environmental Conservation would not be paid
by the applicant because they include overhead. The bill
establishes one important public policy and that is that
those expenses should not be charged to the applicant but
instead spread to the entire public. The purpose of the
bill is to change if an agency is charging their overhead.
In response to concerns voiced by Ms. Adair, Mr. Tillinghast
argued that if your estimates, after four years, differ from
your actualized costs, then there is something wrong with
the way you compute your estimates.
Representative J. Davies countered that the point is not
doing the actuals. That data would not be available as it
was billed and was based on the estimates.
Representative Phillips pointed out that if there were
dispute in what was being billed, those would be the
accepted fees. Co-Chair Therriault agreed with
Representative J. Davies that the first four years of
billings are based on estimates. The hours agreed to were
based on estimates.
Mr. Tillinghast observed that even though the fee charged to
the applicant will be based on an estimate, he thought that
the Department would be doing a "reality check" of the
actual records to guarantee that the charge was correct. It
is safe to assume that the acutal numbers will be available
whether or not they are billed to the applicant.
Representative J. Davies disagreed. He stated that it would
not be cost effective to keep track of all the actuals.
Mr. Tillinghast noted that on Page 5, Line 14, that
subsection is the OMB review portion. An invoice would be
scrutinized under a standard and that standard appears in AS
052, which is on Page 4, Lines 17-21. The reason that
Section D is referenced and not Section C, is because
Section c is the multi agency OMB fee and Section (B) is the
agreements. The way that the bill is structured, OMB
does not have any review authority in either instance. By
referencing an additional subsection, it would expand OMB's
review authority. Mr. Tillinghast and was surprised that
OMB would advocate an expansion of authority.
Co-Chair Therriault noted that final action on the bill
would be HELD for further consideration and receipt of the
final fiscal notes.
Representative G. Davis noted that the Department of Law had
recommended a change to Page 7, Line 17, which would affect
the Department of Natural Resources. Ms. Carroll
recommended waiting to make that change until the fiscal
note had moved through the Division.
HB 361 was HELD in Committee for further consideration.
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