Legislature(2001 - 2002)
05/01/2002 01:55 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
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SENATE BILL NO. 115
An Act extending the termination date of the Board of
Storage Tank Assistance.
HEATHER BRAKES, STAFF, SENATOR GENE THERRIAULT, stated that
under AS 46.03.360, the State Board of Storage Tank
Assistance plays an integral role in promoting compliance
throughout the State of Alaska with State and federal
regulations related to installation and operation
specifications for underground storage tanks as well as
during the cleanup process when leaks and spills occur. By
doing so, the Board is instrumental in safeguarding
underground drinking water supplies from pollution and
therefore protecting the public's health.
Ms. Brakes pointed out that the Board membership is
prescribed by statute and seats seven members. The board is
charged with:
• Adopting regulations used by the Department of
Environmental Conservation in determining which costs
are eligible for financial assistance;
• Adopting regulations to be used by the Department to
prioritize applications for financial assistance;
• Approving regulations specifying allowable
technologies for testing, containment and cleanup, or
corrective action prior to being adopted by the
department; and
• Reviewing regulations proposed by the Department that
set a standard for the level of containment that is
allowed to remain in soil or groundwater after cleanup
of a release from or associated with an underground
storage tank.
Ms. Brakes continued, the board has the authority to settle
disputes for financial assistance and may issue decisions
that are binding on the owner, operator, and Department of
Environmental Conservation. The board is also tasked with
mediating disputes between owners, operators and the
Department in regard to cleanup plans. In addition, the
board may also hear disputes and grievances relating to
delays or requirements associated with cleanup decisions
issued by the Department of Environmental Conservation.
Ms. Brakes advised that the State Board of Storage Tank
Assistance was set to expire June 30, 2001 under AS
44.66.010(18), Legislative Oversight. If the Legislature
does not act to extend the Board, it will have until June
30, 2002 to administratively conclude its affairs. SB 115
extends the Board for two years until June 30, 2003.
JOHN BARNETT, EXECUTIVE DIRECTOR, STATE BOARD OF STORAGE
TANK ASSISTANCE, ANCHORAGE, offered to answer questions of
the Committee.
GARY WEBER, (TESTIFIED VIA TELECONFERENCE), UNDERGROUND
TANK ASSOCIATION, MAT-SU, testified in support of the
legislation.
Representative Croft asked if the State was already in a
"wind-down" as it would expire June 2001. He asked why it
did not expire in 2003 or forward in 2006.
PAT DAVIDSON, DIRECTOR, DIVISION OF LEGISLATIVE BUDGET AND
AUDIT, explained that the Division of Legislative Audit
recommended a two-year extension because of a change in the
financing which could impact how long the board should
exist. It looks like the Board will be needed for
additional two years.
Representative Foster MOVED to report SB 115 out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
SB 115 was reported out of Committee with a "do pass"
recommendation and with fiscal note #2 by the Department of
Environmental Conservation.
#SB153
CS FOR SENATE BILL NO. 153(FIN)
An Act replacing the storage tank assistance fund with
the underground storage tank revolving loan fund and
relating to that revolving loan fund; repealing the
tank cleanup program and the tank upgrading and
closure program; and providing for an effective date.
ANNETTE KREITZER, STAFF, SENATOR LOREN LEMAN, testified in
support of CS SB 153 (FIN). She noted that the owners of
underground storage tanks had until December 22, 1998, to
either upgrade or close their underground storage tanks in
response to a nationwide concern over possible
contamination of drinking water from leaking underground
storage tanks.
The Alaska Legislature responded to the federal mandate by
offering grants and loans to owners of underground storage
tanks to help offset the costs of the new requirements. To
date, $38.9 million dollars has been appropriated for the
upgrade, closure and cleanup grants and loans for
underground storage tanks. She noted that all the
applications for grant assistance under the Upgrade,
Closure and Cleanup programs were in. There can be no new
applicants. The Department and the Board of Storage Tank
Assistance has ranked the applicants according to the
changes made by SB 128.
Ms. Kreitzer pointed out that CS SB 153 (FIN) ends the
upgrade and closure grant program by June 30, 2002, and the
tank cleanup grant program by June 30, 2004, after nearly
$49 million dollars in assistance to the underground
storage tank owners. The legislation would retain the
cleanup loan program and changes it to a revolving loan
program.
Ms. Kreitzer added that the revolving loan program retains
the current test of self-insurance, which guarantees
assistance to the "mom & pop" companies that the grants and
loans were intended to assist, rather than larger
companies.
Ms. Kreitzer advised that the balance in the storage tank
assistance fund on the effective date of the bill could be
transferred to the revolving loan fund. The
capitalization, with all repayments of principal and
interest on the loans, income earned on money in the fund
and money appropriated to the fund, would support the
revolving loan fund.
Ms. Kreitzer provided a highlight of the sectional analysis
and effective date of each section.
Representative Croft questioned the large drop from $3
million to $35 thousand dollars. He inquired if that meant
the State had been providing grants to corporations who
should not have been receiving them.
Ms. Kreitzer responded that would have been the case,
however, through the regulations, the Department of
Environmental Conservation was able to begin the grant
giving process only to the "mom and pop" gas station
owners.
Representative Croft pointed out that there was a zero
fiscal note attached because now the State was changing
from a grant and loan program to a low interest zero note.
Ms. Kreitzer interjected that there are two programs. One
is a zero interest loan and the other is 4% interest rate
for a $25,000 loan. She recommended that Mr. Barnett
clarify the information.
JOHN BARNETT, EXECUTIVE DIRECTOR, STATE BOARD OF STORAGE
TANK ASSISTANCE, ANCHORAGE, explained that there are two
loan packages within the existing program. One is 10% of
the total cost to a maximum of $25,000 dollars. Those
loans are provided at a zero percent interest. The other
program is a loan program and is one half point above the
discounted rate. Those loans are issued for a maximum of
$250,000 dollars for clean-up.
Mr. Barnett applaued the sponsor for the bill and noted
that it was supported fully by the board. He explained
what the bill would accomplish:
• It would finalize the grant program and wrap it up.
• It would establish criteria to prevent larger
companies from taking advantage of the new revolving
loan program by setting some standards that would
prevent large-scale, small corporations from obtaining
low interest loans. He pointed out that there are
about 51 companies looking for loans.
• It would provide an opportunity for a funding source
for the board of storage tank assistance to actually
come out of the revolving loan fund as opposed to
other funding sources.
Ms. Kreitzer addressed the fiscal note. She pointed out
that it would pay for the costs from storage tank
assistance out of the revolving loan fund. The fiscal
note, which accompanies SB 115, would need to be resolved
in Conference Committee, should SB 153 pass.
GARY WEBER, (TESTIFIED VIA TELECONFERENCE), UNDERGROUND
TANK ASSOCIATION, MAT-SU, testified in support of the
legislation.
Representative Foster MOVED to report CS SB 153 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS SB 153 (FIN) was reported out of Committee with a "do
pass" recommendation and with fiscal note #2 by the
Department of Environmental Conservation.
#SB243
CS FOR SENATE BILL NO. 243(FIN)
An Act extending the termination date of the Board of
Chiropractic Examiners; and relating to chiropractors.
HEATHER BRAKES, STAFF, SENATOR GENE THERRIAULT, explained
that under AS 08.20.010, the State Board of Chiropractic
Examiners regulates qualified professionals by ensuring
that the requirements laid out for licensure are met and
adhered to. The Board was established in 1949 and
currently regulates 208 chiropractors in the State of
Alaska.
Ms. Brakes noted that the Board consists of five members
appointed by the Governor. Four members shall be licensed
chiropractic physicians who have practiced in Alaska for no
less than two years. The fifth member shall be a person
with no direct financial interest in the health care
industry.
Ms. Brakes added that the regulation and licensing of
qualified chiropractors continues to safeguard the public
by promoting competence and integrity of those individuals
who represent themselves as chiropractors to the public.
The Board continues to accomplish that by establishing
standards for licensed professionals and monitoring the
manner in which they practice.
The State Board of Chiropractic Examiners is set to expire
June 30, 2002 under AS 08.03.0 10, "Termination of State
Boards and Commissions". If the Legislature does not act
to extend the Board, they will have one year, until June
30, 2003, to administratively conclude those affairs. SB
243 would extend the Board for another four years and
restore the Board's statutory authority to license by
credentials.
Representative Foster MOVED to report CS SB 243 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS SB 243 (FIN) was reported out of Committee with a "do
pass" recommendation and with fiscal note #1 by the
Department of Community & Economic Development.
#SB319
CS FOR SENATE BILL NO. 319(FIN)
An Act relating to shallow natural gas; and providing
for an effective date.
Co-Chair Williams noted it was not his intent to move SB
319 from Committee at this date.
DARWIN PETERSON, STAFF, SEANTOR JOHN TORGERSON, explained
that shallow gas leasing was originally proposed as a
program that would enable exploration and production of
shallow natural gas deposits. One of the features of the
program is to encourage a new energy supply to villages,
mines, and other rural users. The program is fully
operational with over 100 leases processed and nearly 200
more pending. The program has become a vehicle for
commercial gas development in Fairbanks, Big Delta, Matsu
Valley, and the lower Kenai Peninsula. He stated that SB
319 was intended to advance the program into a more robust
and viable commercial program.
Mr. Peterson noted that because the program has become more
commercial in nature, increasing revenues from application
fees and annual rental fees would be appropriate. The
program involves neither competitive bidding nor requires
bonus bids. However, application fees for shallow gas
leases have been increased from $500 to $5,000 dollars and
annual rental fees have been increased from $0.50 to $1
dollar per acre. The increased fees are designed to
increase revenue and pay for the program costs, while at
the same time, not discouraging parties of genuine interest
and ability from developing shallow natural gas resources.
Mr. Peterson pointed out that the requirement that
Department of Natural Resources annually notify a lessee by
certified mail of rental due has been deleted. Rent would
automatically be due on the date determined by the lease.
Deadlines have proven to be unworkable and do not recognize
the work required by the Department to prepare leases in
areas that are populated and may have complex land
ownership patterns.
The limitation on depth to 3,000 feet has been replaced
with the requirement that some portion of the field must be
within 3,000 feet of the surface. The total amount of
acreage that may be held by shallow natural gas lessees has
been increased from 46,080 acres to an aggregate of 100,000
acres. The acreage increase reflects the fact that large
acreage may be necessary to a shallow gas program.
Mr. Peterson added that the requirement that the applicant
conduct a title search would be removed. The Department
routinely conducts a title search for land before leases
are issued. Additionally, there are no title companies who
will conduct a thorough title search of the subsurface
estate and warranty title. The changes will improve
reservoir management and increase the value to the lessee
and the State.
Mr. Peterson concluded that the new bonding provisions
would demonstrate lessees are fiscally responsible and
would help protect surface owners. The lessee must secure
the bond as a precondition to obtaining the lease. In the
event that the surface estate is owned by a private party,
an additional bond may be required if the lessee and the
private party cannot reach an agreement. Lessees will have
from July 1, 2002 through September 30, 2002 to convert
leases from the existing program to the new program.
Representative Whitaker asked how many committees did the
bill pass through.
Mr. Peterson replied that SB 319 has passed through two
committees in the Senate and so far, two in the House.
There were changes in Resources Committee. The field
aggregate was changed from 100,000 acres to 138,240 acres,
the size of six townships. Another change was made to Page
3, section 4, clarifying that if the lease payment is not
received by the due date, the director would mail the
leasee one written notice before the lease would be
terminated.
Representative Whitaker asked if there had been previous
opposition voiced to the bill.
Mr. Peterson replied that there has not been any opposition
to the bill. The industry and the Administration are in
favor of it. He added that the sponsor is opposed to any
further amendments.
Co-Chair Mulder asked how many anticipated shallow gas
projects would be coming on line and producing benefit
throughout the communities.
Mr. Peterson responded that there are none at this time,
however, there continues to be interest expressed.
MARK MEYER, (TESTIFIED VIA TELECONFERENCE), DIRECTOR,
DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES,
ANCHORAGE, noted that the Administration supports the bill.
He added that the changes are important to understanding
that natural gas has high commercial potential in Alaska.
The terms will bring revenue to the State. He added that
there are more than a million acres involved either under
lease or filed for in the Fairbanks and Mat-valley areas.
Mr. Meyer added that the program has been run in the highly
populated areas of the State where there is a significant
market for natural gas. The program needs to be run for
commercial operators that need a fairly substantial site
and scale of operation to become commercially liable. He
recommended that there should be a deeper level of federal
management.
Mr. Meyer recognized that because the program is being
operated in higher density areas, there is more surface
conflict. The program is considered an "over the counter
filing" and is the only oil and gas program like it in the
State. He agreed that the protection of the bonding was a
good idea. The larger acreage is needed for the large-
scale commercial production of open methane. He added that
there have been four test wells drilled in the State and
that the operators are still learning how to drill coal
beds. The technology is favorable for the program to get
the natural gas to the residential communities throughout
Alaska.
Mr. Meyer concluded that the Department strongly supports
the bill and that the economic value of increased revenue
from the $5000 dollar filing fee is supportable. It also
means that the program could pay for the administrative
costs. If the gas were to be used for rural consumption,
it would have a lower royalty rate. The program is
balanced and allows for professional management of the
State's resources. It would bring a revenue position to
the State Treasury.
Representative Foster asked about the acreage involved with
the fifty leases.
Mr. Meyer explained that the million acres were in the old
program. The Department made an assumption that a certain
percentage of the leases would be converted from the old
program to the new program. That way there would be the
$4500 dollar per lease gained under the new program. The
Department did not factor in the rental amount. The
primary justification of the number is the $4500 dollar
differential on the conversion of the leases.
JOHN TANIGAWA, (TESTIFIED VIA TELECONFERENCE), SPECIAL
PROJECT MANAGER, EVERGREEN RESOURCES ALASKA CORPORATION,
ANCHORAGE, stated that currently, his company has 46,080
acres of shallow gas lease applications located near
Willow. He testified in support of SB 319.
Mr. Tanigawa commented that SB 319 would remove obstacles
to exploring and developing shallow natural gas. These
types of activities require at least 100,000 acres or
roughly 4 townships to establish the necessary economies of
scale for initial development. Due to the challenges of
operating in an artic environment, however, increasing the
acreage limitation to 138,240 acres or 6 townships would
increase economic viability of shallow natural gas
development.
Evergreen Resources strongly supports increasing the depth
limitation to one that relies on science and geology for
the specific play. He added that the program is the
primary reason Evergreen stays in Alaska. The changes
proposed in the bill would provide the necessary latitude
to operate in an economically sound and environmentally
safe manner.
Mr. Tanigawa acknowledged that the Division of Oil and Gas
has collaborated with them and other stakeholders. He
added that his business is an excellent example of how the
State and the Industry can work together to the benefit
government, industry and the public.
PAT CARTER, MANAGER OF LAND AND GOVERNMENT AFFAIRS, UNION
OIL COMPANY OF CALIFORNIA (UNOCAL) ALASKA, ANCHORAGE, noted
that he was before the Committee representing Unocal on
behalf of Kevin A. Tabler.
Mr. Carter noted that Unocal was actively involved in an
aggressive gas exploration program in the Cook Inlet area
and is supportive of legislation addressing gas
exploration. He added that the shallow gas leasing
augments the existing area-wide leasing programs and
enhances access and development of the State's natural gas
resources.
Mr. Carter reiterated that Unocal of Alaska is supportive
of the program and other leasing programs throughout the
State providing reasonable access to mineral wealth. SB
319 currently provides for better administration,
flexibility and clarification of the shallow gas leasing
program and that it is in the best interest for the State
of Alaska
ERIC YOULD, EXECUTIVE DIRECTOR, ALASKA RURAL ELECTRIC
COOPERATIVE ASSOCIATION (ARECA), ANCHORAGE, voiced support
for the proposed changes. He noted ARECA has a serious
interest in keeping the costs of electricity low in rural
Alaska. When the shallow gas legislation was passed in
1996, ARECA was a strong supporter of HB 394. The focus of
that legislation was to provide an alternative energy
resource for rural Alaska. He pointed out that the
resource is being developed more in the urban areas. He
acknowledged that was appropriate and should be, however,
voiced concern that some of the measures are making it less
economically feasible for development in small communities,
for which the program was envisioned.
Mr. Yould suggested that for communities and villages of
5,000 or less, the commercial terms should remain as they
are in existing statute. He suggested an amendment that
the filing fee be increased from $500 per applicant to
$5,000 dollars for those places with over 5,000 residents
and for the small communities, the filing fee should remain
at $500 dollars.
Mr. Yould pointed out that the proposal for a lease fee
acreage base was to be increased from $.50 cents per acre
to $1 dollar per acre. He asked that the lease rate of
$.50 cents be maintained for the smaller communities of
less than 5,000.
Mr. Yould noted that he not yet testified in any other
committees because of other commitments. He apologized to
the bill sponsor. He stressed that it is important to
maintain the integrity and the economic feasibility of the
program. He noted that there had been a suggestion that
the permitting time line, before the sponsoring agency, be
unrestricted.
Co-Chair Mulder asked how many projects in the rural
communities had taken advantage of the proposal.
Mr. Yould replied that at present time, none had taken
advantage of it. The reason for that is because of the
high costs for hole drilling in rural Alaska, which
averages nearly $1 million dollars per hole. No community
has the economic ability to come up with that amount of
money. There is an improved technology that is coming, a
micro drilling, which hopefully can bring the costs down.
Additionally, technology is not currently available to
fully utilize the natural gas that already exists, which is
a technology in fuel cells.
Co-Chair Mulder suggested that this could open a "big
fight" for something that is not yet happening. He noted
that the amendment would then only exclude Anchorage,
Fairbanks and Juneau.
Mr. Yould understood that the sponsor was concerned about
that and that was why he was recommending $5,000 dollars
rather than $10,000 dollars.
Co-Chair Mulder pointed out that the proposed changes were
coming forward late in the process.
Mr. Yould apologized and offered to work with the sponsor.
CS SB 319 (FIN) was HELD in Committee for further
consideration.
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